IS THE GIG ECONOMY WORKING?

On Mat 15, 2017, Nathan Heller writes in The New Yorker:

Not long ago, I moved apartments, and beneath the weight of work and lethargy a number of small, nagging tasks remained undone. Some art work had to be hung from wall moldings, using wire. In the bedroom, a round mirror needed mounting beside the door. Just about anything that called for careful measuring or stud-hammering I had failed to get around to—which was why my office walls were bare, no pots yet dangled from the dangly-pot thing in the kitchen, and my bedside shelf was still a doorstop. There are surely reasons that some of us resist being wholly settled, but when the ballast of incompletion grew too much for me I logged on to TaskRabbit to finish what I had failed to start.

On its Web site, I described the tasks I needed done, and clicked ahead. A list of fourteen TaskRabbits appeared, each with a description of skills and a photograph. Many of them wore ties. I examined one called Seth F., who had done almost a thousand tasks. He wore no tie, but he had a ninety-nine-per-cent approval rating. “I’m a smart guy with tools. What more can you want?” he’d written in his profile. He was listed as an Elite Tasker, and charged fifty-five dollars an hour. I booked him for a Wednesday afternoon.

TaskRabbit, which was founded in 2008, is one of several companies that, in the past few years, have collectively helped create a novel form of business. The model goes by many names—the sharing economy; the gig economy; the on-demand, peer, or platform economy—but the companies share certain premises. They typically have ratings-based marketplaces and in-app payment systems. They give workers the chance to earn money on their own schedules, rather than through professional accession. And they find toeholds in sclerotic industries. Beyond TaskRabbit, service platforms include Thumbtack, for professional projects; Postmates, for delivery; Handy, for housework; Dogvacay, for pets; and countless others. Home-sharing services, such as Airbnb and its upmarket cousin onefinestay, supplant hotels and agencies. Ride-hailing apps—Uber, Lyft, Juno—replace taxis. Some on-demand workers are part-timers seeking survival work, akin to the comedian who waits tables on the side. For growing numbers, though, gigging is not only a living but a life. Many observers see it as something more: the future of American work.

Seth F.—the “F” stood for Flicker— showed up at my apartment that Wednesday bearing a big backpack full of tools. He was in his mid-forties, with a broad mouth, brown hair, and ears that stuck out like a terrier’s beneath a charcoal stocking cap. I poured him coffee and showed him around.

“I have molding hooks and wire,” I said, gesturing with unfelt confidence at some coils of translucent cord. “I was thinking they could maybe hang . . .” It struck me that I lacked a vocabulary to address even the basics of the job; I swirled my hands around the middle of the wall, as if blindfolded and turned loose in a strange room.

Seth F. seemed to gather that he was dealing with a fool. He offered a decision tree pruned to its stump. “Do you want them at eye level?” he asked.

“Eye level sounds great,” I said.

Seth F. had worked for TaskRabbit for three years, he told me as he climbed onto my kitchen stool—“like twenty-one years in normal job time.” In college, he had sold a screenplay to Columbia Pictures, and the film, though never made, launched his career. He wrote movies for nine years, and was well paid and sought after, but none of his credited work made it to the big screen, so he took a job as a senior editor at Genre, a now defunct gay magazine, where he covered the entertainment industry. He liked magazine work, but was not a true believer. “I’m one of those people, I think, who has to change jobs frequently,” he told me. He got a master’s degree in education, and taught fourth grade at Spence and at Brooklyn Friends. Fourteen years in, a health condition flared up, leaving his calendar checkered with days when it was hard to work. He’d aways found peculiar joy in putting together ikea furniture, so he hired himself out as an assembly wiz: easy labor that paid the bills while he got better. He landed on TaskRabbit.

“There are so many clients, I rarely get bored,” he told me. He was feeding cord through the molding hooks to level my pictures. At first, he said, hourly rates at TaskRabbit were set through bidding, but taskers now set their own rates, with the company claiming thirty per cent. A constellation of data points—how quickly he answers messages, how many jobs he declines—affect his ranking when users search the site. He took as many jobs as he could, generating about eighty paid hours each month. “The hardest part is not knowing what your next paycheck is from,” he told me.

Seth F. worked quickly. Within an hour, he had hung six frames from the molding over my couches. Sometimes, he confessed, his jobs seem silly: he was once booked to screw in a light bulb. Other work is harder, and strange. Seth F. has been hired to assemble five jigsaw puzzles for a movie set, to write articles for a newspaper in Alaska, and to compose a best-man speech to be delivered by the brother of the groom, whom he had never met. (“The whole thing was about, ‘In the future, we’re going to get to know each other better,’ ” he explained.) Casper, the mattress company, booked him to put sheets on beds; Oscar, the health-insurance startup, had him decorate its offices for Christmas.

As we talked, his tone warmed. I realized that he probably visited strangers several times a day, meting out bits of himself, then moving on, often forever, and I considered what an odd path through professional experience that must be. He told me that he approached the work with gratitude but little hope.

“These are jobs that don’t lead to anything,” he said, without looking up from his work. “It doesn’t feel”—he weighed the word—“sustainable to me.”

The American workplace is both a seat of national identity and a site of chronic upheaval and shame. The industry that drove America’s rise in the nineteenth century was often inhumane. The twentieth-century corrective—a corporate workplace of rules, hierarchies, collective bargaining, triplicate forms—brought its own unfairnesses. Gigging reflects the endlessly personalizable values of our own era, but its social effects, untried by time, remain uncertain.

Support for the new work model has come together swiftly, though, in surprising quarters. On the second day of the most recent Democratic National Convention, in July, members of a four-person panel suggested that gigging life was not only sustainable but the embodiment of today’s progressive values. “It’s all about democratizing capitalism,” Chris Lehane, a strategist in the Clinton Administration and now Airbnb’s head of global policy and public affairs, said during the proceedings, in Philadelphia. David Plouffe, who had managed Barack Obama’s 2008 campaign before he joined Uber, explained, “Politically, you’re seeing a large contingent of the Obama coalition demanding the sharing economy.” Instead of being pawns in the games of industry, the panelists thought, working Americans could thrive by hiring out skills as they wanted, and putting money in the pockets of peers who had done the same. The power to control one’s working life would return, grassroots style, to the people.

The basis for such confidence was largely demographic. Though statistics about gigging work are few, and general at best, a Pew study last year found that seventy-two per cent of American adults had used one of eleven sharing or on-demand services, and that a third of people under forty-five had used four or more. “To ‘speak millennial,’ you ought to be talking about the sharing economy, because it is core and central to their economic future,” Lehane declared, and many of his political kin have agreed. No other commercial field has lately drawn as deeply from the Democratic brain trust. Yet what does democratized capitalism actually promise a politically unsettled generation? Who are its beneficiaries? At a moment when the nation’s electoral future seems tied to the fate of its jobs, much more than next month’s paycheck depends on the answers.

One Thursday evening in February, Caitlin Connors texted me and said to meet her at a bar in Williamsburg called Donna. The place was large and crowded; I found her in the middle of a big group, in a corner bathed in light the color of Darjeeling. Connors is small and outgoing, with a brown Jackie O. bob that looks windswept even indoors. She had come to New York five years earlier, from Colorado, “to learn about the Internet,” she said, and she worked in marketing awhile. Agency life had not been her thing—“a lot of crazy bitches”—so she started her own branding firm, the Fox Theory, which does marketing for entrepreneurs, artists, authors, and a sleight-of-hand magician. She led me to the bar to sit. She wore a black floral blouse and skinny navy pants. “I think we’re just coming into the next wave of human civilization,” she told me, and drained her cocktail with a straw. “Humans can operate on a person-to-person basis, sharing ideas and sharing business without intermediaries.”

When Connors first came to New York, she lived with several roommates in a huge, run-down place in Chelsea she dubbed the Fox Den. When her sister came to stay with her, they moved to a newer building, the Fox Den 2.0, and that was where she discovered Airbnb. She started to rent out an extra room, and the income made them “less pinched.” When she moved again, with another roommate (she has had thirty-six roommates in total), they searched for an optimally Airbnb-able place. They ended up in Williamsburg, a neighborhood that seemed “trendy” to tourists. The Fox Den 3.0, as the new digs were christened, was a three-bedroom duplex by the Bedford Avenue subway station. It had sleek new appliances and a lovely yard; through an ingenious configuration of beds and couches, it could sleep up to twelve people.

Connors tried to rent it out one week a month. Some swapping was often required. If she and her roommate were in town during a rental, they decamped to make room for the guests. Sometimes they used an acquaintance’s pad in Manhattan, also on Airbnb. Sometimes Connors stayed at the home of an old friend. “It’s the time we have to hang out and chill and catch up,” she said. “He loves it. I love it.” The financial upsides were considerable. By Airbnb-ing out their apartment one week a month, Connors and her roommate could clear their four-thousand-dollar rent. Sometimes they were gone for longer. One golden month, Airbnb-ing brought in five figures. “That’s more than most people, smart people, make in their job,” Connors observed.

For Connors, though, the real benefit of Airbnb was that it allowed her to travel, which she still loves to do. She spent part of November in Mexico, and part of December in Jordan. She saw the Fox Den as a tool for living a worldly life without committing to a worldly career. (“Otherwise, you’d have to be another level of rich to make this work.”) She spent all of January in Cuba, which gave her a new business concept.

