Equality of Opportunity as a Fig Leaf

Don’t get me wrong, I fully support equality of opportunity. Everyone in society, no matter where and in what circumstances they are born, should have every opportunity to succeed. All men are born equal.

However, neoliberals, whose policies promote inequality, have used the idea of ‘equality of opportunity’ as a fig leaf, to hide the fact that they really won’t do anything to combat, and don’t even care about, inequality.

In the US, Paul Ryan, of the Republican Party, said the following:

These actions starkly highlight the difference between the two parties that lies at the heart of the matter: Whether we are a nation that still believes in equality of opportunity, or whether we are moving away from that, and towards an insistence on equality of outcome.

Policies that ignore the rent-seeking ‘free lunches’ that, more often than not, are what the richest members of society got their wealth from, and defund public services and impoverish less fortunate members of society, increase income and wealth inequality dramatically. Fully aware of this, the majority of people would not vote for politicians who support such policies, as they would be better off for not doing so. Therefore, neoliberals must offer a carrot to voters. They offer the ‘opportunity’ to become a part of the elite.

A casino analogy is apt to describe the neoliberal concept of ‘opportunity’. The casino operators represent (and might be in reality) those rich off unearned income. The gamblers represent the rest of the population. Gamblers are encouraged to play the game by the possibility of a windfall gain. In practice, the gamblers usually lose, and the casino operators become rich from the gamblers. Hence, this can be called casino capitalism.

But people’s livelihoods shouldn’t be part of a game. Offering people a chance to become a part of the elite normalizes massive gaps in terms of incomes and wealth between the rich and the poor.

How can this happen? Because our economies are already sufficiently unequal, the wealthiest people have enough of a share of an economy’s wealth to use it as a carrot to manipulate less wealthier citizens. The super-rich can fund parties and candidates that do not represent the interests of the majority of voters, so much so that those parties and candidates are consistently in power.

Henry George predicted this, all the way back in 1879:

… political equality — when coexisting with an increasing tendency toward unequal distribution of wealth — will ultimately beget either tyranny or anarchy.

A representative government may become a dictatorship without formally changing its constitution or abandoning popular elections. Forms are nothing when substance has gone. And the forms of popular government are those from which the substance of freedom may go most easily. For there despotism advances in the name of the people. Once that single source of power is secured, everything is secured. An aristocracy of wealth will never struggle while it can bribe a tyrant.

When the disparity of condition increases, democratic elections make it easy to seize the source of power. Many feel no connection with the conduct of government. Embittered by poverty, they are ready to sell their votes to the highest bidder or follow the most blatant demagogue. One class has become too rich to be stripped of its luxuries, no matter how public affairs are administered. Another class is so poor that promises of a few dollars will outweigh abstract considerations on election day. A few roll in wealth, while the many seethe with discontent at things they don’t know how to remedy.

Where there is anything close to equal distribution of wealth, the more democratic government is, the better it will be. Where there is gross inequality in the distribution of wealth, the opposite is true. The more democratic government is, the worse it will be. To give the vote to people who must beg or steal or starve, to whom the chance to work is a favor — this is to invoke destruction. To put political power in hands embittered and degraded by poverty is to wreak havoc.

Hereditary succession (or even selection by lot) may, by accident, occasionally place the wise and just in power. But in a corrupt democracy, the tendency is always to give power to the worst. Honesty and patriotism are a handicap, while dishonesty brings success. The best sink to the bottom, the worst float to the top. The vile are ousted only by the viler.

National character gradually absorbs the qualities that win power. In the long panorama of history, we see over and over that this transforms free people into slaves. A corrupt democratic government must finally corrupt the people. And when the people become corrupt, there is no resurrection. Life is gone, only the carcass remains. It is left but for the plowshares of fate to bury it out of sight.

Unequal distribution of wealth inevitably transforms popular government into despotism. This is not a thing of the far future. It has already begun in the United States, and is proceeding rapidly before our very eyes. Men of the highest ability and character avoid politics. The technique of handlers and hacks counts more than the reputations of statesmen. The power of money is increasing, while voting is done recklessly. Political differences are no longer differences of principle. Political parties are passing into the control of what might be considered oligarchies and dictatorships.

Modern growth is typified by the great city. Here we find the greatest wealth and the deepest poverty. And here popular government has most clearly broken down. In all the great American cities of today, a ruling class is defined as clearly as in the most aristocratic countries. Its members have whole wards in their pockets, select slates for nominating conventions, and distribute offices as they bargain together. “They toil not, neither do they spin,”* yet they wear the finest of raiment and spend money lavishly. They are men of power, whose favor the ambitious must court, and whose vengeance they must avoid.

