The Free Flow of Capital is an Individual Right

Few people think that the free flow of capital is a civil or individual right. Few people fight for the right to do what they want with their capital. Few would die for that right or engage in civil disobedience over it or even protest for it. But, in truth, it is an important right for which men should fight. If we are to recover a proper society, we must demand it, fight for it and get out on the street for it.

The free flow of capital is the right of every individual to use his investment capital in any way he decides. It is such an important right that the capitalist system is thwarted without it. Capitalists hold that the government should protect it because it keeps people free and advances their abilities to live and prosper. It is essential to the growth and success of capitalists and workers, so much so that its frustration can destroy the capitalist system and the prosperity that comes with it. 

Today, progressives and other leftists believe that government should restrict and control the flow of capital to ensure that investment capital is used in a way that benefits the least among us. They hold that productive individuals and businesspeople should be forced to advance “social justice” over private profit without consideration of the scientific fact that re-distribution of income and capital destroys prosperity and sends society into deeper and deeper poverty.

Why is this so? Let’s try to understand the role that capital investment has in society. First, let’s understand how investment capital works in society. Who provides capital for investment? The answer is people who save their earnings so they can gain interest. These people include pension plans, individual savers from the middle class and upper classes and, finally, venture capitalists. This last group is usually called the 1% and despite the fact they are very small in number, they make the largest part of the income in society. For want of a better word, the 1% make up the people who work harder and smarter. They are inventive and hard-working people who have found the best way to use their money. They create the newest and best products, find the most efficient companies and invest their huge earnings in order to take advantage of those efficiencies and high profits. They are the real “worker bees” in society and they produce the bulk of the profits. Let’s examine their impact on society.

Let’s look at how the 1% earn their money. 

The following chart shows how people earn their money.

We see that the top 1% earn significantly more money from investments and from running their own businesses. On the other hand, the 99% earns more money from employment and since they invest very little and even fewer of them run their own businesses, they don't earn very much compared to the 1%. The implication of this is that the 1% invests better than the 99%. They use their money better and it reflects more earnings from capital investments. That's why they are rich. They are smarter about money.

The critical questions are “why are we taking any money from the rich and giving it to the poor? Isn't it true that most of the poor will spend their money in economically wasteful consumption?" 

Remember the key difference between investment/production and consumption: The money invested in product creation is not consumed. It comes back to the investor along with profits. But the money spent on consumption does not come back to the spender; it is consumed – destroyed. This means that we lose the benefit of letting the 1% invest their money wisely. That money is destroyed through consumption when it could have been preserved through investment.

Who pays the largest amount of taxes? As individuals, the top 1% pays the most taxes. But if we look at a percentage of the total taxes paid, here is what we get:

This chart was done with IRS data updated by FinancialSamuri.com on 1/27/15. It shows that, during that time, the top 50% of people paid 97% of the taxes. This means that by punishing the very people who invested we were seriously affecting our economic stability and growth. 

Government force through taxation is a violation of the right to the free flow of capital. Additionally, it violates the freedom of expression, the freedom of association and property rights. Yet, the truth is that if you produce something and earn a profit, that profit should be yours to do with as you decide. The free flow of capital is the expression of your freedom to use your mind and survive to the best of your ability. The free flow of capital represents your right to use your property as you see fit. 

In the macro sense, the free flow of capital means that money flows to its best uses when people are free to decide how best to live their lives. It represents the choice to remove capital from poor uses and put it to better uses. It is a choice for the individual to make and properly not a choice for the government to make.

The free flow of capital is an expression of individual choice not a collective choice that decides upon the social goals that capital should serve. Every individual has the right to use his savings and surplus capital as he sees fit. These freedoms are individual rights that are as inalienable as are the rights to freedom of speech, freedom of association, belief and self-defense. In fact, all examples of self-defense and individual rights should include the right to the free flow of capital.

Copyright 2019 by Robert Villegas. This post is taken from a forthcoming book making the moral case for capitalism. To see Mr. Villegas' books available for purchase go to Books by Robert Villegas