“In Cuba—random little town—half the town wanted me to start their Airbnb accounts for them,” she said. Connors found a population that desperately needed help with the marketing of personal brands. Now she got out her iPhone and started swiping rapidly through photos, many of which centered on azure shorelines and shirtless men. “Cuba is preserved like a time capsule,” she said. She stopped at a street scene. “Everyone drives old cars.” She swiped. “These are their farms. They plow their fields with oxen.” On her next trip, she planned to help Cuban artists market themselves as American millennials do: “I want to help the Cubans learn to make money off of their art.”

A friend of hers, Prescott Perez-Fox, passed by us, on his way out. Connors snagged him. “I don’t know what you do anymore!” she said.

Perez-Fox fished some business cards from his pocket. “I’m a graphic designer and brand strategist, and I also run a podcast, and a podcast meet-up. You should come to our meet-up,” he said, handing her a card. The card said, “new york city podcast meetup.” “That’s the group,” he said. “My show is on the back side.” The back of the card said, “the busy creator podcast.” “It’s about workflow and creative productivity and culture and habits for creative pros.”

“Why have I not been”—Connors blinked hard—“learning from you more often?”

“Girl, get after it!” Perez-Fox exclaimed. In addition to hosting his own podcast, he had been a guest on nine other podcasts, including “Freelance Transformation” and “Life in the Woods: Hope for Independent Creatives.” “I’m finishing a project tomorrow,” he told her. “Then I’ll be more free.”

Connors said that she was in New York at least through next week, probably, and then she was going back to Cuba. “Want to come down?” she asked.

“Ah,” Perez-Fox said. “A little bit hasty.”

One of the best things about Cuba, Connors explained when Perez-Fox had darted out into the night, was that she greeted each day there without anxiety. “Not waking up stressed every day, doing something super-rewarding, and having time to write and make art and all that stuff—that’s what I want,” she told me. Soon after we went our separate ways, she left town, to fly south.

In 1970, Charles A. Reich, a law professor who’d experienced a countercultural conversion after hanging with young people out West, published “The Greening of America,” a cotton-candy cone that wound together wispy revelations from the sixties. Casting an eye across modern history, he traced a turn from a world view that he called Consciousness I (the outlook of local farmers, self-directed workers, and small-business people, reaching a crisis in the exploitations of the Gilded Age) to what he called Consciousness II (the outlook of a society of systems, hierarchies, corporations, and gray flannel suits). He thought that Consciousness II was giving way to Consciousness III, the outlook of a rising generation whose virtues included direct action, community power, and self-definition. “For most Americans, work is mindless, exhausting, boring, servile, and hateful, something to be endured while ‘life’ is confined to ‘time off,’ ” Reich wrote. “Consciousness III people simply do not imagine a career along the old vertical lines.” His accessible theory of the baffling sixties carried the imprimatur of William Shawn’s New Yorker, which published an excerpt of the book that stretched over nearly seventy pages. “The Greening of America” spent months on the Times best-seller list.

Exponents of the futuristic tech economy frequently adopt this fifty-year-old perspective. Like Reich, they eschew the hedgehog grind of the forty-hour week; they seek a freer way to work. This productivity-minded spirit of defiance holds appeal for many children of the Consciousness III generation: the so-called millennials.

“People are now, more than ever before, aware of the careers that they’re not pursuing,” says Kathryn Minshew, the C.E.O. of the Muse, a job-search and career-advice site, and a co-author of “The New Rules of Work.” Minshew co-founded the Muse in her mid-twenties, after working at the consulting firm McKinsey and yearning for a job that felt more distinctive. She didn’t know what that was, and her peers seemed similarly stuck. Jennifer Fonstad, a venture capitalist whose firm, Aspect Ventures, backed Minshew’s company, told me that “the future of work” is now a promising investment field.

Many dreamy young people, like Caitlin Connors, see unrealized opportunity wherever they go. Some, in their careers, end up as what might be called hedgers. These are programmers also known as d.j.s, sculptors who excel as corporate consultants; they are Instagram-backed fashion mavens, with a TV pilot on the middle burner. They are doing it for the money, and the love, and, like the overladen students they probably once were, because they are accustomed to a counterpoint of self. The hedged career is a kind of gigging career—custom-assembled, financially diffuse, defiant of organizational constraint—and its modishness is why part-time Lyft driving or weekend TaskRabbit-ing has found easy cultural acceptance. But hedging is a luxury, available to those who have too many appealing options in life. It gestures toward the awkward question of whom, in the long run, the revolution-minded spirit of the nineteen-sixties really let off the leash.

As Caitlin Connors’s apartment became more popular, she faced unforeseen challenges. Cleaning had to be done rapidly, in between stays. Questions from guests required prompt responses, even when she was abroad, and had no Internet access. When Airbnb logistics started to approach “a full-time job,” she hired a management company, called Happy Host, to handle bookings, cleanings, and related chores. Happy Host normally charges twenty-five per cent of earnings, but Connors found the cost worthwhile. “I’m, like, They do everything for you?” she said. “Sign me the fuck up!”

One day, I went to visit Happy Host’s founder, Blake Hinckley, at his loft apartment on Broadway, a block from the Strand bookstore. The elevator opened into the living room, which was sparsely but stylishly furnished with caramel-colored leather couches and bright, extroverted art work. Hinckley, who is twenty-nine, had a blond cascade of hair, round glasses, and a short, raffish beard. He had studied English and economics at Middlebury College, and worked for the Boston Consulting Group, doing efficiency assessments for big companies. While travelling three hundred days a year, he was also renting an apartment, in Boston. He did the math and found that, if he’d put the place on Airbnb, he could have made tens of thousands of dollars. Around that time, consulting in New York, he met his girlfriend. “The idea of being staffed in Cleveland and doing another ‘delayering’—B.C.G.’s polite euphemism for layoffs—just seemed catastrophic,” he said. Love, freedom, and a dream of fleeing corporate America won out.

Hinckley and three roommates have Airbnb-ed their apartment (“Glam Greenwich Village 4BR Loft”). As part of its service, Happy Host arranges professional photography, and the loft, a former hat factory with Eamesian kitchen stools and a fig tree by the window, stood ready for an appraising gaze. In addition to taking photos, Happy Host writes text for Airbnb listings, screens reservation requests, coördinates check-ins, greets guests, answers e-mails, and supplies soaps, towels, and wine. Hinckley’s people remain on call for emergencies, which can arise under improbable conditions. The company once had a client who, in the space-saving fashion of New Yorkers, used the drawer under her oven as a storage area for documents and mail. She nearly lost the kitchen to a fire when a Bavarian guest attempted to bake.

The afternoon was waning, and the “unrivaled natural light” in the apartment’s “West facing windows” had turned tawny. Twin arrays of seven large, gonglike bells, each mounted on a facing wall, shot off a pong. “The gamelatron!” Hinckley explained. “My roommate was at sea, and saw a gamelatron, and had a religious experience.”

Hinckley told me that creative, affluent professionals are the company’s typical customers. “Startup founders, consultants, people in private equity have been really drawn to this, because they’re so busy, they don’t have time to respond to a guest inquiry within the hour, or the inclination to wake up at one in the morning because the guest has had a couple of cocktails and is having trouble opening the door,” he said. “Also, intellectually, the concept of pricing really resonates.” If a property is constantly booked, its prices are too low; frequent fallow periods mean the rate is high. Long stays are favored, because cleaning and coördinating make turnovers costly. Happy Host sets future rates using a proprietary algorithm.

When deciding whether to work with a host, Hinckley assesses the apartment’s appearance (enlisting a designer if necessary), amenities, and location. Opening a laptop, he asked for my Zip Code and entered it into AirDNA, a third-party subscription database that gathers Airbnb market information nationwide.

“Forty-seven rentals in your neighborhood,” he said, peering at the laptop screen. “Seventy-one per cent are occupied at any time. Your median person is making 31K there on a 22.8K two-bedroom cost.” He frowned: weak margin. “The neighborhoods we like are the ones that are really high on this trend line.” He clicked to a new data set. “SoHo, Greenwich Village. There, you have people making over fifty-five thousand dollars on their apartment, if it’s a full-time rental.” He looked at me and opened up his eyes wide. “Which is wild.”

In promotional material, Airbnb refers to itself as “an economic lifeline for the middle class.”A company-sponsored analysis released in December overlaid maps of Airbnb listings and traditional hotels on maps of neighborhoods where a majority of residents were ethnic minorities. In seven cities, including New York, the percentage of Airbnb listings that fall in minority neighborhoods exceeds the percentage of hotel rooms that do. (Another study, of user photos in seventy-two majority-black neighborhoods, suggested that most Airbnb hosts there were white, complicating the picture.) Seniors were found to earn, on average, nearly six thousand dollars a year from Airbnb listings. “Ultimately, what we’re doing is driving wealth down to the people,” Chris Lehane, the strategist at Airbnb, says.