Who are these men? The wise, the learned, the good? No. They are gamblers, fighters, or worse. Men who have made a trade of controlling votes, and buying and selling offices and legislation. Through these men, rich corporations and powerful financial interests pack the Senate and the courts with their lackeys. In many places today, a Washington, a Franklin, or a Jefferson could not even get into the state legislature. Their very character would be an insurmountable disqualification.

Progress and Poverty, Chapter 42 (Modern Edition)

Rather than giving people the ruse of ‘equality’, how about some real equality. Capture unearned economic rent, such as gains in a landowner’s property caused by an enterprising community and government-funded infrastructure and services, to block off this free lunch for a select few. Use this captured rent to sustain all, through a Basic Income scheme. This gives people a safety net to take on risky and  volatile ventures such as starting a business or writing a book, and pay for the costs of living while people undergo education and training.

Give people an equal grant to start themselves off, and allow people to earn more money only through hard work, and true equality of opportunity will appear.


The Effects of Economic Rent When Private and When Common

Economic rents are unearned income. They are not in return for exertion, like wages given for labour, and they are not in return for bringing capital to the market, like capital yield/interest*. Rents come from owning a finite resource, usually a natural resource.

Rents, unlike wages and capital yields, do not serve to incentivise economic activity. On the contrary, they tend to discourage it.

When a worker receives pay in return for work, they are incentivised to work. Ceteris paribus (all other things being equal), a worker who works more will be paid more, and a worker who works less is paid less. As a result, people are encouraged to contribute their labour to production.

Labour can be combined with natural resources (‘land’ as a factor of production) to produce goods and services for consumers or to produce capital. Consumer products directly satisfy the wants and needs of consumers, while capital products are themselves used for further production. Some products can be both consumer and capital goods, such as computers or vehicles. Laptops can directly satisfy the wants of households, or can be used by businesses in the process of production to generate wealth.

Since all capital is produced by labour and land, manufacturers of products obviously must charge prices sufficient to pay wages and rent (inventory costs consist of both wages and rent) to stay in business. Consumers will pay for products that they want, but capitalists are in business, and must recoup their costs. Therefore, they must receive a return to their capital (capital yield/interest) sufficient at least to cover the costs of purchasing, and also maintaining, capital. This is one justification for interest.

In addition, when an owner of capital receives capital yield or interest on their capital, they are encouraged to bring capital to the market. Someone who has saved $100 000 could stash it under their bed or floorboards (hoarding), which slows economic activity. Alternatively, they could use it to buy capital, such as a commercial vehicle or small shop, that facilitates economic activity. They could also pool their resources with others to buy more expensive capital goods, or lend their money to someone who needs it to purchase capital, likely an entrepreneur. Interest incentivises people to use their savings in a way that is beneficial to the economy. In summary, capital yield and interest pay for the costs of capital and encourage capital to be produced and brought to the market.

On the other hand, land has no production cost and can’t be produced. As a result, when a land owner leasing his or her land receives rent … nothing in particular happens. The land owner has done very little, probably no labour, as real estate agents, for example, can be paid a small fee for property management. They are not driven to produce more land, as land generally cannot be produced. Land reclamation is used only in extreme cases, and reduces the area of a body of water. While higher land prices and rents may encourage owners holding land vacant to release land, this is more than counteracted by the trend of rising land prices encouraging land owners to hold land vacant with the intention of selling for a higher price in the future.

This land speculation is destructive to the economy. When valuable locations are kept out of use, it means workers cannot produce wealth at those locations, and so are denied opportunities to make a living. They must accept other work, and since opportunities to work have been limited, wages are lower. In addition, they must set aside some of their already smaller income to meet rising housing costs. Workers may have no choice but to work under someone fortunate enough to possess some capital. Remember that since workers have less money, few people can afford capital. Since a small number of people have capital, they are able to force workers to work for low wages.

But capitalists do not have it all lucky. They too must forego good land, and put capital on inferior land, where lower capital yields are made. They too must pay rent to landlords. Landlords gain massively, workers lose massively, and capitalists are in between.

Unearned rents are the perfect source of government funding. Raising revenue from rent-based sources, far from inhibiting economic activity, increases economic activity. Not only will workers and capitalists no longer have to pay rents, but taxes on incomes, sales, profits and similar sources will no longer have to be levied. The productive parts of the economy will gain enormously.

Government revenue from rents is likely to exceed government spending. Social welfare programs designed to help those denied reasonably paying work will no longer be required. Stress and health problems will be reduced from less demanding lifestyles, reducing health costs. Infrastructure costs will be reduced, as the cause of urban sprawl, prime locations going unused, will be removed. The excess revenue may be distributed to every citizen via a basic income grant. Every citizen unconditionally receives a certain sum of money on a regular basis, to spend on whatever they like. Some may take care of family members, further their education, undertake creative endeavours, or even start a business. I have previously written about this topic in more detail here. Even land owners may be better off than they
would otherwise be, if economic growth is particularly fast, and the basic income exceeds what they would otherwise receive  from their land.

