Two Ways to Drive Currency Acceptance through Taxes

When it comes to the means of production, society can be considered as falling into two basic groups – ‘owners’ and ‘non-owners’. Acceptance of a tax-driven currency can be achieved through the exertion of pressure on one or other of these groups, or both. In a low-tech, labor-intensive economy, the state essentially compels non-owners to supply labor services to owners. In a high-tech, capital-intensive economy, there is less need for such compulsion. It will become increasingly viable to place the initiative on owners to supply final output in exchange for the currency as technology continues to advance.

Here are two – of many possible – approaches to driving currency acceptance. Both assume property rights are enforced by the state. The choice is presented in stark terms to illustrate a simple point. The state can:

1. Impose an exogenous tax on all non-owners.

2. Impose an exogenous tax on owners and give non-owners a basic income.

With method 1, production is induced by compelling the majority to place themselves at the command of owners. Non-owners must offer their labor services to owners, or depend upon somebody who does. They will have to do this to survive. Owners can make a profit by hiring non-owners and paying them wages in the state currency to produce output for sale on the market. The profit motive is likely to be sufficient to drive the owners to behave in this way, but if necessary an exogenous tax could also be imposed on them.

Note that it is not necessary for the state to use method 1 to compel non-owners to work for owners. It can instead impose most or all taxes on owners. Under private ownership of the means of production, it is enough that the owners will need the state currency to meet their tax obligation. Non-owners will still be compelled to work for owners if they wish to survive. The main point of interest is that, in method 1, non-owners are coerced into productive activity for the benefit of owners.

With method 2, there is no compulsion on non-owners to work for owners. The onus is instead on owners somehow to supply final goods and services in exchange for the state currency in order to pay their taxes. They either need to attract non-owners to work for them or mechanize production. The basic income received by non-owners becomes a desired target of owners. They can get a cut of this income by outcompeting other owners. Rather than the onus primarily falling on workers to outcompete each other for less and less desirable jobs, the onus is now primarily on owners to entice workers with better pay and conditions or, if it is more profitable, to mechanize. There is still compulsion in this method, but it applies to owners rather than non-owners. Even so, the state can always compel non-owners at the same time (method 1) if technical development proves insufficient to enable sole reliance on method 2.

A variation on method 2 would be for the state to:

2′. Impose an exogenous tax on owners, purchase final output from them and freely distribute it to non-owners.

More generally, a combination of free distribution of public goods and services (2′) and private consumption out of basic income (2) could occur in proportions reflecting the electorate’s preferred mix of market and non-market distribution.

The basic point is that, in principle, driving acceptance of the currency does not have to rely primarily on compelling non-owners to offer themselves up for exploitation by owners once technology has advanced to a level at which machines remove the need for humans to engage in coerced activity. Those humans who nonetheless still choose to work for an owner will be doing so without coercion, at least relative to the present situation.

An alternative policy approach would be to compel everyone, owners and non-owners alike, to perform a minimum labor-time commitment to the extent that unpleasant jobs remain. If coerced labor is deemed necessary, it should perhaps be equally required from all. I have discussed these issues elsewhere, so won’t do so again here.

From a Marxist perspective, the likely effect of method 2 (or 2′) would be the gradual dwindling, over time, of profit income. This is because, for Marx, labor is the sole source of value. At a certain point, either owners could be paid a salary for performing whatever functions are deemed to be necessary, or society could assume collective ownership of the means of production. Presumably a dwindling of profits will not be what the ruling class has in mind if it ever decides to implement basic income. In that event, basic income would, in all likelihood, be seen as a way to dismantle the welfare state and roll back the state provision of key public services. And, indeed, basic income could well be implemented for these purposes if electorates stand by and let it happen, which they very well might given their track record at the polling stations.

None of the above should be interpreted as necessarily indicating a preference on my part for basic income rather than a job guarantee. It is simply intended to point out that coercion of labor is not the only mechanism through which taxes can drive currency acceptance. For what it’s worth, my preferences have not changed in relation to the job guarantee or basic income. I have discussed all that previously.

Related posts

Taxes as an Inducement to Supply Real Output
Currency Viability in a Pure Income Tax Regime with a Basic Income
Unearned Income and its Distribution
Approaches to the Reduction of Aggregate Labor Time