It is, of course, driving wealth down unevenly. A study conducted by the New York attorney general in 2014 found that nearly half of all money made by Airbnb hosts in the state was coming from three Manhattan neighborhoods: the Village-SoHo corridor, the Lower East Side, and Chelsea. It is undeniably good to be earning fifty-five hundred dollars a year by Airbnb-ing your home in deep Queens—so good, it may not bother you to learn that your banker cousin earns ten times that from his swank West Village pad, or that he hires Happy Host to make his lucrative Airbnb property even more lucrative. But now imagine that the guy who lives two doors down from you gets ideas. His finances aren’t as tight as yours, and he decides to reinvest part of his Airbnb income in new furniture and a greeting service. His ratings go up. Perhaps he nudges up his prices in response, or maybe he keeps them low, to get a high volume of patronage. Now your listing is no longer competitive in your neighborhood. How long before the market leaves you behind?

I put a version of this question to Lehane on the phone one morning. In the White House, he was known as a “master of disaster” for his strategic crisis management. As Al Gore’s press secretary, in 2000, he led the double-black-diamond effort of making the Vice-President seem loose and easygoing on the campaign trail. He told me that even an arms race to the top of the market would benefit overlooked neighborhoods. “It has a ripple effect on the local economy,” he explained.

A competitive Airbnb host who hires a cleaner and a decorator in Queens creates work for locals. Guests—some of whom, Lehane insisted, prefer to be in remote neighborhoods—might patronize businesses in the area. “What we do represents a different model of capitalism,” he told me. After hanging up, he sent a six-hundred-word e-mail of elaboration, and another after that.

He pointed out that, traditionally, affluent people have accrued further wealth passively—from real estate, investments, inheritances, and the like. Those with less charmed lives have had to resort to work in exchange for money. Airbnb makes passive earning available to anyone with a spare room.

In a competitive market, though, advantaged people still end up leveraging their advantages: that is why Happy Host exists. Today, every major Airbnb city (among them London, Paris, Los Angeles, San Francisco, Chicago, and New Orleans) has multiple Happy Host equivalents to help meet rising market expectations. A two-year-old New York competitor, MetroButler, has twenty-two contractors and two cleaners, and last year bought the clientele of another competitor, Proprly. MetroButler’s co-founder Brandon McKenzie had been using Airbnb to pay down law-school debts when he realized that short-term rentals could support an entire service industry. “We’re sort of in the business of pickaxes during the Gold Rush,” he said.

Others harbor similar ambitions. “Our goal is to become a mega-behemoth,” said Amiad Soto, who, with his twin brother, co-founded Guesty, a Tel Aviv-based company that helps hosts manage bookings (or arranges for a remote operator to do so under their names). Guesty has seventy-five employees, and Soto spends much of his time hiring more. For physical work, most such companies rely on other apps—Handy, Postmates—or hire part-time workers themselves. Sharing is not only challenging an existing model; it is generating its own labor force.

One drizzly spring afternoon, I met a MetroButler worker named Bobby Allan while he prepared an apartment for guests. Allan is a conservatory-trained actor and singer in his mid-twenties. He came to MetroButler last summer, from a gig at Proprly; he also works as a cater-waiter and as a hype man at children’s parties. At MetroButler, he is a part-time contractor, without benefits, but he doesn’t mind: gig work makes it possible to take time off for more exciting endeavors (for instance, an appearance in Syfy’s “The Internet Ruined My Life”). MetroButler pays him fifty dollars for each two-hour cleaning—sixty if he greets the guests, too. “You meet so many crazy people,” he told me. The place he was cleaning, a small garden apartment with a child’s room at the back, was a regular for him. He had put fresh company linens on the queen-size bed, and had left hotel-size shampoo and conditioner bottles, with the MetroButler logo, on the nightstand. He discovered that the bulb in the desk lamp had burned out, so he made a note to buy a replacement.

In the child’s room, Allan dressed the twin bed in crisp white sheets, pulled the duvet cover over the duvet with impressive speed, and rolled a bath towel and a hand towel into little logs, to be arranged in the center of the bed. His first tax return as an independent worker had been a shock, he said. But the work had been instructive in many other ways, too. He consulted his phone. Every task was annotated on a photo of the space in an app that let MetroButler watch his progress in real time; he checked off each detail and took a photo of the room when he was done. He hummed the finale to “The Firebird” while he swept the floor.

Normally, every efficiency has a winner and a loser. A service like Uber benefits the rider, who’s saving on the taxi fare she might otherwise pay, but makes drivers’ earnings less stable. Airbnb has made travel more affordable for people who wince at the bill of a decent hotel, yet it also means that tourism spending doesn’t make its way directly to the usual armies of full-time employees: housekeepers, bellhops, cooks.

To advocates such as Lehane, that labor-market swap is good. Instead of scrubbing bathrooms at the Hilton, you can earn directly, how and when you want. Such thinking, though, presumes that gigging people and the old working and service classes are the same, and this does not appear to be the case. A few years ago, Juliet B. Schor, a sociology professor at Boston College, interviewed forty-three mostly young people who were earning money from Airbnb, Turo (like Airbnb for car rentals), and TaskRabbit. She found that they were disproportionately white-collar and highly educated, like Seth F. A second, expanded study showed that those who relied on gigging to make a living were less satisfied than those who had other jobs and benefits and gigged for pocket money: another sign that the system was not helping those who most needed the work.

Instead of simply driving wealth down, it seemed, the gigging model was helping divert traditional service-worker earnings into more privileged pockets—causing what Schor calls a “crowding out” of people dependent on such work. That distillation-coil effect, drawing wealth slowly upward, is largely invisible. On the ground, the atmosphere grows so steamy with transaction that it often seems to rain much needed cash.

“Airbnb enabled me to go back to school and become a full-time student and work as a part-time photographer.”

“Airbnb is necessary while my cousin is out of town to work.”

“I am here as an individual, not representing some radical, self-serving organization. I am speaking to my own experience.”

The streets near New York’s City Hall were ear-stinging and windy on the morning of a big Airbnb hearing, but attendees clogged the doorway, and the air inside was thick with sour human concern. A new law had made it illegal for many New Yorkers to advertise short-term rentals. The law ostensibly targeted unregulated hoteliers, who snatch up multiple apartments and Airbnb them year-round, but it served the broader interests of major hotel trade groups, such as the American Hotel and Lodging Association and the Hotel and Motel Trades Council, which lobbied against Airbnb. At the hearing, hosts protested the rule’s breadth: why not limit each member’s listings, rather than banning them all?

Christian Klossner, the executive director of the Mayor’s Office of Special Enforcement, sat behind a desk microphone, wearing a patient expression as speakers gave testimony. Suzette Sundae, a musician wearing a fifties-style swing dress and a white cardigan over her tattoos, said that she ran a vintage-clothing store in Park Slope. When the store’s traffic fell off, she had Airbnb-ed her home. “It saved me from having to declare bankruptcy, and it allowed me to close my store without owing a dime,” she said. An East New York resident named Heather-Sky McField recalled having to travel to Baltimore each week to care for her mother, who had breast cancer. She had been unable to evict her tenants, who’d stopped paying rent. “Had it not been for Airbnb, I would have been foreclosed by now,” she told Klossner.

Given such testimony, it was easy to see how the sharing economy became a liberal beacon—and easy to see the attendant paradoxes. A century ago, liberalism was a systems-building philosophy. Its revelation was that society, left alone, tended toward entropy and extremes, not because people were inherently awful but because they thought locally. You wanted a decent life for your family and the families that you knew. You did not—could not—make every personal choice with an eye to the fates of people in some unknown factory. But, even if individuals couldn’t deal with the big picture, early-twentieth-century liberals saw, a larger entity such as government could. This way of thinking brought us the New Deal and “Ask not what your country can do for you.” Its ultimate rejection brought us customized life paths, heroic entrepreneurship, and maybe even Instagram performance. We are now back to the politics of the particular.

For gigging companies, that shift means a constant struggle against a legacy of systemic control, with legal squabbles like the one in New York. Regulation is government’s usual tool for blunting adverse consequences, but most sharing platforms gain their competitive edge by skirting its requirements. Uber and Lyft avoid taxi rules that fix rates and cap the supply on the road. Handy saves on overtime and benefits by categorizing workers as contractors. Some gigging advocates suggest that this less regulated environment is fair, because traditional industry gets advantages elsewhere. (President Trump, it has been pointed out, could not have built his company without hundreds of millions of dollars in tax subsidies.)

Still, since their inception, and increasingly during the past year, gigging companies have become the targets of a journalistic genre that used to be called muckraking: admirable and assiduous investigative work that digs up hypocrisies, deceptions, and malpractices in an effort to cast doubt on a broader project. Some companies, such as Uber, seem to invite this kind of attention with layered wrongdoing and years of secrecy. But they also invite it by their high-minded positioning. Like traditional companies, gigging companies maintain regiments of highly paid lawyers and lobbyists. What sets them apart is a second lobbying effort, turned toward the public.

“We’re borrowing very heavily from traditional community-organizing models, and looking at the grass roots in each city,” Emily Castor, Lyft’s leader in the campaign against regulatory constraint, told me a while back, when we spoke in the company’s San Francisco headquarters. “Who are the leaders? Who are people who distinguish themselves as passionate, who want to get more involved? We have a team that includes field organizers who are responsible for different parts of the country.”