In conclusion, while it is very beneficial to the economy for wages and interest/capital yields to be kept private, privatised economic rent is harmful to the economy. On the other hand, rents captured for purposes of government revenue may be a force for good.

*Here I use the terms ‘interest’ and ‘capital yield’ interchangeably. Both refer to the wealth distributed to owners of capital. Capital yield is a more precise term for my purposes, as interest can refer to returns on any loans or securities, which can be used to purchase land. Interest, however, is a more commonly used term to describe the return to capital.

A Basic Income Guarantee Doesn’t Need Coercive Redistribution

In the last few weeks a lot has been said about Libertarianism and the Basic Income Guarantee (BIG). This includes Matt Zwolinki’s column piece ‘The Libertarian Case for a Basic Income’, Ash Navibi’s critical response, and John Danaher’s 3 part series on ‘Libertarianism and the Basic Income’ (Part 1, 2, and 3), and many other articles quickly accessible via Google search. However, a recurring basic assumption through many of these writings are that a BIG requires coercive redistribution. This is never challenged. However, a BIG can be provided without coercive redistribution, if the right revenue streams are tapped.

What is a Basic Income Guarantee?

A basic income guarantee provides to every citizen an unconditional income. Everyone, rich or poor, full-time worker, part-timer or unemployed, is provided with a regular stream of money. This can provide for, or help provide, for the necessities of life, and helps people who are unemployed, have to care for others, or wish to take a risk on an entrepreneurial venture. Even if one cannot receive sufficient income from work, they are still given enough to meet the needs of life. Those left jobless are not forced into homelessness.

A BIG holds advantages over conventional social welfare programs. Since there it is universal, without means testing, there is no disincentive to work harder and earn more income, where that might otherwise push an individual’s income beyond the means test. There are no cases where it is not worthwhile to work due to welfare, and people become dependent on the hard work of others. There is also no stigma behind receiving the BIG to meet your needs, as everyone receives it.

If a BIG did require forced income redistribution, I would find it difficult to reconcile with a libertarian viewpoint. Libertarians believe in the free market, and in low taxes, and raising income taxes to fund a basic income would be a very difficult proposition. But we need not raise income taxes. We simply need to tap unearned income.

Scarce Nature

Abiotic nature, including all of its resources, services and opportunities, are scarce, and we cannot expand or increase them. Nature was not created by humans through labour; it existed before us, and we came from it. We cannot create more of nature. To use land, probably the most significant aspect of nature,as an example, land reclamation projects simply take from the seas and oceans to create more buildable land, and are economically viable in very few situations. No nature can be added by humans.

Living organisms, such as plants and animals, are not fixed in size since they reproduce. Plants and animals whose reproduction we can control may be considered capital, as they are taken care of through human labour and other capital. What I call nature is usually referred to as the economic factor of land, which includes much more than the common notion of land as the dry surface of the earth.For the sake of simplicity, when I refer to nature, I do not include organisms we breed.

As a result of the scarcity of nature, the value of nature rises immensely, in line with economic activity. For example, as the population and economy of a settlement grows, as the settlement becomes a large city, land values rise immensely. A small block of land in a city such as New York is worth much more than an enormous plot of farmland in the interior of a country.

Rents (Unearned Income)

When individuals are given rights to the gain in land value, heavily guarded as ‘private property’, we have given them unearned income, also known as economic rent (as opposed to wages for labour, interest/capital yield for capital, and profit for enterprise).

There is no basis for property rights in that which cannot be created through labour. The purpose of private property is to protect that which an individual has made through their own effort and hard work, and provide incentives to produce. When Alice is paid $20 an hour for their work, this is what her employer judges to be the value of her work to them in the market. They may use that money to buy an amount of goods and services equivalent to the goods they produce or services they provide (taxation complicates this).

Since individuals do not create land through labour, and can’t be incentivised to do so, property rights to land values are not justified. All that is needed is the possession of land, the exclusive right to land, protection against others intruding in your land, and the right to the wealth produced on that land, in return for a charge based on the value of that land.

Rent Capture

What I have just suggested is often called ‘land value taxation’, or simply a ‘land tax’. However, these names are inaccurate, as a tax usually refers to a forced payment made to the government, without any particular good or service in return (government services received are rarely in proportion to taxes paid). However, a charge based on land value, is a trade, a purchase of the exclusive rights to land in exchange for a fee. If you do not wish to pay the charge on your land, based on its value, you may give it to others. Land not in prime locations that is excess to economic needs, which nobody competes for, has no value, and so it may be used for free, without the payment of any charges whatsoever. This revenue tool may be more accurately called ‘land value capture’.

