On September 2, 2014, Juan Cole writes on Nation Of Change:
Calling the bottom of a river a “bed” is a metaphor. Imagine the river restlessly sleeping on its muddy mattress. But when we’ve so internalized a metaphor that we forget it is a figure of speech, as with the phrase “river bed,” it is called a “dead metaphor.”
Labor Day is, alas, akin to a dead metaphor in contemporary America. There was a time when, as in 1936, the unionized auto workers could make effective demands from their employers, for higher wages and better working conditions. Workers no longer get better off in today’s U.S.A. They are often summarily dismissed if they try to unionize. They are badly paid. Good jobs have been switched out for bad jobs. Tax policy has been manipulated by the wealthy and corporations, who have bought Congress and state legislatures, so as to ensure that the rich get richer, and richer and richer.
The U.S. has one of the worst records on wealth and income inequality in the advanced industrialized world. This situation is bad for everyone. Rich people still only need one or two refrigerators. Many poor people can’t afford any. Having a small number of super-rich and a large number of poor means that refrigerator manufacturers can’t sell as many refrigerators as they could in a more equal society, which means that they can’t hire many workers, which reduces the number of jobs in the manufacturing sector.
So as we burn dead meat and play frisbee in a warming climate, we could stop to consider the lives of the laborers we are theoretically honoring:
1. There has been a decade of stubborn wage stagnation. The Economic Policy Institute notes:
“According to every major data source, the vast majority of U.S. workers—including white-collar and blue-collar workers and those with and without a college degree—have endured more than a decade of wage stagnation. Wage growth has significantly underperformed productivity growth regardless of occupation, gender, race/ethnicity, or education level. ”
In contrast, the wealthy have been getting a larger share of any income growth: “The top 20 percent of the highest income households in the U.S. experienced 60.6 percent of total wage gains between 2005 and 2012…” The top 5% alone took home over a quarter of all the wage gains in those years.
2. EPI observes that the lost decade comes on top of previous decades of wage stagnation, going back to about 1970, which reversed the era of wage growth after World War II:
“This lost decade for wages comes on the heels of decades of inadequate wage growth. For virtually the entire period since 1979 (with the one exception being the strong wage growth of the late 1990s), wage growth for most workers has been weak. The median worker saw an increase of just 5.0 percent between 1979 and 2012, despite productivity growth of 74.5 percent—while the 20th percentile worker saw wage erosion of 0.4 percent and the 80th percentile worker saw wage growth of just 17.5 percent.”
3. Only 11.3% of wage and salary workers belong to unions in 2014. This is down from about 35% at the peak of the movement in 1954, and down from 20% in 1983. This vast decline in unionization is not because workers don’t want the protections of union organization. It is because state legislatures have deliberately passed laws aimed at weakening unionization rights and because large corporations have systematically fired workers who tried to unionize, despite this practice being supposedly illegal.
4. Income inequality is greater than at any time since 1928. Workers are taking home a smaller slice of the overall pie, while the wealthy and superwealthy are walking away with the lion’s share. It is not in fact clear that most financiers are more important to you than your plumber, but the former make hundreds of times what the latter does. Pew Research Center remarks,
“U.S. income inequality is the highest it’s been since 1928. In 1982, the highest-earning 1% of families received 10.8% of all pretax income, while the bottom 90% received 64.7%, according to research by UC-Berkeley professor Emmanuel Saez. Three decades later, according to Saez’ preliminary estimates for 2012, the top 1% received 22.5% of pretax income, while the bottom 90%’s share had fallen to 49.6%.”