If Uber has come to be known as the Wicked Witch of the West, dark-logoed, ubiquitous, and dragging a flaming broom of opportunism, Lyft has sought to be the Glinda, upbeat, pink, and conciliatory, and its organizing outreach has been key to this reputation. Castor’s work was not accosting government but assembling users, building a network of ordinary people who wanted Lyft in their lives.

“They’ll have dinners and other opportunities for people to learn more about what policy activities are happening in their area,” she said. This often means turning out for community-style lobbying—like the hosts at the Airbnb hearing in New York. “We get to know who has a powerful voice that would be helpful if shared with elected officials,” she explained.

Castor is a friendly woman with tidy blond hair who also started out in Democratic politics. After college, she worked in Washington as a legislative aide for the California representative Susan Davis. In 2008, before returning to school to get a degree in public administration, she worked on an unsuccessful congressional campaign. She moved to San Francisco, and in 2011 worked as a municipal finance consultant. It was an exciting time to be in the Bay Area. In the wake of economic collapse, young people with big ideas and an understanding of mobile technology were thinking about how work could be made cheaper, lighter, and more accessible. Castor started renting out her car on Getaround, an early sharing-economy company, and then tried Zimride, Airbnb—any service she could get her hands on. Their premise of sharing moved her. “It was like falling in love,” she told me. “You ask yourself, Is this love? Is this love? And, when you find the thing that’s right, you don’t have to ask.” Early in 2012, she started an event series, Collaborative Chats, devoted to the sharing economy. When Lyft launched, in June, 2012, the founders hired her to be the company’s first “community manager.” She found that she could draw on her political training. “Collective identity is one of those aspects that, in the theory of social movements, is so important,” she told me. “You’re not just ‘taking rides.’ ”

A key architect of that organizing strategy is Marshall Ganz. From the sixties through the early eighties, he worked under Cesar Chavez, leading the organizing efforts of the United Farm Workers. Now, at the Harvard Kennedy School, he teaches what he calls “a story of self, a story of us, a story of now”: the collective-identity movement-building method that Castor invoked. In July, 2007, he led a boot camp to train Obama’s first battalion of organizers for Iowa and South Carolina’s primary contests. He told me that he found the sharing companies’ use of grassroots methods “problematic.”

“There’s a difference between exchange, which is what markets are all about, and discernment of common purpose, which is what politics is about,” he said. Ganz told me that he had been distraught after Obama’s victory in 2008 when the Democratic National Committee seemed to abandon the President’s grassroots network. What he had hoped would be a movement had been cast aside as an electoral tool that had served its purpose.

Castor, who is nearly four decades younger than Ganz, had a different heroic ideal for social change. “When I worked on the Hill,” she recalled, “my chief of staff used to say, ‘A political campaign is a startup that is designed to go out of business.’ ”

Questions have emerged lately about the future of institutional liberalism. A Washington Post /ABC News poll last month found that two-thirds of Americans believe the Democratic Party is “out of touch,” more than think the same of the Republican Party or the current President. The gig economy has helped show how a shared political methodology—and a shared language of virtue—can stand in for a unified program; contemporary liberalism sometimes seems a backpack of tools distributed among people who, beyond their current stance of opposition, lack an agreed-upon blueprint. Unsurprisingly, the commonweal projects that used to be the pride of progressivism are unravelling. Leaders have quietly let them go. At one point, I asked Chris Lehane why he had thrown his support behind the sharing model instead of working on traditional policy solutions. He told me that, during the recession, he had suffered a crisis of faith. “The social safety net wasn’t providing the support that it had been,” he said. “I do think we’re in a time period when liberal democracy is sick.”

In “The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream” (2006), Jacob Hacker, a political-science professor at Yale, described a decades-long off-loading of risk from insurance-type structures—governments, corporations—to individuals. Economic insecurity has risen in the course of the past generation, even as American wealth climbed. Hacker attributed this shift to what he called “the personal-responsibility crusade,” which grew out of a post-sixties fixation on moral hazard: the idea that you do riskier things if you’re insulated from the consequences. The conservative version of the crusade is a commonplace: the poor should try harder next time. But, although Hacker doesn’t note it explicitly, there’s a liberal version, too, having to do with doffing corporate structures, eschewing inhibiting social norms, and refusing a career in plastics. Reich called it Consciousness III.

The slow passage from love beads to Lyft through the performative assertion of self may be the least claimed legacy of the baby-boomer revolution—certainly, it’s the least celebrated. Yet the place we find ourselves today is not unique. In “Drift and Mastery,” a young Walter Lippmann, one of the founders of modern progressivism, described the strange circumstances of public discussion in 1914, a similar time. “The little business men cried: We’re the natural men, so let us alone,” he wrote. “And the public cried: We’re the most natural of all, so please do stop interfering with us. Muckraking gave an utterance to the small business men and to the larger public, who dominated reform politics. What did they do? They tried by all the machinery and power they could muster to restore a business world in which each man could again be left to his own will—a world that needed no coöperative intelligence.” Coming off a period of liberalization and free enterprise, Lippmann’s America struggled with growing inequality, a frantic news cycle, a rising awareness of structural injustice, and a cacophonous global society—in other words, with an intensifying sense of fragmentation. His idea, the big idea of progressivism, was that national self-government was a coöperative project of putting the pieces together. “The battle for us, in short, does not lie against crusted prejudice,” he wrote, “but against the chaos of a new freedom.”

Revolution or disruption is easy. Spreading long-term social benefit is hard. If one accepts Lehane’s premise that the safety net is tattered and that gigging platforms are necessary to keep people in cash, the model’s social erosions have to be curbed. How can the gig economy be made sustainable at last?

During the final days of the Obama Administration, I went to see Tom Perez, at that time the Secretary of Labor and now—after a candidacy fraught with inner-party conflict—the chair of the Democratic National Committee. Perez, tieless in a white shirt, greeted me from a couch. Beyond the stresses of leaving the Cabinet, he had just experienced a bad nosebleed and looked drained.

“If you’re looking for the five-point blueprint, I don’t have it,” he said, when I asked about his vision for the gigging labor market. Last year, he pushed the Census Bureau to reinstate the Contingent Worker Supplement to gather data. (The government currently has no information on a gigging sphere as such.) He believed that any long-term labor model should include input from workers, but wasn’t sure what that should look like. “Voice can take a lot of forms,” Perez said. “I’m a big fan of collective bargaining and the labor movement, but I recognize that there are other ways.”

Perez champions what he calls “conscious capitalism”—free-market liberalism, with an eye to workers’ rights—and he insisted to me that profit-seeking and benefits-giving are not at odds. “Shareholders are best served when all stakeholders are well served!” he explained. The mind-set was mainstream during the nineteen-nineties, and still runs strong in the tech community, with its doing-well-by-doing-good ethos. One popular idea is that app markets regulate themselves with online ratings by and of everyone involved in a transaction.

The record here is mixed. Some earners complain about the way rating systems favor the judgment of customers (Seth F. told me that it is hard to challenge a poor rating) and can be leveraged for haggling purposes. (Some Airbnb customers, Blake Hinckley, of Happy Host, said, use trivial problems to seek a refund.) And reputation governance can’t pick up patterns of unjust exclusion. Research on Airbnb found that identical profiles given different ethnic names were treated differently by hosts, and that pricing on equivalent apartments ran lower for black hosts than for everybody else. (A couple of weeks ago, Airbnb agreed to let a regulatory body, in California, test for discrimination; the company itself has instituted an aggressive program to try to curb such behavior.) Still, you cannot regulate somebody’s house or car the way you regulate a hotel or a taxi.

“Someone who’s hosting on Airbnb might say, ‘Well, this is my space. I only want a certain kind of guest in my spare bedroom,’ ” Arun Sundararajan, an N.Y.U. business professor, says. Is that unreasonably discriminatory? In a new book, “The Sharing Economy,” he proposes a halfway measure like Airbnb’s: self-regulation in collaboration with government. Many elected politicians like a long-leash approach, too. In November, 2014, after an Uber employee described tracking a journalist’s movements, Senator Al Franken sent a list of privacy-policy queries to Uber’s C.E.O.; last fall, Franken pressed Uber and Lyft about apparent race-based discrepancies in wait times. “What I’m trying to do is help customers understand what these companies are doing, and encourage these companies to put in place voluntary measures,” Franken told me soon after dispatching the first letter. Some companies have taken preëmptive measures. Laura Copeland, the head of community at Lyft, describes having created an “advisory council” of seven drivers to make sure that the people on the street have a voice in the company.

Other assessments suggest that employees, too, should get their houses in order. “To succeed in the Gig Economy, we need to create a financially flexible life of lower fixed costs, higher savings, and much less debt,” Diane Mulcahy, a senior analyst at the Kauffman Foundation and a lecturer at Babson College, writes in her book “The Gig Economy,” which is part economic argument and part how-to guide. Ideally, gig workers should plan not to retire. (Beyond Airbnb hosting, Mulcahy sees prospects for aging millennials in app-based dog-sitting.) If they must retire, they should prepare. Mulcahy suggests bingeing on benefits when they come. Fill your dance card with doctors while you’re on employee insurance. Go wild with 401(k) matching—it will come in handy.

