The trouble with capital assets is that too few of us have them. New Labour's child trust fund, providing cash for future 18 year olds, is revolutionary.by Samuel Brittan / August 20, 2003 / Leave a comment
The 19th-century French anarchist-socialist, Pierre-Joseph Proudhon, achieved fame with his dictum, “property is theft.” Karl Marx, who had contempt for Proudhon in everything else, took over the idea and believed that problems of poverty and inequality would be solved by collective ownership of the means of production.
Marx’s diagnosis was wrong. The trouble with capital assets and investment income is not that they exist but that too few of us have them. The traditional European upper-middle classes derived enormous benefits from having a nest egg to fall back upon. This was useful not only in providing collateral for home loans or starting or extending a small business. It was also helpful for people who wanted to opt out for a while from the rat race to try becoming a creative artist, to work at tasks with low market rates of pay, to pursue good causes, or just to enjoy an extra bit of leisure or riotous living.
And there is an alternative radical tradition based on distributing assets more widely. It has Biblical roots. The Old Testament decreed that every 50th year should be a jubilee in which all land would be returned to its original owners, debts cancelled, slaves set free and transactions in the preceding half century annulled. There is no evidence that this was attempted. But the injunction showed a recognition that capital ownership should not depend entirely on the accidents of heredity and past transfers.
The Peruvian economist Hernando de Soto has recently attracted attention by proposing for the third world a form of popular capitalism based on granting full property rights to the many forms of de facto property, such as extra-legal small businesses and property owned by the poor in shanty towns. There are not so many hidden assets of this kind in the industrial west. Property ownership for most people takes the form of home ownership and/or pension rights, whether in state or private schemes. The sale of council houses at heavily discounted prices was probably the most popular measure enacted by the Thatcher government, even though it did little to increase the wealth of those at the lower end. One problem with home ownership is that, despite equity withdrawal, houses are there basically for people to live in and do not become available as a nest egg or reserve unless or until the owner trades down in late middle age when…