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Cash exchange and power

The transfer of money from one institution to another has the effect to transfer power. In a capitalism economy, the accumulation of money is associated to the power as only an individual who has an excess of cash can take the risk to lose it.

Trade: Selling is the most direct source to obtain money. It is obtain in exchange of products or services. The difference between the cost to create the service and the product is a profit and can be used freely by the seller to buy something else. The buyer has the full freedom to buy or not. The seller can offer for selling but he is not guarantee to sell.

Investment: An investment is a direct source of cash to a moral entity in order to have the cash to develop activities. The investment can be divided between stock investment and bond investment. In the case of stock investment, the investor receive a part of the property of the company against his money. In doing so, it has no transfer of power from the investor to the manager of the moral entity. It is the most neutral form of transfer of money. The investor is free to refuse the investment and the company has no obligation to accept it. In case of an investment in share, the investor has implicitly approved the budget of the manager of the company and the investment of his cash. In case of bond, the investor does not want to know about the usage of the cash. The manager engages himself in a return (interest rate) about the solvability of the company. The donor is highly motivated by the right usage of his cash. So, the activity of investment concentrates in the hand of professional who permanently monitor the quality of their investment.

Tax: Tax is collected on the profit of trade by a central entity (usually the state) on small entities (individuals or companies). Tax induces a transfer of power from small entities to the central entity (state). The small entities have no possibility to reject the taxes. The transfer is an obligation. The central entity has the tendency to increase the tax up to a level that small entity (or individuals) will give up with any economical activity. In democracy, the individuals have the possibility to protest against the level of taxation. But, this refusal is undirected and the state have the possibility to concentration the tax burden on individual  not influential at the level of the election. The system presents a strong imbalance as there is nearly no counterbalance to reduce the tendency of  the state to increase the tax. It is also impossible to estimate the efficiency of the usage of the tax by the state as there are no valid criteria of comparison. The state will collect taxes whatever the performance of his administration.

Oriented tax:  An oriented tax is the obligation to pay a tax to an entity. In this case, the tax payer has the obligation to pay a determine amount. He has however the possibility to  choose the beneficiary of the cash and so he could avoid to pay tax to entity who has a bad reputation. This kind of tax is only marginally used. Example: In France, the company has to pay the "professional tax". The tax has to benefit to the university and school. The system has the inconvenient that the tax payer is not interested in the effectiveness of his payment. A criteria of the effectiveness of this payment is however not as easy to find as in the case of an investment (profit). 

Donation: It is transfer of cash where the donor is free to give. The transfer is done at the advantage of an organization (usually a charitative association) who are involved in an action whom the benefit are difficult to estimate.  It is the more free transfer of cash.

In these five transfers of cash, only investment is neutral in term of transfer of power from one individual to another. Trade can be neutral if the profit is null and in this case, selling actors don't have an extra cash to invest and expend. 

On the opposite, tax is on the benefit of a central power who collects tax to maintain its power. And so, an excess of tax will induce an excess of power concentration on the benefit of a central power.


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Copyright 2002

Author: Hector Archytas