Distributing Our Technological Inheritance
by Gar Alperovitz
Copyright 1994, Massachusetts Institute of Technology Alumni Association.
Technology Review (October 1994) Vol. 97, No. 7: 30-36.

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Democracy and Economic Power

Given that all current monetary gains depend so significantly on a free gift from the past, how could we allocate those gains more fairly? For one thing, inheritance taxes could be substantially increased. Andrew Carnegie, founder of Carnegie Steel and one of the nineteenth century's greatest "captains of industry," believed that accumulated resources should go to the community as a whole rather than largely to the progeny of rich individuals.

"Men who continue hoarding great sums all their lives, the proper use of which for public ends would work good to the community, should be made to feel that the community...cannot...be deprived of its proper share," Carnegie wrote in 1889. "By taxing estates heavily at death the state marks its condemnation of," or at least its imposition of time limits on, such selfishness. The contradiction between democracy and inheritance so bothered James B. Conant, former president of Harvard University, that he proposed we confiscate all property "once a generation" to "prevent the growth of a caste system."

James Meade, a Nobel Prize-winning economist now retired from Cambridge University, has suggested a system in which "every gift or legacy received by any one individual would be recorded in a register against his name for tax purposes. He would then be taxed... according to the size of the total amount which he had received over the whole of his life by way of gift or inheritance.

Yet we clearly confront a far deeper problem than inheritance of individual wealth and property. If we agree that today's technological progress is akin to a pebble resting on a mountain of previous achievements, then a substantial portion of society's current income should go as a matter of equal right to eac individual, apart from the amount he or she earns from current work or risk, or to the entire community.

Public ownership of patents and copyrights after an individual's or company's control has expired might be one mechanism for accomplishing this.

Rather than simply allowing whoever is best situated to take advantage of such knowledge fo free, the national treasury would accrue licensing revenues on the principle that the invention resulted largely from general knowledge created over time by the whole society. The government could distribute such revenues equally among all citizens or use the funds to support public institutions such as schools. Education would be an especially appropriate outlet given that businesses rely on schools to produce skilled citizens who have absorbed society's accumulated prowess.

Louis Kelso, a prominent corporate lawyer based in San Francisco who died fairl recently, proposed another tack. Aware from experience that the rich commonly gain title to new wealth by borrowing against what they already have, he sought some mechanism for the nonrich to do the same. He reasoned that a government trust fund could function as a guarantee, as do the portfolios of old wealth that some individuals use as collateral, to allow those without capital to obtain loans for purchasing and holding stocks. The stock would be held in escrow until the government-guaranteed loans were paid off. Because he also proposed that corporations pay out all profits to stockholders, Kelso estimated that seven years of dividends would be needed to pay back the loans plus interest, at which time those previously without capital would become full stockholders and receive, as a second income, all further dividends.

In this conservative lawyer's view, both economic well-being and democracy were at stake: "Any society seriously caring about freedom must structure its economic institutions so as to widely diffuse economic power while keeping it in the hands of individual citizens," Kelso held. "Nor can freedom in an industria democracy be long maintained unless the economic well-being of the majority is reasonably secure. Never in history has universal suffrage been built on a soun economic foundation; it is this defect, not the ordinary man's inability to cop with freedom that accounts for the notorious fragility of democratic institutions."

Harvard law professor Roberto Mangabeira Unger proposes still another possibility: that the government establish a "rotating capital fund" to democratize the use of society's wealth. "Capital takers"--entrepreneurs and other business investors--would pay a substantial interest charge and thus establish a large flow of income back to the public, to be distributed to individuals or invested in public needs. No one would have a permanent right to the use of capital: it would be on loan from the community. Each capital fund would distribute its resources through auctions, under which capital takers could buy one another's resources, or through a rotation system, in which the fund would take a more direct role in planning the allocation of capital. Clear limits would be set on the amount any individual or group could accumulate before returning the funds to the community or transferring them to other uses.

Of course, until recently socialism--the notion that the state should own all property on behalf of the people--was the most common mechanism for protecting and distributing society's technological inheritance. But aside from the practical difficulties of creating a well-functioning economy based on such ownership, a central problem with this idea is that power attaches itself to wealth. As with private corporate property under capitalism, but far more intensely, concentration of wealth usually leads to excessive state power. Still, more limited forms of public control of capital may enable citizens to reap the benefits of technological advance.

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