This ketchup-packet-hoarding approach sounds sensible, given the current lack of systemic support. Yet, as Mulcahy acknowledges, it’s a survival mechanism, not a solution. Turning to deeper reform, she argues for eliminating the current distinction between employees (people who receive a W-2 tax form and benefits such as insurance and sick days) and contract workers (who get a 1099-MISC and no benefits). It’s a “kink” in the labor market, she says, and it invites abuse by efficiency-seeking companies.

Calls for structural change have grown loud lately, in part because the problem goes far beyond gigging apps. The precariat is everywhere. Companies such as Nissan have begun manning factories with temps; even the U.S. Postal Service has turned to them. Academic jobs are increasingly filled with relatively cheap, short-term teaching appointments. Historically, there is usually an uptick in 1099 work during tough economic times, and then W-2s resurge as jobs are added in recovery. But W-2 jobs did not resurge as usual during our recovery from the last recession; instead, the growth has happened in the 1099 column. That shift raises problems because the United States’ benefits structure has traditionally been attached to the corporation rather than to the state: the expectation was that every employed person would have a W-2 job.

“We should design the labor-market regulations around a more flexible model,” Jacob Hacker told me. He favors some form of worker participation, and, like Mulcahy, advocates creating a single category of employment. “I think if you work for someone else, you’re an employee,” he said. “Employees get certain protections. Benefits must be separate from work.”

In a much cited article in Democracy, from 2015, Nick Hanauer, a venture capitalist, and David Rolf, a union president, proposed that workplace benefits be prorated (someone who works a twenty-hour week gets half of the full-time benefits) and portable (insurance or unused vacation days would carry from one job to the next, because employers would pay into a worker’s lifelong benefits account). Other people regard the gig economy as a case for universal basic income: a plan to give every citizen a modest flat annuity from the government, as a replacement for all current welfare and unemployment programs. Alternatively, there’s the proposal made by the economists Seth D. Harris and Alan B. Krueger: the creation of an “independent worker” status that awards some of the structural benefits of W-2 employment (including collective bargaining, discrimination protection, tax withholding, insurance pools) but not others (overtime and the minimum wage).

I put these possibilities to Tom Perez. He told me that he didn’t like the idea of eliminating work categories, or of adding a new one, as Harris and Krueger suggest: you’d lose many of the hard-won benefits included with W-2 employment, he said, either in the compromise to a single category or because current W-2 companies would find ways to slide into the new classification. He wanted to move slowly, to take time. “The heart and soul of the twentieth-century social compact that emerged after the Great Depression was forty years in the making,” he said. “How do we build the twenty-first-century social compact?”

Perez’s new perch, at the D.N.C., has given him a broader platform, and a couple of hours after the House passed the American Health Care Act last week, he championed the old safety net in forceful language. “Scapegoating worker protections is often a lazy cop-out for some who want to change the rules to benefit themselves at the expense of working people,” he told me. “We shouldn’t have to choose between innovation and the most basic employee protections; it’s a false dichotomy.” The entanglement of the sharing economy and Democratic politics has continued—Perez’s press secretary at the Department of Labor now works for Airbnb—but his approach had circumspection. “Any changes you make to policies or regulations have to be very careful and take all potential ripple effects into account and keep the best interest of the worker in mind.”

His own effort to do that led him one day to New York, where he stopped by a company called Hello Alfred. “I just wanted to introduce us a little bit, explaining why we’re here,” Marcela Sapone, the company’s C.E.O. and co-founder, said. “I think the best way to do that is to show you what we do. I heard that you like Coke heavy”—that is, the opposite of Coca-Cola light—“so we went ahead . . . ” She handed him a miniature bottle.

“The perfect size!” Perez exclaimed. He looked delighted and confused.

“At Alfred,” Sapone went on, “we think that help should be built into your life.” Sapone and her co-founder, Jess Beck, had met at Harvard Business School after leaving McKinsey. “We were thinking about how we were going to balance a career, building a family, building a social life in the community—you’d have to be a superhero. So we asked for some help to become that superhero,” Sapone said.

Unlike TaskRabbit, Hello Alfred is based on recurring service. When customers download the app and sign up, they’re assigned a single tasker, called a home manager, who comes once or twice a week, on a schedule. Alfred taskers often have keys and let themselves in; the idea is that, like traditional home help, they get to know their clients’ preferences and quirks. “It’s sort of a weird relationship you build with this person,” Leah Silver, a client who is an elementary-school teacher on the Upper West Side, told me. “They know so much about you.”

The reason for Perez’s visit was an unusual feature of Hello Alfred’s model: although the taskers can work part time, on a schedule they determine, all are full W-2 employees. Perez considered the company to be a model—creative, well-intentioned, and kind toward its employees—and praised it between pulls on his Coke heavy. “I appreciate that you’re understanding the high road is the smart road,” he said. “This is not an act of charity! This is an act of enlightened self-interest.”

He would have been more correct to call it self-interest tamed. Sapone told me later that it’s expensive to carry a staff of W-2 workers on a gigging schedule. The tax burden is greater for Hello Alfred than it would be on a 1099 model, the hourly rate is high, and the required human-resources infrastructure drives up the cost. Attrition is low, but W-2 companies are also vulnerable to various employee lawsuits from which 1099 employers are insulated.

For now, however, companies such as Hello Alfred, going above and beyond market demands out of principle, may be the gig economy’s best hope. And, occasionally, the principles travel. Blake Hinckley has already moved the most senior three of his six Happy Host staff cleaners onto W-2 status. The reason, he told me, is Sapone: they knew each other in Boston, and she convinced him that any honorable company owed its workers employment benefits.

One afternoon, I accompanied a Hello Alfred tasker named Phillip Pineno as he went to service apartments in Kips Bay. A placid guy with tiny silver hoops in his ears and a hipster’s dusky beard, Pineno does tasking four days a week and, like Bobby Allan, works in his remaining time as an actor. In the lobby of a building facing Bellevue South Park, he gathered packages and ascended to a client’s apartment—one of eleven he’d visit that day. A bag of Trader Joe’s Veggie & Flaxseed Tortilla Chips went in a cupboard. A box of cereal was tucked into position on the counter. Pineno used to be a caterer, doing events at Lincoln Center and the Museum of Natural History. The work was fine, he said, but unpredictable, different from Hello Alfred. “You get to feel more like a human,” he told me. He could take time every week to work toward his dream without gambling his future on it. He had found some sense of workplace comfort—of being valued and known.

For many gig workers, as for Seth F., that dream remains elusive. When Seth F. had finished hanging art work in my living room, I led him to the dining room. He took a small electric drill and some screws out of his backpack, and started driving them into the plaster. We were hanging a small print of a Sol LeWitt drawing, squares in squares in squares. He extracted a laser level, and projected it across the wall. “This is my favorite tool,” he told me, with a moving tenderness. He rarely met other taskers, he said; there were no colleagues in his life with whom he could share experiences and struggles. The flexibility was great, if you had something to be flexible for.

“The gig economy is such a lonely economy,” he told me. He left his drill behind after he finished the work, but I was out when he returned the next day to get it. I never saw him again.

http://www.newyorker.com/magazine/2017/05/15/is-the-gig-economy-working

There Is a Solution to Our Broken Economy Besides Universal Basic Income

On May 10, 2017, Tom Ward writes on Futurism:

IN BRIEF
Universal Basic Assets (UBA) is a system in which each citizen receives an equal amount of baseline assets, in contrast to Universal Basic Income, which deals only with money. But could UBA produce a more equal society?

WHAT IS UBA?

Universal Basic Assets (UBA) have been suggested by the Institute for the Future (IFTF) as a more progressive and fair way to challenging inequality — which, at this point, is staggering. Currently, according to Oxfam, eight people own as much wealth as half of the world’s population.

This inequality will become more severe with the exponential increase of two factors: The first is climate change, which creates “climate refugees” due to water and food shortages as well as the wars that start as a result. The second is advancements in artificial intelligence (AI) and  automation technology, which will displace many workers. Stephen Hawking has recently added his name to the growing list of scientists worried about the impact of AI on middle class jobs.

UBA has been proposed as a way of averting economic disaster by properly assessing and distributing our resources to meet the needs of every person. It can be seen as an evolution of the concept of Universal Basic Income (UBI), which gives every citizen, regardless of how much they earn, a set amount of guaranteed money. The biggest criticisms of this concept are that it is hugely expensive, not all individuals have equal skills in managing money, and that — as Lenny Mendonca of NewCo Shift wrote in an opinion piece — “it is giving crumbs to pacify rather than means to participate.”

The IFTF defines UBA as “a core, basic set of resources that every person is entitled to, from housing and healthcare to education and financial security.” Rather than just focusing on money, the IFTF divides assets into three categories: First, private assets owned personally, such as housing, land, and money. Second, public assets owned collectively and usually managed by a government, which can include anything from the police force to public art galleries to national parks.

And third, open assets owned by neither an individual nor the government, but by a defined group. Resources in this category are epitomized by how open-source software operates today. John Clippinger, founder of the Institute for Data-Driven Design, said this category usually evolves with society, giving the example of British Common Law in an interview with Forbes, “It was constantly reinventing itself around the circumstances, and there was no single point of control.”