Wealth ownership inequality is even greater than income inequality: “the highest-earning fifth of U.S. families earned 59.1% of all income, the richest fifth held 88.9% of all wealth…”
5. Although there are signs of a halting recovery from the massive job losses that began in 2008 as a result of Wall Street corruption and reckless business practices, the new jobs added pay substantially less than the ones that were lost. USA Today observes,drawing from a report by the U.S. Conference of Mayors and IHS Global Insight,
“The jobs regained since the recession have, as a whole, been lower paying than the ones lost. According to the IHS report, the average annual income of jobs lost between 2008 and 2009 was $61,637, while the average for those gained through the second quarter of 2014 was $47,171. This amounts to a wage gap of 23 percent and $93 billion in lower wage income . . . Jobs in low-income fields such as hospitality, which pay around $21,000 a year, replaced jobs lost in high-paid sectors such as manufacturing, which pay $63,000, the report found. ”
And, you guessed it, the top 5 percent in contrast have made out like bandits in the same period.
Another writer who ONLY focuses on JOBS as if hypnotized to not recognize that the effect of advancing technology is to replace human labor in the production process. After all, why else would businesses use a machine instead of human labor if there were no benefit to doing so?
What is absent in such writings is a discussion of Who Should Own America?
It is evident that no one in a leadership position speaks of a vision for a future system of economic democracy based on equality of opportunity for every person to become an owner of wealth-creating, income-generating productive capital.
Why the focus on “productive capital?” Physical capital is non-human “things” owned by people used to produce products and services (productive land, resources, structures, infrastructure, tools, machines, superautomation, robotics, digital computerized processing and operations, etc. and certain intangibles that have the characteristics of property such as patents and trade names). Real physical capital isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production. In the law, property is the bundle of rights that determines one’s relationship to things.
The reality, which is ignored in our political discussions and even by conventional economists and the media, is that productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. The ownership of productive capital is the source of wealth and income for the richest Americans––not a job.
Businesses, whether small or large, or sole proprietors, partnerships, or business corporations are formed to provide products and services at a profit. Their success or failure is dependent on whether or not there are “customers with money.”
Unfortunately, politicians, economists and the media focus on JOB CREATION as the ONLY way to create “customers with money” and provide a source of income for peoples’ livelihood. Yet the demand for people (labor workers who contribute manual, intellectual, creative and entrepreneurial work) is being made less necessary as productive capital is increasingly the source of the world’s economic growth. What should we conclude from this assessment of reality? Well, simply that if both labor and productive capital are interdependent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all.
The role of physical capital is to do ever more of the work, which produces income to the business owners. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profit. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical capital’s ever-increasing role.
The function of research and technology is to invent tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological innovation and invention. Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant).
It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
What we really need in America today is a national discussion on the topic of the importance of productive capital ownership and how we can expand the base of private productive capital ownership simultaneously with the creation of new productive capital formation, with the aim of building long-term financial security for all Americans through accumulating a viable income-producing capital estate.
If we are to significantly expand the population of “customers with money” and significantly grow the economy, then the ownership of productive capital must be spread more broadly and simultaneously with the growth, without taking anything away from the 1 to 10 percent of the people who now own 50 to 90 percent of the wealth controlled by businesses. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.
Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on JOB CREATION and redistribution of wealth rather than on full production and broader productive capital ownership accumulation resulting from OWNERSHIP CREATION. This is manifested in the misguided belief that labor work is the ONLY way to participate in production and earn income.
Thus, when politicians advocate taxpayer money spending to stimulate industry development, there needs to be a conscious policy to broaden private, individual ownership in the companies benefiting from the stimulus––not just argue the justification for taxation redistribution and further national debt based on how many jobs would result. We also need to incentivize business corporations to pay out all their profits as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full dividend payout shares for broad-based citizen ownership.
To accomplish this we must ensure that FUTURE economic growth be financed to create new owners of expanding existing and future businesses to ensure that the consumer populous is able to get the money to buy the products and services produced as a result of substituting “machines” for people.
But how can we accomplish this goal of creating new owners of FUTURE productive capital investment simultaneously with the growth of the economy?
The solution requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” That’s what the Capital Homestead Act addresses.
The “Capital Homesteading” concept is the direction America needs to take to build an OWNERSHIP CULTURE and ensure a balance between production and consumption.