Wednesday, 30 September 2009

Wealth and Income

An interesting observation. I and many of my friends have to work to pay our debts. We are intelligent proletarians. A proletarian is a person who possessing neither capital nor production means, must earn his living by selling his labour. A non-proletarian may work, but he does not have to in order to support his living. We are paying out mainly our mortgages, which are mainly the loans for the houses we live in. And most of the value of the houses is the land. So basically we work hard to pay out the land we live on. That makes me ponder.

A simple model. A number of people are willing to buy a resource which is not producible by labour, for example, land. The market price for the land rises up to the level of the limit of competitive abilities of those people. If the people are desperate they borrow from the bank some kind of paper. By doing this they sell their future labour. The owner puts this paper back to the bank, and the bank cancels the paper. When future comes, people have to work to pay back the borrowed paper producing a lot of consumable products. If the amount of products is more than enough, they have to produce all kinds of luxuries to please the owners of the bank and the resource previous owners. When the demand for the resource declines, the prices fall, leaving years of hard labour spent on something, which those people not really required at the first place.

I always suspected that the slavery era has not ended. It transformed. People, who have to work and earn for living, pay taxes. They pay taxes directly through their income and indirectly through businesses they work for, and through the sale taxes. But some who do not have to work usually pay much less taxes, because their lives are businesses with tax deductible expenses. Am I a supporter of this kind of system? Would a simple solution as taxing wealth (not wealth taxing) instead of personal income make all people happier? That makes me ponder.