Other than land value capture, revenue tools that capture nature’s rents rather than hard work include a carbon price for using the atmosphere to dispose of carbon (as well as similar charges for other pollutants). Whether or not global warming is real, caused by humans, and worth fighting, it is worthwhile to charge a price for the earth’s services when the atmosphere is used to dispose of pollutants.

Mining and extraction companies should also be charged royalties or severance taxes equal to the value of minerals in the ground, which is equal to a normal profit rate subtracted from profits of mining companies. Most companies buy at a price, add value, and sell as a higher price, but companies that extract minerals, oil and gas do not pay a price for their products, which they sell for a considerable profit. Mining companies deserve the value they add to minerals by taking them out of the ground and making them usable, and a return to their capital, but not unearned income from natural resources.

There are also numerous smaller rents, such as water rights charges, fishery license charges, and so on. Altogether, these rents likely have enough value to fund a fairly-sized BIG, and remove all taxes on labour and capital as well. This provides more incentives to work, overcoming any discouragement to work that a BIG would bring. This double bonus of a basic income and no taxes would dramatically increase economic growth and wealth, and entrepreneurialism, as we will see later.

Managing Rents

Those on earth, including the human race, as well as other animals and plants, have a common right to the value of nature. We are created from nature, a part of nature, so we have the rights to the fruits of nature. Since, we are the most advanced and intelligent race on this planet, humans have a duty to administer the rights to nature. The fruits and value of nature are to be used to benefit all people, rich or poor, elderly, young or yet to be born for a hundred years, as well as other species inhabiting the earth.

An organisation or organisations representing all people should take care of rights to nature. It would administer nature’s resources, services and opportunities, and revenues from trades for the above three fruits of nature. These organisations might be democratic governments that truly represent their populations, or trusts with a duty to manage nature, whichever is more achievable and suitable.

Remember that the enforcement of property rights requires a governing body, just as a BIG does. A basic income funded from nature’s revenues is no less laissez-faire than letting owners of nature become rich off unearned income. Both require government action, and in both cases the income is not from work. The only difference is that a BIG benefits all, while leaving unearned income to owners of nature benefits only a select few. A BIG is not income redistribution, it is just distribution.

The term ‘predistribution’ is sometimes used, referring to an economic system that prevents the privatisation of unearned income, and ensures a fair wealth distribution in the first place. This means that individual incomes vary only as individual labour contributed to the economy varies. This is much more efficient than redistributing income, which entails greater adminstrative costs.

The Basic Income Grant Helps Entrepreneurs

In fact, a basic income promotes libertarianism and the free market more, as it encourages entrepreneurialism. To start a business requires a significant amount of starting capital. If Bob can use a BIG to meet their daily needs, then the money he gets from working can be saved. Enough money can be saved for Bob to start a business. Had there been no BIG, Bob would likely still be working for someone else, simply trying to make ends meet, without enough money to realise any entrepreneurial aspirations. Rather than creating jobs, he would have taken a job.

Income during the early stages of a business is often small. The Bob’s income may be too small for him to survive, or live in reasonable comfort. A BIG supplements a small business owner’s income, allowing and encouraging entrepreneurs such as Bob to stick by small businesses, and allow them to grow.

An entrepreneur takes on risk. They risk failure. With a BIG, the failure of a business is no catastrophe. If an unsuccessful business leaves Bob without income, a basic income can help him survive, while he finds a job. Bob may start another business, likely a more successful one, since he has had the opportunity to learn from his mistakes.

In any case, there is plenty of justification to support entrepreneurs with a BIG. Entrepreneurs obviously create jobs. While people will no longer have to work with a BIG, the sheer abundance of jobs that will result will likely encourage many people to work anyway. After all, human wants are unlimited. But when a business fails, this provides information on what works and what doesn’t for a business. To use the language of Nicholas Nassim Taleb’s book Antifragility, fragile units (businesses) make for an antifragile whole (economy). ‘The fragility of every startup is necessary for the economy as a whole to be antifragile, and that’s what makes, among other things, entrepreneurship work: the fragility of individual entrepreneurs and their necessary high failure rate.’ Mistakes made in business help the economy run smoother. The economy improves with individual failure.

However, the benefits of mistakes do not always flow to the same people who made those mistakes. A entrepreneur starting a business may look at past businesses similar to theirs that failed, to know what not to do. That person has benefited from the errors of another person. This happens more if a failed entrepreneur can’t start another, more successful business, having learned from past mistakes. A BIG allows entrepreneurs who have made mistakes to get back on their feet, and create new, better businesses. It also compensates those who have failed for the benefits their mistakes have on others.


A Basic Income Guarantee does not need coercive redistribution. It is very much compatible with libertarianism, if funded from capturing unearned incomes. It helps the free market function better and promotes entrepreneurialism, economic growth, wealth generation and job creation.

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