BETTER THAN UBI?

The IFTF is still early in its planning stage, so its members are vague about exactly how they propose to implement UBA. Their model going forward is to:

  • Catalyze a community to create a “new economic operating system built on universal basic assets.”
  • Conduct research, particularly on open assets.
  • Launch experiments from which they can forecast the kind of society we can create.

However, there are some key issues that will have to be faced in order to change the economic operating system:

Firstly, there is the issue of quantification. In order to distribute something equally, there must be a way of measuring it in order to assign the same amount to each individual. While this is fairly simple with private assets (money can be counted, land measured in feet etc.), it becomes murkier when applied to the IFTF’s categorization of open assets.

Secondly — and linked to the above point — while private and public assets lie within a country’s borders, open assets do not. An example of this could be the air we breathe. So even if we can find a way to quantify open assets, how will we be able to distribute resources that we do not own, and cannot be owned?

Finally, if a problem with UBI is that not everyone has equal financial management skills, then the same criticism can be applied to asset management.

Douglas Rushkoff states in Economics Is Not a Natural Science that “The marketplace in which most commerce takes place today is not a pre-existing condition of the universe.” UBA is a promising means of making the economy a more equal space. However — like any new idea — there are some problems it has to overcome first.

There Is a Solution to Our Broken Economy Besides Universal Basic Income

The singular problem that Universal Basic Assets (UBA) and Universal Basic Income (UBI) present is the destruction of private property principles as a direct result of redistribution of the earnings or capital assets of those in our society who contribute to the economy via their human labor and/or their non-human productive capital assets, which they own as individuals. These solutions are in direct conflict with the private property principles our nation was founded upon.

The “pursuit of happiness” phrase in the Declaration of Independence was interchangeable in those times with the word “property.” The original phrasing was “the right to life, liberty and property.” “The pursuit of happiness” phrase was a substitute for the “property” phrase. In the forerunner of the Declaration of Independence and Bill of Rights, the 1776 Virginia Declaration of Rights declared that securing “Life, Liberty, with the means of acquiring and possessing Property” is the highest purpose for which any just government is formed. Thus, democratizing economic power and empowering EVERY citizen to contribute productivity to the economy, not redistributing earnings and capital assets, will return us to the innocence and economic power diffusion we had in a pre-industrial society where labor was the principal factor in the creation of wealth.

As Lenny Mendonca of NewCo Shift wrote in an opinion piece — “[Universal Basic Income] is giving crumbs to pacify rather than means to participate.”

Along with Universal Basic Income and Universal Basis Assets proposals, the key means of redistribution is taxation — taking from the legitimate producers and giving to the non- or under-producers — to make up the economy’s ever-wider income and purchasing power shortfalls.

Unlike the pre-industrial society, today and in the future productive capital is (and will) increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Binary economist Louis Kelso postulated that if both labor and capital are independent 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. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive, and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.

Another aspect of the Universal Basic Assets proposal is that everyone should be equal. This is a belief system fallacy. This will never be in a free society. What does need to be equal is opportunity to the means of acquiring and possessing property for EVERY citizen.

Thus, rather than focus studies on how to redistribute earnings and capital assets, our focus should be on empowering EVERY child, woman and man to become a productive contributor to the economy via universal equal access to financial mechanism that create wealth and produce income from OWNERSHIP of newly formed productive capital assets simultaneously with the growth of the economy, without taking anything away from those who already own capital assets.

Kelso said, “We are a nation of industrial sharecroppers who work for somebody else and have no other source of income. If a man owns something that will produce a second income, he’ll be a better customer for the things that American industry produces. But the problem is how to get the working man [and woman] that second income.”

There’s nothing new about the non-human factor (productive land; structures; tools; machines; robotics; computer processing; etc., which are owned by people individually or in association with others) replacing people, but the rate of replacement is exponential and the result is that productivity gains lead to more wealth for the OWNERS of the non-human factor of production, while for others who have always been dependent on jobs as their source of income, there has been a steady decline to poverty-level labor incomes as private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

Thus, we can no longer ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.

What must be understood is that fundamentally, economic value is created through human and non-human contributions.

Also what needs to be understood is that human productivity has not advanced (our human abilities are limited by physical strength and brain power — and relatively constant), but that the productiveness of the non-human factor of production — productive capital — is the reason that private sector corporations, majority owned by the “1 percent,” are utilizing the non-human factor of production increasingly to create efficiencies and save labor costs. It is the function of technology to save labor from toil and to enable us to do things that otherwise is humanly impossible without non-human input. The critical question becomes who should own productive capital? The issue of OWNERSHIP is unbelievably overlooked by those in academia and politics. Yet we live in country founded upon private property rights.

Today, large streams of data, coupled with statistical analysis and sophisticated algorithms, are rapidly gaining importance in almost every field of science, politics, journalism, and as well as digitalization of the manufacturing and service industries. What does this mean for the future of work?

“The era we’re in is one in which the scope of tasks that can be automated is increasing rapidly, and in areas where we used to think those were our best skills, things that require thinking,” says David Autor, a labor economist at Massachusetts Institute of Technology.

Businesses are spending more on technology now because they spent so little during the recession. Yet total capital expenditures are still barely running ahead of replacement costs. “Most of the investment we’re seeing is simply replacing worn-out stuff,” says economist Paul Ashworth of Capital Economics.

Yet, while the problem is one that no one can no longer ignore, the solution also is one starring them in the face but they just can’t see the simplicity of it. Instead, they pursue redistributive solutions such as UBI and UBA to equalize economic inequality. Thus, the political focus on job creation and redistribution of wealth rather than on equal opportunity to produce, full production and broader capital ownership accumulation.

We need to reevaluate our tax, monetary and central banking institutions, as well as, labor and welfare laws. We need to innovate in such ways that we lower the barriers to equal economic opportunity and create a level playing field based on anti-monopoly and anti-greed fairness and balance between production and consumption. In so doing, every citizen can begin to accumulate a viable wealth-creating, income-producing capital estate without having to take away from those who now own by using the tax system to redistribute the income of capital owners. What the “haves” do lose is the productive capital ownership monopoly they enjoy under the present unjust system. A key descriptor of such innovation is to find the ways in which “have nots” can become “haves” without taking from the “haves.” Thus, the reform of the “system,” as Kelso postulated, “must be structured so that eventually all citizens produce an expanding proportion of their income through their privately owned productive capital and simultaneously generate enough purchasing power to consume the economy’s output.”

Failing to abate the monopoly ownership of productive capital assets is being an accomplice to murder. And anyone who seeks to own productive power that they cannot or won’t use for consumption are beggaring their neighbor — the equivalency of mass murder — the impact of concentrated capital ownership.

As long as working people are limited by earning income solely through their labor worker wages, they will be left behind by the continued gravitation of economic bounty toward the top 10 percent capital ownership class of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in turmoil and upheaval, if not revolution.

A new system that would ensure equal opportunity for every child, woman, and man to acquire productive capital with the earnings of capital and broaden its ownership universally does not require people to be any better than they presently are, but it does enable our society to leverage both greed and generosity in a way that honestly recognizes and harnesses productive capital as the factor that exponentially produces the wealth in a technologically advanced society.

Kelso wrote: “In the distribution of social power, whether it be political power or economic power, all things are relative. The essence of economic democracy lies in the elimination of differences of earning power resulting from denial of equality of economic opportunity, particularly equal access to capital credit. Differences of economic status resulting from differences in advantages taken and uses made of differences based on inequality of economic opportunity, particularly those that give access to capital credit to the already capitalized and deny it to the non- or under-capitalized, are flagrant violations of the constitutional rights of citizens in a democracy.”

What needs to be our focus is to adjust the opportunity to produce, not the redistribution of income after it is produced. 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.

The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and labor worth devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today’s wealthy 10 percent ownership class, and ownership is broadened so that EVERY American earns income through full-earning stock ownership dividends so they can afford to purchase the products and services produced by the economy.

None of this is new from a macro-economic viewpoint as productive capital is increasingly the source of the world’s economic growth. The role of physical productive capital is to do ever more of the work of producing more products and services, which produces income to its owners. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital — which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented 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 invention. Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and labor worth devaluation due to tectonic shifts in the technologies of production and competitive globalization of production.

There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.

The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the “machines” that are replacing them or devaluing their labor value.

The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in viable businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America’s future capital wealth 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 using insured, “pure” interest-free capital credit, repayable out of the future earnings of the investments. Essentially, we need to implement financial mechanisms that empower EVERY American to acquire productive capital with the self-financing earnings of capital, instead of leaving them to acquire, as best as they can, with their earnings as labor workers and the pledge of past savings as security collateral to protect against investment failure.

Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and under-capitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.

As for addressing the problem that not everyone has equal financial management skills and a knowledgable basis to choose what viable business capital expansion projects to invest in and subsequently manage their growing wealth-creating, income-producing capital asset portfolio, solutions should include education, professional asset management services as well as producers ownership unions to manage asset accounts for their members. But this is a subject for another article.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

See the article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

See the article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058. And also “Achieving The Green Economy” at http://foreconomicjustice.org/?p=9082.

Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “The Income Solution To Slow Private Sector Job Growth” at http://www.foreconomicjustice.org/9872/the-income-solut…ector-job-growth.

 

The Future Of 21st Century Manufacturing Is Digital

On May 21, 2017, Elizabeth Chmurak writs on NBC News:

Across America, manufacturing is changing from the traditional assembly line to the use of collaborative robots. By 2025, industrial robots are expected to perform 25 percent of tasks such as assembly, packaging, and material handling.

“Instead of these old factories that are very laborious and have a lot of big machinery, manufacturing is going to look more like software, and have machines that are running off of digital files,” said Jonathan Schwartz of Voodoo Manufacturing, a 3-D printing company in Brooklyn, New York.

Schwartz and fellow co-founder Max Friefeld rely on 160 3-D printers to manufacture nearly 50 different projects, from key chains to T-Rex shower heads, all at once.

The Factory of the Future is Digital 3:32

 

“We’re focused on doing this at high volume, cost effectively,” said Friefeld. “3-D printing used to be 10 units, 20 unit prototypes. Now we do thousands for every order.”

The Rebirth of Manufacturing

Bringing manufacturing jobs back to the U.S. is a top priority for President Donald Trump, who has made “Buy American, Hire American” a key element in his pro-business agenda.

However, the manufacturing industry is no longer what it used to be. According to the U.S. Bureau of Labor Statistics, 4.9 million manufacturing jobs have disappeared in the past 20 years — in part because of increased automation.

Industry executives say today’s manufacturing is about collaboration with innovation, and learning to work hand in hand with robots.

Helping to take Voodoo to the next level of a modern-day factory is Jim Allen, director of manufacturing.

“I think they’re gonna adapt,” he said of traditional manufacturing businesses. “There are examples of companies that have been tool and die, automotive, and other industries where [now] they’re using robotics.”

Robots Create Jobs

Voodoo isn’t the only manufacturing company taking the leap into 3-D printing. Big brands such as GE, Adidas, Boeing, Ford, Nike, Hasbro, and Hershey’s are also integrating the technology into their products.

The fear of robots replacing humans in the manufacturing industry is a growing concern for millions of unemployed Americans. But Allen says there is a silver lining that comes with technological advances.

“Because of automation, we’re increasing our productivity. We’re able to get more products out there at a lower cost at higher quality. Being able to do that increases demand, increased demand creates more jobs — so it’s a self-fulfilling cycle of creating more jobs,” said Allen. “We have to be competitive with the other processes and other countries. And that enables us to create more jobs.”

http://www.nbcnews.com/business/business-news/future-21st-century-manufacturing-digital-n762156

This is yet another article whose subject matter should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime. The first burst of this phenomena was the Industrial Revolution. But now we are in an age of technology sophistication that is permeating every sector of industry and our day-to-day lives.

While author Elizabeth Chmurak quotes Jim Allen, Director of Manufacturing at Voodoo who states that increased productivity increases more demand because products and services become less expensive and thus such “demand creates more jobs,” Allen fails to address that people need to earn income to be “customers with money” to create demand, and if productive capital is increasingly the source of the world’s economic growth, therefore, it should become the source of added property ownership incomes for all.

There’s nothing new about machines replacing people, but the rate of replacement is exponential and the result is that productivity gains lead to more wealth for the OWNERS of the non-human factor of production, but for others who have always been dependent on jobs as their source of income, there has been a steady decline to poverty-level labor incomes as private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

Thus, we can no longer ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.

What must be understood is that there are two independent factors of production — human or labor workers who contribute manual, intellectual, creative and entrepreneurial work and non-human or physical productive capital (productive land; structures; infrastructure; tools; machines; robotics; computer processing; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like which are owned by people individually or in association with others).

Fundamentally, economic value is created through human and non-human contributions.

Also what needs to be understood is that human productivity has not advanced (our human abilities are limited by physical strength and brain power — and relatively constant), but that the productiveness of the non-human factor of production — productive capital — is the reason that private sector corporations, majority owned by the “1 percent,” are utilizing the non-human factor of production increasingly to create efficiencies and save labor costs. It is the function of technology to save labor from toil and to enable us to do things that otherwise is humanly impossible without non-human input. The critical question becomes who should own productive capital? The issue of OWNERSHIP is unbelievably overlooked by those in academia and politics. Yet we live in country founded upon private property rights.

Today, large streams of data, coupled with statistical analysis and sophisticated algorithms, are rapidly gaining importance in almost every field of science, politics, journalism, and as well as digitalization of the manufacturing and service industries. What does this mean for the future of work?

The pursuit for lower and lower cost production in other countries that relies on slave wage labor and lacking environmental regulations will eventually run out of places to chase. In reality, off-shoring of manufacturing will eventually be replaced by human-intelligent super-robotic automation. Eventually, “rich” countries, whose productive capital capability is owned by its citizens, will be forced to “re-shore” manufacturing capacity, and result in every-cheaper robotic manufacturing.

“The era we’re in is one in which the scope of tasks that can be automated is increasing rapidly, and in areas where we used to think those were our best skills, things that require thinking,” says David Autor, a labor economist at Massachusetts Institute of Technology.

Businesses are spending more on technology now because they spent so little during the recession. Yet total capital expenditures are still barely running ahead of replacement costs. “Most of the investment we’re seeing is simply replacing worn-out stuff,” says economist Paul Ashworth of Capital Economics.

Yet, while the problem is one that no one can no longer ignore, the solution also is one starring them in the face but they just can’t see the simplicity of it.

The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and labor worth devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today’s wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through full-earning stock ownership dividends so they can afford to purchase the products and services produced by the economy.

None of this is new from a macro-economic viewpoint as productive capital is increasingly the source of the world’s economic growth. The role of physical productive capital is to do ever more of the work of producing more products and services, which produces income to its owners. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital — which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented 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 invention. Binary economist Louis Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

Furthermore, according to Kelso, 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. Kelso postulated that if both labor and 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. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.

A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and labor worth devaluation due to tectonic shifts in the technologies of production.

There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.

The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the “machines” that are replacing them or devaluing their labor value.

The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America’s future capital wealth 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.” The proposed Capital Homestead Act would produce this result.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

See the article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

See the article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058. And also “Achieving The Green Economy” at http://foreconomicjustice.org/?p=9082.

Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “The Income Solution To Slow Private Sector Job Growth” at http://www.foreconomicjustice.org/9872/the-income-solut…ector-job-growth.

It’s Not Just the Assembly Lines — Robots Could Wipe Out 40 Percent Of Retail Jobs

On May 22, 2017, Ben Popken writes on NBC News:

The death of retail is about to become a mass grave.

A new study finds that robots could destroy up to 7.5 million jobs over the next 10 years. That could be a bigger hit for the retail industry than when automation came for manufacturing jobs.

Retail has already suffered massive hits as its overbuilding bubble bursts and shoppers increasingly skip the mall for shopping online.

Retailers embrace high tech to lure customers into stores 3:40

 

Just this weekend Sears said it was closing an additional 30 stores this spring on top of those already announced, bringing the total to almost 200.

But that retail downsizing trend is about to go full turbo. Robots will replace workers outright in certain jobs, according to the report, or make workers so efficient you don’t need as many of them.

“Cashiers are considered one of the most easily automatable jobs in the economy,” noted Cornerstone Capital Group, the financial services firm that conducted the study.

Many sales job are also up for the digital axe. More customers will make use of in-store smartphones and computer kiosks, reducing the need for as many salespeople on the floor.

While robots won’t be stocking retail store shelves any time soon, improvements in computerized inventory control means you won’t need as many bodies to do it. Then there’s the robot shopping carts that can return themselves.

Related: Do Shoppers Still Prefer Brick and Mortar Stores?

And, although successful demands for higher wages may have improved the lives of the workers they lifted up, higher pay can be a double-edged sword. With margins squeezed, retailers already under pressure will look even harder for ways to save.

“Companies which use technology to support their workers are likely to benefit from long-term productivity gains,” said the report. “However, technology also has the potential to automate part of the sales process and render a range of jobs redundant.”

While old industries are always being killed off and new ones created, the pace at which workers are being asked to learn new skills and new jobs is happening faster than it ever has in human history.

Can society and government keep up with the bots?

http://www.nbcnews.com/business/business-news/it-s-not-just-assembly-lines-robots-could-wipe-out-n762951

This is yet another article whose subject matter should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime. The first burst of this phenomena was the Industrial Revolution. But now we are in an age of technology sophistication that is permeating every sector of industry and our day-to-day lives.

There’s nothing new about machines replacing people, but the rate of replacement is exponential and the result is that productivity gains lead to more wealth for the OWNERS of the non-human factor of production, but for others who have always been dependent on jobs as their source of income, there has been a steady decline to poverty-level labor incomes as private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

Thus, we can no longer ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.

What must be understood is that there are two independent factors of production — human or labor workers who contribute manual, intellectual, creative and entrepreneurial work and non-human or physical productive capital (productive land; structures; infrastructure; tools; machines; robotics; computer processing; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like which are owned by people individually or in association with others).

Fundamentally, economic value is created through human and non-human contributions.

