Capital, sustainable economic recovery
This article presents a proposal to broaden the right to acquire capital with the earnings of capital as a means of promoting sustainable economic recovery and growth. It would open the markets for real and financial capital acquisition more fully and competitively to poor and working people (1) to distribute more broadly the earnings of capital and (2) to profitably employ more capital and labor. The article notes that both the recession and the strategies advanced to promote economic recovery may be viewed as responses to the prospect of inadequate present and future earning capacity of both consumers and producers (1) to purchase what can physically be produced and (2) to repay existent and anticipated debt obligations undertaken to stimulate the economy. To increase the prospects of sufficient, sustainable earning capacity, the approach advanced in this article is to extend to all people the same protections and benefits presently provided by government that facilitate market transactions whereby capital is acquired with the earnings of capital primarily for people in proportion to their wealth. Although in theory, all people in a market economy are able to acquire capital with the earnings of capital, reliable empirical data reveal that as a practical matter, the major determinant of the ability of individuals to acquire capital with the earnings of capital is the existing distribution of capital ownership. The theory of "binary" economic growth (on which the proposal advanced in this article is based) holds that the market return on capital depends not only on the wage rate, the scarcity of capital, its marginal productivity, and the interest rate, but also depends on the distribution of capital acquisition with the earnings of capital. The prospect of a broader distribution of capital acquisition with the earnings of capital carries with it the prospect of more broadly distributed earning capacity in future years, which in turn will provide the market incentives to profitably employ more capital and labor in earlier years. The idea that the broader distribution of capital acquisition with the earnings of capital will promote growth is not found in any of the widely accepted theories and models of economic growth such as those proposed by Schumpeter, Solow, Roemer, and Lucas. By opening to all people the institutions of corporate finance, banking, insurance, government loans and guaranties, and monetary policy (the very institutions presently relied upon by the Federal Government to stimulate the economy) the practical ability to acquire capital with the earnings of capital can be more broadly extended to all people, and a more level and competitive economic playing field can be established, with the result that greatly enhanced prospects for greater and more broadly distributed earning capacity and growth can be reasonably expected and realized by all.
Ashford, Robert, "Broadening the Right to Acquire Capital with the Earnings of Capital: The Missing Link to Sustainable Economic Recovery and Growth" (2009). College of Law Faculty Scholarship. Paper 9.
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