New Article: Robert Ashford, Why Working But Poor? A Capital Explanation and Solution, SSRN 2015. Abstract below:
This paper responds to two of the questions posed by the 2014 AALS Poverty Law Section’s Call for Papers: (1) “What other solutions can and should be employed [to reduce poverty]?” and (2) “What can legal scholars, lawyers, law schools, legal clinics, and law students do to reduce poverty?”
The answer to the first question is to democratize “capital acquisition with the earnings of capital” based on the principles of “binary economics.” This democratization requires extending to poor and middle-class people competitive access to the same government-supported institutions of corporate finance, banking, insurance, reinsurance and favorable tax and monetary policies that are presently available primarily to people and businesses to acquire capital with the future earnings of capital substantially in proportion to their existing wealth. With this democratization, participation in capital acquisition by the vast majority of poor and middle class people would no longer be limited as a practical matter to their meager or even negative net worth.
This democratization would transform the existing system of corporate finance (that presently functions primarily to concentrate capital ownership) into an ownership-broadening system of corporate finance. It would require no taxes, redistribution, borrowing, or government command. Corporations would be free to continue to meet their capital requirements as before, but they would have an additional, ownership-broadening, potentially more profitable, market means to do so. This additional means could be voluntarily employed to: 1. reduce poverty, welfare dependence, and fear of poverty by substantially enhancing the earning capacity of poor and middle class people (by supplementing their labor income and any transfer payments they may receive increasingly with capital income); 2. reduce tax rates, taxes, and the need for government expenditures; 3. enhance the earning capacity of the participating companies, their shareholders, their employees, and their customers; 4. reduce unemployment, raise wages, and enhance working conditions; 5. enhance the value of equity investments and retirement plans and reduce the risk of borrowing; 6. promote more sustainable, environmentally friendly growth, and 7. (if implemented globally) enhance the creditworthiness of national governments and their ability to raise revenue.
The answer to the second question is for law legal scholars, lawyers, law students, and individuals with responsibility for the curriculum of law schools and activities of legal clinics (1) first to learn and to teach (a) the underlying principles of binary economics, (b) how this democratization with the earnings of capital, based on its understanding, can be practically implemented and (c) how this democratization is a necessary part of any systemic solution to poverty and (2) then to advocate, work for, and facilitate its implementation.