A New Year’s Resolution For Capitalism

If Mr. Market came to me for advice on a New Year’s resolution, here’s what I’d suggest:

“Capitalism needs to self-regulate its inequities so as not to fall out of favor with the population it so greatly serves.”

Then I’d have to admit that I stole that quote from Bram Zeigler – professional money manager and founder of an intriguing new charity called Capitalists For Shared Income, or C4SI. (Full disclosure – Zeigler is a former colleague and he asked me to join C4SI’s advisory board, but all of the very heavy lifting in starting the organization was his.) 

What’s so unusual about C4SI?  

First of all it aims to be around for a long time – basically forever. Zeigler’s ambitious goal is to create a privately funded, permanent endowment which would distribute roughly 5% of its assets each year to those living in poverty.

“It will be similar to Norway’s Oil Fund or the Alaska Permanent Fund, but instead of building an endowment from natural resource wealth, we’re building an endowment from the wealth spawned by the ingenuity, productivity and entrepreneurial spirit of the capitalist system”.

The Yale Model, But For Normal People

Elite schools like Yale and Stanford have long used this model to fund tuition and research. Yes, it’s important to have well-funded world class universities, but let’s be clear – the beneficiaries are, or at some point will be, part of the 1%. It’s a process that reinforces inequality. C4SI aims to use the same model but to lean in the other direction, helping those at the bottom end of the wealth spectrum.

I asked Zeigler if such an endowment couldn’t be funded faster and in greater size through a wealth tax and, somewhat shamelessly, pointed him to an article I had written on the wealth tax in February. He was polite, but skeptical:

“I saw Andrew Yang speak at the Iowa caucus in 2020. He reminded us that Milton Friedman – the ultimate free-market economist – proposed a negative income tax to help the poor. Yang said the House actually passed this proposal twice in the early 1970’s as part of a larger economic package, but the Senate rejected it. His own idea of the “Freedom Dividend” repackaged Friedman’s proposal to appeal to the left.

So you’ve got an idea that’s been there for 50 years in various forms and nothing has happened. If the Senate rejected it in the early 1970s, there is no reason to think it will pass today. Waiting for political action will take too long and, even if something does emerge, it might not be very effective.”

Cash Is King

Watch Netflix’s

NFLX
hit series Maid, based on the true story of a single mother struggling to survive as a cleaner in rural Washington, and you’ll end up sharing Zeigler’s skepticism about the effectiveness, and indeed basic kindness, of our current government policies.

Want help with child care? You need a job first. But how can you hold down a job if you don’t have child care? Yes, vouchers for food are available, but they bring demoralizing stigma. And stress, because what if you need something else – like new eyeglasses or an oil change – in order to keep working?

Which brings me to another intriguing bit of C4SI’s approach – it gives people cash (in the form of a debit card). No form filling. No strings attached. No judgement. Zeigler said he always felt intuitively cash was the best form of assistance, but even so was still surprised at what the first recipients of C4SI money communicated to him:

“The woman who got the first endowment generated $ecurity Card, said she would use the money for a badly needed oil change for her car (which she lived in previously!). Another broke down and said she could now buy her grandson eyeglasses”.

A final bit of C4SI’s quirkiness is the $58 value of each $ecurity Card. Why $58? That’s a day’s pay at the current federal minimum wage:

“I like the idea of handing someone, who has demonstrated need by engaging with a charity, a debit card and saying “Here’s a day’s pay. Use it how you see best.”

My daughter returned to university last night. To mark the occasion we rented a movie and had pizzas and ice cream delivered. (Note to self: come on dude, you were supposed to lose 10 lbs this year!). The bill, with DoorDash tip, wasn’t far off $58. A night in for us is a day’s work for many.

Where Is The Love?

Despite its shortcomings capitalism itself needs a little love – it’s been astonishingly effective at lifting people out of poverty. Two centuries ago most humans – 90% of the world’s population – lived in extreme poverty. Now it’s less than 10%. The Covid-19 vaccines are a real-time medical miracle that would not have happened without the ingenuity and technology of capitalist entities.

We want to live in a richer and healthier society but we also want fairness. Right now capitalism seems less and less fair to more and more people. In 2022, capitalists should resolve to harness their energy and spirit to rectify this perception themselves. C4SI is an ambitious start.