Introduction

Socioeconomic Democracy: An Advanced Socioeconomic System, by Robley E. George, was published in 2002 by Praeger Publishers.

George begins with the reasonable premise that there is something inherently wrong with an economy that allows people to starve through lack of income when others are able to amass multiple billions of dollars in wealth, and proposes Socioeconomic Democracy as the solution:

“Socioeconomic Democracy is a model economic system, or more precisely, socioeconomic subsystem in which there is some form of Universal Guaranteed Personal Income [‘UGI’] as well as some form of Maximum Allowable Personal Wealth [‘MAW’], with both the lower bound on personal material poverty and the upper bound on personal material wealth set and adjusted democratically by all society.”

This solution offers a “direct and powerful challenge to the fatal shortcomings of virtually all currently dominant economic paradigms”. The book claims to be a textbook, and much, much, much, more:

“…[T]he book is written for and should be found useful by a much wider audience. It is intended to be comprehensible and meaningful to the attentive adolescent and the seriously concerned mature citizen. All that are required for a profitable reading is an open mind, a sense of proportion and balance, and a respect for consistency. Academically, the book should be understandable and interesting to students ranging from those in high school to those engaged in university studies as well as post doctoral research and to teachers at all these levels. It should be useful as a basic or supplementary textbook for both undergraduate and graduate courses in economics, socioeconomics, socioeconomic engineering, and the plethora of related or supporting disciplines. It is hoped that the generally informed citizen, the focused policy analyst, and the serious social activist, as well as the scholarly student, will all find the book of interest. Further, this writer respectfully submits that the general ideas presented here have, in fact, worldwide beneficial applicability.”

So I was interested to see if George had an alternative to offer to our existing economic systems.

Unfortunately, the reading has proven to be a chore for a multitude of reasons beginning with aspects of the writing that are more than just annoying; to what seem to me be fundamental and obvious flaws in the author’s logic. Stylistically, the book is about one third extended quotes of other people’s works, one third class hatred and malice directed against successful people combined with other patronizing commentary, and possibly one third George’s own on-topic contributions. Two more-or-less random examples what has pretensions to be a textbook suffice to make the points. First, from a passage supposedly about Thomas Jefferson’s ideas on progressive taxation:

“…That Thomas Jefferson and Sally Hemings (apparently) shared a loving, if illegal, relationship, while old Tom remained true to his dying wife not to marry again, makes ya just love the guy even more, doesn’t it? We note, with pleasure and amusement, the recently expanding turnout in celebration of family reunions at Monticello…” (p. 48)

The prurient interest in Jefferson’s love life crops up conspicuously over several pages, and equivalently prurient comments occur in many other areas of the book as well.

The next example is in a chapter on the “physical realizability, feasibility and implementation of socioeconomic democracy”

“As for the dot2000 presidential campaign, the class warfare loose cannons appeared to roll back and forth uncontrollably on the deck of the good ship U.S.S. Conservatism. Repubs and Democs alike, defending the taking of ‘hard’ and ‘soft’ money from the wealthy influential wanting to have influence, nevertheless paid lip service to defending the poor and working, class, with all the candidates speaking more Spanish on the stump than most of us can understand. Then there was that wonderful Reform Party, with GoPatGo Buchanan taking advise [sic.] for awhile from Lenora Fulani, a card-carrying character, and ‘The Donald’ Trump (bless his billionaire heart)…” [and on, and on] (p. 237).

In short, no matter how intrinsically interested I was in the topic, and no matter what I had paid for this book, I would have consigned to the trash can within the first 50 pages. However, I agreed to review it, so I slogged through to the end.

The book begins with the reasonable premise that something is inherently wrong with economic systems allowing people to starve through lack of income when others are able to amass tens of billions of dollars in wealth. According to this year’s Forbes Magazine rich list1, in April 2007, there were 946 billionaires in the world, with Bill Gates still the richest at $56 billion. The World Bank’s 2006 World Development Indicators estimates that in 2002, more that one billion of the world’s population lived on incomes of less than $1.00, and 2.6 billion on less than $2.00 per day2. By contrast, according to a Forbes chart, in 2002 the 200 wealthiest people had an aggregate worth of more than 1.1 trillion dollars.

George introduces his UGI and MAW concepts, discusses the fairness of establishing some kind of livable guaranteed minimum income, and then reviews a range of historical and contemporary works on the evils of maldistributed wealth, often with a strong tinge of class warfare. In passing, he points out the consistent failures of income tax systems where through the creative use of exemptions, the obscenely wealthy may actually pay less tax than do low and middle income earners. He then argues that replacing income taxes with taxes on excess wealth will produce a fairer system. The rest of the book explores how democratic processes can reliably establish the bounds on UGI and MAW, justifications, incentive and self-interest, practical approximations to his theoretical ideal, financial benefits and costs from various combinations and limits on upper bounds on MAW and lower bounds on UGI, how such systems could be realized practically, and the wholly beneficial ramifications that implementing democratically established UGI and MAW would have on various aspects of society. The one genuinely interesting chapter is an essay on Islamic economics, which appears to work to redistribute wealth in ways that appear to be acceptable in Muslim society. However, given the limited scholarship of the rest of the book, I would want to do much more research before I would consider anything written by George to be authoritative.

To me there are four fundamental issues that George seems blissfully unaware of: (1) Wealth in excess of needs breeds more wealth through investment (literally money makes more money). Eliminating great wealth will remove one of the major drivers of economic growth. (2) Confiscating wealth above the democratically set maximum allowable wealth will quickly eliminate the source of wealth for distribution (why would anyone work to create wealth just so it can be confiscated?), forcing the MAW setting lower and lower until no-one has any wealth. (3) The historical record from most communistic societies that people don’t work if wealth is confiscated for redistribution — where is the evidence that voters would have the wisdom to find workable values for UGI and MAW? (4) Where is the evidence that a MAW tax would be any more fairly administered than income taxes are. Even for publicly listed companies, let alone private wealth, we don’t have good tools for measuring their value beyond cash in the bank.

Basically, George’s solution to the maldistribution of wealth is so obviously flawed and so poorly argued that I would not recommend the book to any reader interested in finding a solution for social ills resulting from unequal distribution of wealth. That is not to say that I regard the problem to be insoluble.

To me, a much more workable kind of redistribution that would have been impossible in the past to provide a UGI, could be achieved by taxing all cash flows (i.e., taxing the economy as a whole). The world economy is now largely based on electronic transactions from the very largest ones down to minor ones like commuter bus and train fairs. It would be comparatively easy to eliminate the last vestiges of physical cash. A flat tax on all transactions could be easily automated, as could the automated topping up of every person’s transaction account on a daily or weekly basis with the UGI. Not only would this eliminate the negative productivity of the huge bureaucracies required to assess income or wealth and welfare bureaucracies to distribute it, but it would ensure any wealthy individual making transactions would pay their fare share. Given the reduction in bureaucratic costs, the impost on a given transaction — whether payment for a good or interest on shares or property should be small enough that it would not deaden the economy the way the direct confiscation of wealth would.

To conclude, George picked an interesting topic for his book, but he seems to have lost the plot in his class hatred of wealth, and wants to cook all the geese that lay golden eggs because he thinks they are too fat.

Notes

  1. http://www.forbes.com/2007/03/07/billionaires-worlds-richest_07billionaires_cz_lk_af_0308billie_land.html

  2. http://siteresources.worldbank.org/DATASTATISTICS/Resources/table2-7.pdf