Sun, 20 Jan 2008
Economic Justice
The Dalai Lama made a few remarks on economic justice, recently, reiterating that he favors Marxism over Capitalism.
At a gathering at the Indian Institute of Management, Ahmedabad (IIM-A), he said: "I am a Marxist monk, a Buddhist Marxist. I belong to the Marxist camp, because unlike capitalism, Marxism is more ethical. Marxism, as an ideology, takes care of the welfare of its employees and believes in distribution of wealth among the people of the state."
I thought I'd use the Dalai Lama's remarks as a peg to hang my own ideas on. Usually the discussion of economics wanders between the two poles of individual liberty and government control, either in the form of regulation or outright ownership. My own idea is different. Briefly stated, I believe all publicly traded corporations should be run by people having no economic stake in the company. In other words, the management of the company would be forbidden to own any stock in the company, own any bonds issued by the company, or have any economic relation to the company at all besides drawing a salary. The salary, of course, could not be tied to the company's economic performance. Any economic stake would be viewed as a conflict of interest and be grounds for dismissal.
The reason for this change is to unleash the forces of altruism that are naturally present in everyone, though usually hidden under self-seeking and greed. If you are running a company and can do anything, absolutely anything with it and no course of action will benefit you more than another, what happens next? In a way, it's similar to meditation. You sit down, physically constrained from doing your usual stuff. So what happens then? The problem with conventional approaches to economic justice is that corporations, as the most interested parties, inevitably end up gaining control of the regulatory apparatus that is meant to constrain them. So well meaning efforts to control the worst excesses of capitalism either come to nothing or actually make the problem worse.
The obvious objection to my idea is that whoever runs the company might simply waste its resources on crazy idea. However, the company must still raise capital by borrowing or selling stock, and the financial markets would act as a brake on any sort of craziness. As another check on uneconomic behavior, I would create a tax on all capital property which was equal to the real return on a safe investment, such as treasury bonds. This would be approximately two percent. Any company not earning this rate of return would be forced to liquidate itself, selling off its assets to economically healthy companies, ensuring that capital did not stagnate in unprofitable uses.
The idea here is that people are basically good, but are corrupted by a system that only rewards greed. This system distorts human nature, but if the rules of the game are changed, the altruism naturally present in people will flower. And this solution is decentralized, it doesn't require one central authority making the decision on what is right. Instead thousands of people each make individual decisions about what to do. So the barrier to new ideas is lower and the system is resistant to corruption. There has to be an educational aspect to the solution as well, because people have been brainwashed with the idea that "greed is good" and need to understand that running a company is a grant of trust from the public.
That's a general outline of how I think economics needs to be reformed. I could say more about the details, but this will do for now.
