by Louis O. Kelso and
Patricia Hetter Kelso
(click on title above to view full paper | 93kb
PDF file - requires Adobe
Acrobat Reader to view and print.)
If needist redistribution takes the form of coerced or legislated
wage increases in the useful-goods industries, it bloats consumer prices
with welfare costs; thus, to the extent the increased distribution
to labor (not being accompanied by any increase in productive input
by labor) is not absorbed by the capital owners at the cost of the
erosion of their property rights, the benefit takes the form of inflation
and is illusory. Paying a worker more for the same or less labor
input does not increase the available consumer goods and services which
he or she produces.
If redistribution takes the form of coerced or legislated wage increases
in the useless or non-economic goods industries (such as the space
race, military overkill hardware, etc.), the effect is purely inflationary
to the extent that the wage increases are not offset by corresponding
income tax increases. The purchasing power which arises out of
the production of useless goods and services is not matched by an equivalent
supply of consumer-useful goods and services, which are the only kind
that satisfy creature comforts. Therefore, in the pockets of
individuals, it will be spent to bid up the price of useful goods and
services. The net effect is to broaden the distribution of poverty,
rather than to increase the number of families who enjoy affluence.
If redistribution takes the form of direct money doles to individual
consumers, such as welfare checks, guaranteed annual income payments,
or negative income tax distributions, with taxation on middle and high
incomes or increases in government debt supplying the funds, some income
otherwise invested will be diverted to consumer goods and services. But
the apparent increases in the gross national product will be mostly
inflationary (i.e., imaginary). An indispensable condition for
building a genuinely affluent economy is new productive power. Redistribution
is incapable of bringing into existence any significant amount of new
capital formation.
If redistribution according to need takes the form of direct governmental
distributions of goods the government has bought previously (such as
goods surpluses), the path is paved for habitual government purchase
of such goods; thus, as noted above, the concentration of ownership
of productive capital is further promoted. The resulting economic
patterns are familiar throughout the non-socialist Western world. It
is true that the most dire forms of poverty may be somewhat diminished
through this process, but the poor are still never enabled to become
affluent. No one has ever achieved affluence on a dole, nor will
this ever happen.
Needist schemes have another inherent shortcoming that none can avoid. Its
most familiar manifestation is the “means test,” presently
found in all welfare laws and arrangements. The recipient is
required to demonstrate, as a condition to his dole, the nature and
extent of his need. Thus the human dignity of the recipient,
already wounded by having to apply for charity, is dealt a second blow. On
humanitarian grounds most modern needist schools propose that the means
test be abolished, and that all humans be granted a legal or constitutional
right to some kind of income without productive responsibility. Expedients
of various kinds may succeed in disguising the means test temporarily,
but they will never dispose of it—the problem goes deeper than
the Needists suppose.
Experience shows that, as a general rule, human beings are incapable
of judging the needs of others to be as great as their own. To
put it another way, every human being desires affluence for himself
but few, if any, having the power to bestow or withhold, believe that
this need is equally valid for others, particularly when those “others” are
strangers. Exceptions to this harsh rule are rare, as any estate
lawyer can testify. During their lifetimes and in their last
wills and testaments, the wealthy almost unfailingly appraise the “needs” of
their children, grandchildren, relatives, friends, and employees as
being well below the levels of consumption they considered desirable,
and even necessary, for themselves during their own lifetimes; frequently
they prefer to give the bulk of their fortunes to charities and foundations
in which they have evidenced little previous interest. Many potential
heirs live on their expectations for decades, rear their families in
genteel penury, and are well past middle age when their inheritance
finally devolves upon them.
A Joseph Kennedy who gives each one of his children a million dollars
upon their majority because he wants them to be independent even of
him astonishes the world precisely because the sentiment is so uncommon. Even
old family retainers who have given a lifetime of faithful and unselfish
service are seldom left with more than a symbolic pittance by the departed
objects of their devotion. As for those who give generously of
their wealth to strangers, they are in every age the stuff of legend
and sainthood.
The historical lesson is clear: the needs of persons not objects of
natural bounty will always be appraised as minimal. The productive
will never voluntarily support the unproductive in an affluent style. They
never have, and the evidence is that they are emotionally incapable
of it. Even the Soviet Union has its anti-parasite laws, and
its constitutional mandate that those who do not render society productive
labor shall not eat. Thus distribution of wealth according to
the need principle—so offensive to society in practice—is
indefinitely postponed to those distant aeons, calculable only in astronomical
magnitudes of time, when the acquisitive instinct, according to the
Marxist intellectuals, shall have been purged from human nature.
The most important generalization that can be made about all needist
proposals is that they are invariably addressed to the effects of poverty,
i.e., insufficient income, rather than to the cause of poverty, i.e.,
low productive power of the poor. Needist solutions in general
are either proposals for further steepening pinnacle affluence, or
for equalizing poverty. They are not, and by their very nature
cannot be, instruments for achieving the ideal goal of universal capitalism,
which is universal affluence. That goal can be achieved only
by universal capitalism and practical steps for its realization of
the tenor of those contained in the Second Income Plan. They
alone are designed to enlarge the physical economy, to bring into existence
a capital plant (in the United States and in Canada, for example) several
times as productive as those presently in existence, and to structure
the financing of these second economies so that they will be owned
by the 90% of families and individuals who do not own viable capital
holdings in either of these economics today.
The less the incentive to produce, the smaller the product. To
the extent that Needists succeed in redistributing income and wealth
from those who produce to those who do not, they kill the incentive
to produce. Laws will not substitute for that incentive . . .
.
The nations of the world may take years and even decades to recognize
as needist proposals many schemes that are verbally, legally, politically,
or psychologically disguised. But in a world in which all individuals
want affluence and most, if not all, could produce it through the combined
forces of labor and capital, needism as a principle of distribution
is doomed. Needism is contrary to human nature: it cannot
work, and it will not work. It can only foment bitterness, enmity,
strife and disillusionment in the societies that undertake the experiment.
-- First published in Two Factor Theory: The
Economics of Reality (New York: Vintage Books, Random House,
Inc., 1967), pp. 25-29.
