No, it’s a tax on currency-denominated wealth, which is not the same thing at all. Wealth in the form of land, houses, mining rights, guns, loyal soldiers, gold, cows, or friends at court is not taxed by inflation. To the extent that the problem in poor countries is that a small elite controls most of the cash economy—I do not make a claim on how large an extent this is—inflation would indeed solve it, provided that the tax extracted was given to the poor. Which is somewhat unlikely, but there you go.
I’m aware; I strongly suspect that it is much easier for the poor (that would be receiving this help) to store their wealth in the local currency than any of the forms you listed.
The issue is more that the small elite controls the legal economy, with most of the economy occurring off the books, leading to very little in the way for legal protection of the more sophisticated economic organizations which help people accumulate wealth.
(de Soto tells the story of being a government economist in Peru, where they were all worried that the construction market was collapsing because of declining revenues and permits. But something seemed odd- there were still cranes and buildings going up all over Lima, and concrete sales were seeing steady growth. They scratched deeper and discovered that extra-legal construction, which they thought was a few percent of legal construction, turned out to be significantly larger- the majority of the construction economy in the country was off the books.)
I strongly suspect that it is much easier for the poor (that would be receiving this help) to store their wealth in the local currency than any of the forms you listed.
Ok, fair enough. As noted, I don’t make any claim on the extent to which the problem consists of cash being mainly in elite hands. That said, if you were willing to start with a blank slate, you might be able to redistribute with a one-time inflation event. Making up numbers: Suppose a 10% elite controls 90% of the wealth in both currency and non-currency forms, and suppose that these two are roughly equal. Do a 100% devaluation of the currency, ie full hyperinflation, redistributing the gains equally. The 10% still control 90% of the non-currency wealth, but now they only have 10% of the currency wealth. Presumably there is then some re-equilibration and you end up with some of the non-currency wealth making its way into 90% hands in exchange for the new currency.
Of course, in practice it is the wealthy who would be able to protect themselves from your scheme by moving their currency holdings into dollars, or whatever; and I’ve no idea how realistic my distribution between currency and non-currency is. If 90% of wealth is in non-currency form then you’re hacking about at the edges. In any case, though, a single hyperinflation event is probably a bit different from the steady-but-low inflation in the original question.
No, it’s a tax on currency-denominated wealth, which is not the same thing at all. Wealth in the form of land, houses, mining rights, guns, loyal soldiers, gold, cows, or friends at court is not taxed by inflation. To the extent that the problem in poor countries is that a small elite controls most of the cash economy—I do not make a claim on how large an extent this is—inflation would indeed solve it, provided that the tax extracted was given to the poor. Which is somewhat unlikely, but there you go.
I’m aware; I strongly suspect that it is much easier for the poor (that would be receiving this help) to store their wealth in the local currency than any of the forms you listed.
The issue is more that the small elite controls the legal economy, with most of the economy occurring off the books, leading to very little in the way for legal protection of the more sophisticated economic organizations which help people accumulate wealth.
(de Soto tells the story of being a government economist in Peru, where they were all worried that the construction market was collapsing because of declining revenues and permits. But something seemed odd- there were still cranes and buildings going up all over Lima, and concrete sales were seeing steady growth. They scratched deeper and discovered that extra-legal construction, which they thought was a few percent of legal construction, turned out to be significantly larger- the majority of the construction economy in the country was off the books.)
Ok, fair enough. As noted, I don’t make any claim on the extent to which the problem consists of cash being mainly in elite hands. That said, if you were willing to start with a blank slate, you might be able to redistribute with a one-time inflation event. Making up numbers: Suppose a 10% elite controls 90% of the wealth in both currency and non-currency forms, and suppose that these two are roughly equal. Do a 100% devaluation of the currency, ie full hyperinflation, redistributing the gains equally. The 10% still control 90% of the non-currency wealth, but now they only have 10% of the currency wealth. Presumably there is then some re-equilibration and you end up with some of the non-currency wealth making its way into 90% hands in exchange for the new currency.
Of course, in practice it is the wealthy who would be able to protect themselves from your scheme by moving their currency holdings into dollars, or whatever; and I’ve no idea how realistic my distribution between currency and non-currency is. If 90% of wealth is in non-currency form then you’re hacking about at the edges. In any case, though, a single hyperinflation event is probably a bit different from the steady-but-low inflation in the original question.