When Henry Ford became a millionaire over a century ago, he didn’t get wealthier in isolation. Thousands of his assembly line workers entered the middle class for the first time.
Industrial capitalism spread prosperity partly because growth required large workforces. Digital technologies increasingly scale with very few workers.
Consider that when Instagram was purchased for $1 billion, it had a mere twelve employees.
The gap between the richest and poorest has been widening for decades, and it’s accelerating. The AI revolution is about to create a trillionaire class.
Wealth disparities, in and of themselves, are not a societal failing. This is where the left (always) gets it wrong. To the contrary, they are the natural result of a free society where hard work, ingenuity, and even luck are rewarded.
The problem is in how societies can respond if the disparities become acute. Periods of economic displacement have historically generated populist movements and social instability.
While the implications of AI are still being sorted out, one probable scenario will see the older, equity-holding class get richer, leaving behind the young who see their jobs being replaced by AI.
This already appears to be happening.
The natural response, reasonable or not, will be class-driven anger and finger pointing. Politically, it will mean more AOCs and Mamdanis. Wealth taxes and asset seizures will be the least of it. These are now routine policy preferences in the emerging Democrat base.
Worse, Luigi Mangione-style political violence will be normalized.
It’s not hard to see how disastrous this would be for our nation. The question is, how do we avoid it?
There is one approach that would help, and the mechanics are already in place. It's called Trump accounts.
But first, it’s important to state what not to do.
Large tax increases would be a mistake. Not only do they hinder economic growth, but they channel money through the government, which is highly inefficient at best and corrupt at worst.
Universal Basic Income, something a few frightened conservatives are even talking up, is another mistake. Nothing can possibly be more disincentivizing than “free money now.”
Lastly, channeling money through NGOs is aanother horrible idea. They, too, are inefficient, and if there’s anything the last year has shown us, it’s that NGOs are frequently corrupt, too.
The challenge becomes: how to transfer (some) wealth without destroying personal incentive and without routing money through self-interested intermediaries?
The answer I propose is expanding the use of Trump accounts. The federal government is currently seeding these with $1,000. That money gets invested in index funds until age 18, at which point it converts to a standard IRA.
Michael Dell and other wealthy individuals have contributed $7 billion to the program to boost the amounts kids receive. These accounts will compound into meaningful amounts over time and give our young a vested interest in our economy, creating “skin in the game.”
So rich people: instead of "giving pledges" that make vague promises to someday give money to the NGO Industrial Complex, why not be Michael Dell? You have an interest in social and economic stability. You can even tailor the gift, like Ray Dalio did, to specific states or Zip Codes. Let’s build a generation of young who have a nest egg and care about markets.
One caveat. There will be those tempted to bust their accounts on their 18th birthdays just to party. This will cost income taxes plus a 10% penalty, but the there are plent of stupid people out there. The solution to this is to increase the pain at ealier ages. The penalty should be increased to, say, 30%, and phased down over time.
