The Marginal Million Theory

(excerpt from the book “The Sustainable Organisation — a new paradigm for a fairer society”)

This theory is based on a world with annual revenue of between US$50,000 and US$100,000. If this were true among the global population, then we would be able to see a middle class with high purchasing power. As a result, economies would undoubtedly grow as a whole, the ultimate aim of any country, government. However, the reality is entirely different. What we see is that the current distribution of wealth and revenue is not effective altogether.

According to Princeton University’s Daniel Kahneman’s 2010 study on the price of happiness mentioned above, money can buy happiness, but the line is set at US$75,000. This study, which is solely based on the US population, shows that gaining more than this amount brings no additional happiness. In the UK, for instance, this would mean that very few have reached this plateau. In fact, according to the Office of National Statistics’ annual survey[i], in the tax year ending in April 2012, “the median gross annual earnings for full-time employees on adult rates who had been in the same job for at least 12 months were £26,500” ($43,009), a 1.4% increase compared to the previous year.

Kahneman and his research team concluded:

“More money does not necessarily bring more happiness, but less money is associated with emotional pain”

Therefore, the proposal for a sustainable model starts within the company – the entity that is actually producing the wealth. Through an effective corporate governance model, the entity should be able to use that wealth (produced with the help of every single member of staff) and redistribute it accordingly, fairly, meritocratically, without any major discrepancies that mean that some may have too much, and others too little. At least that is the general idea…

The fact is, this idea sounds both too obvious and too utopic. However, if it seems obvious to everyone – and if redistribution is obviously the way forward to tackling poverty – why has it not been used before? We could name a few factors, like the lack of satisfaction and the lack of consideration for the global situation. What becomes obvious is that there needs to be a change of mentality where we take a modernized “Robin Hood” approach and share our “surplus happiness”.

Therefore, with the obvious note that money does help in the path to pursue happiness and using the logic that a severe lack of money strongly contributes to someone’s unhappiness, we propose the use of fair distribution.

An extra million, deemed to have very little impact on the improvement of one’s quality of living, could be divided meritocratically among a population that needs more money to attain a comfortable life. Then, this population would be closer to reaching happiness, as they would have access to all basic goods and services.

French economist Thomas Piketty, has also proposed an approach to wealth distribution to curb rising inequality. In Capital in the Twenty-First Century, he provides an outlook on global inequality heralded to provide a shift in the focus of economic policy towards distribution. Piketty reckons that the importance of wealth in modern economies is approaching levels last seen before the First World War.

As a rule, he explains, wealth grows faster than economic output. Other things being equal, he says, faster economic growth will reduce the importance of wealth in society, whereas slower growth will enhance it. However, he explains, there are no natural forces pushing against the steady concentration of wealth; only a rapid growth caused by technological progress or rising population. Piketty concludes his work by recommending that the government step in now and adopt a global tax on wealth to prevent soaring inequality from contributing to economic or political instability.

What we propose is the implementation of the principle that one marginal million in the hands of a few people is worth ten times more, if put in the hands of many. This is based on the concept of redistribution and on the idea that there is such a thing as a “satiation point” which enables the calculation of a marginal amount that can be redistributed among the employees. The result will be a happier community that can use this “marginal” sum to provoke a greater impact in their well-being. Considering that giving money also leads to happiness and satisfaction, this is bound to have a positive impact on both ends.

“Aspiration without opportunity leads to violence”. – Nick Hanauer, venture capitalist

Fact: A middle class with a high capacity for consumption would make the economy grow.

Does money buy everything?

The big conclusion here is that, if money buys happiness and if we are happier when we give money to others, redistribution does seem to be the key to general happiness, and the distribution of money and opportunities can sometimes represent a distribution of happiness.

“The best things in life are free, but impossible to buy!”  — Miguel Reynolds Brandão