Also what needs to be understood is that human productivity has not advanced (our human abilities are limited by physical strength and brain power — and relatively constant), but that the productiveness of the non-human factor of production — productive capital — is the reason that private sector corporations, majority owned by the “1 percent,” are utilizing the non-human factor of production increasingly to create efficiencies and save labor costs. It is the function of technology to save labor from toil and to enable us to do things that otherwise is humanly impossible without non-human input. The critical question becomes who should own productive capital? The issue of OWNERSHIP is unbelievably overlooked by those in academia and politics. Yet we live in country founded upon private property rights.

Today, large streams of data, coupled with statistical analysis and sophisticated algorithms, are rapidly gaining importance in almost every field of science, politics, journalism, and as well as digitalization of the manufacturing and service industries. What does this mean for the future of work?

The pursuit for lower and lower cost production in other countries that relies on slave wage labor and lacking environmental regulations will eventually run out of places to chase. In reality, off-shoring of manufacturing will eventually be replaced by human-intelligent super-robotic automation. Eventually, “rich” countries, whose productive capital capability is owned by its citizens, will be forced to “re-shore” manufacturing capacity, and result in every-cheaper robotic manufacturing.

“The era we’re in is one in which the scope of tasks that can be automated is increasing rapidly, and in areas where we used to think those were our best skills, things that require thinking,” says David Autor, a labor economist at Massachusetts Institute of Technology.

Businesses are spending more on technology now because they spent so little during the recession. Yet total capital expenditures are still barely running ahead of replacement costs. “Most of the investment we’re seeing is simply replacing worn-out stuff,” says economist Paul Ashworth of Capital Economics.

Yet, while the problem is one that no one can no longer ignore, the solution also is one starring them in the face but they just can’t see the simplicity of it.

The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and labor worth devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today’s wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through full-earning stock ownership dividends so they can afford to purchase the products and services produced by the economy.

None of this is new from a macro-economic viewpoint as productive capital is increasingly the source of the world’s economic growth. The role of physical productive capital is to do ever more of the work of producing more products and services, which produces income to its owners. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital — which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented 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 invention. Binary economist Louis Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

Furthermore, according to Kelso, 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. Kelso postulated that if both labor and 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. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.

A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.

There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.

The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the “machines” that are replacing them or devaluing their labor value.

The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America’s future capital wealth 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.” The proposed Capital Homestead Act would produce this result.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

See the article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

See the article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058. And also “Achieving The Green Economy” at http://foreconomicjustice.org/?p=9082.

Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “The Income Solution To Slow Private Sector Job Growth” at http://www.foreconomicjustice.org/9872/the-income-solut…ector-job-growth.

 

Our Political Economy Is Designed To Create Poverty And Inequality

Poverty is not an abstraction. People wear it on their faces, carry it on their backs as a constant companion—and it is heavy.

On March 5, 2017, Denis Kucinich writes on The Nation:

Let me begin by sharing with you the story of an inner-city Cleveland family of seven, two adults and five children all under the age of 11.

The family did not own a home. They were renters. As the family grew, it became ever more difficult to find rent. At one point the old car in which they roamed the city in search of rent became their living quarters. Evenings, the father and mother and a newborn slept in the car’s front seat, and the four other children, in the back.

They found rent by understating the number of children, which, when discovered, led to eviction and the same cycle of wandering as urban nomads. The father, a truck driver, had a war-related injury that occasionally required medical treatment, taking him out of work. Bills piled up, which led to garnishments. The mother suffered from post-partum depression, compounded by noisy, rambunctious children.

The children were sometimes out of school, as the family did not know where its next shelter or its next meal would come from.

This inner-city family lived in 21 different places in 17 years, including a couple of cars.

When we gather today to speak of poverty and inequality, I understand, because I was the oldest child in that inner-city family, which grew to nine persons, a family that was riveted to a day-to-day struggle to survive.

Ours was an intense experience of poverty and inequality that led to social disorganization, chronic instability that made daunting every encounter with every institution in a society, instability that created severe emotional difficulties in four of the seven children. Poverty and its partner chaos can play on people’s minds.

One of my most powerful memories was of listening to the sound of my parents’ counting pennies to pay utility bills. “Click, click, click,” I could hear the pennies drop, one by one, as they hit the metal top table.

Today I can hear those pennies dropping all over America for families not able to scrape together the cash to pay their bills, families who lack adequate housing, families who do not have adequate health care, families trying to raise children in a chaotic urban environment, families who truly do not know where their next meal will come.

In America today there are tens of millions of people with a hard-luck story. Tens of millions out of work, in ill health, in search of affordable rent, having neither a place nor a home to call their own; millions of people for whom, as Langston Hughes put it, life “ain’t been no crystal stair.”

No one who escapes such an environment physically or economically does it alone. There are teachers, coaches, doctors, lawyers, aunts, uncles, neighbors who appear as angels in our lives, who catch us when we are about to fall, who lift us up at the right moment, who show us a different path, who guide us in a new direction, who transport us to new possibilities, new futures.

But for every person upon whom fortune smiles, opportunity calls, and destiny stirs, there are many others for whom the future is obscured, for whom society is harsh, punitive, and unwelcoming.

I call these people my brothers and sisters, my cousins, my kinfolk who are ill-fed, ill-clothed, lacking in basic health care, working (if able) for low wages, hostages to debt, owning little, credit starved, renting if they can, and estranged from even rudimentary knowledge of wealth creation.

Poverty is not an abstraction. People wear it on their faces, carry it on their backs as a constant companion, and it is heavy.

Those of us acquainted with that condition often lack understanding of the nature of the material world, and, since access to material wealth seems random, are prey to the notion about wealth preached ironically by the Pardoner in The Canterbury Tales, “Radix malorum est cupiditas,” ‘The love of money is the root of all evil.”

One does not need to have taken a vow of poverty to be poor, one needs only the unconscious or conscious acceptance of the underlying precepts of a class-based society, the meek acceptance of a doctrine of predestination, the assumption of one’s status as merited and the acceptance of a political economy that equates one’s personal wealth with one’s innate value as a human being, while the so-called invisible hand of the marketplace quietly dips into the public till, and “moral hazard” is a polite term for theft.

All are created equal, indeed, but all do not have the same access to privilege, nor the same friends inside the government or financial centers of power, nor the same accountants.

Our reality is socially constructed and culturally affirmed. We have come to accept a system of things as inevitable without challenging the assumptions upon which a system is based.

Where does money come from? How is it made?

Before answering that question, let me state the obvious: Our political economy is structured to create poverty and inequality.

Nineteen of every 20 dollars of new wealth created goes to the top 1 percent. The top 1 percent has more wealth than the bottom 90 percent.

This cataclysm for our democracy was accelerated with the subprime meltdown of a decade ago.

According to the National Center for Policy Analysis, as many as 10 million families lost their homes to foreclosure during the housing crisis, and as a result had to move, in some cases resulting in a resegregation of city neighborhoods.

During this period, the Federal Reserve created trillions of dollars and gave them to banks, while Congress authorized $700 billion to bail out banks, without passing a program to make sure that the masses of people underwater in their mortgages or those caught up in no-doc low-doc schemes would have a chance to hold onto their homes.

Meanwhile, one of the few investments held by the middle class, home equity, plummeted as housing values sank in many city neighborhoods.

Much of America has not recovered from the carnival of financial corruption of a decade ago—except for the finance economy, of course.

For those barely holding on to middle-class status, the median income for a four-person family is just over $54,000. Yet the average US household with credit card debt owes more than $16,000 to credit card companies. On average, those with a mortgage owe $176,222, with auto debt owe $28,948, and with student loans owe $49,905.

Health-care consumes about 17.8 percent of America’s GDP, or three trillion two hundred billion dollars. The Kaiser Foundation reports that the average month premiums for family coverage in 2016 is $1,511 a month, or $18,132 a year.

The country is held hostage by insurance companies, while politicians wrangle over what is the best system of predatory for-profit health care, as pharmaceutical companies receive near-unlimited patent extension and public funding for 84 percent of new drug research, yet price their products out of the reach of millions of Americans, while their stocks perform at twice the Standard and Poors stock index.

The health-care industry is not the only institution casting Americans into poverty. The average family of four sees some $13,200 a year of its collective wealth deposited into America’s largest piggy bank, the Pentagon, which, according to noted economist Chalmers Johnson, now siphons off about a trillion dollars annually from all sources to prosecute several wars simultaneously, while managing nearly 800 military bases in 130 countries, this while never successfully completing an audit and having trillions in accounts that cannot be reconciled.

Martin Luther King Jr. said, “A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual doom.”

The cost of the war against Iraq, alone, adds $3 trillion to the national debt while bolstering the bi-party line that there simply is not enough money to meet domestic needs. Families have no reserves. More and more people are tethered to low-paying jobs, with few, if any benefits. Jobs are not there for young people coming out of school. The burden of debt, its extractive nature, forces survivors to borrow and borrow and borrow, to go deeper in debt.

In biblical times there was debt jubilee. Today we have not a jubilee but debt peonage for many, with a national debt compounded by environmental disasters, military misadventures, and Wall Street bailouts, and seldom suffered by those who helped to create it.

The bailout of Wall Street, the utter neglect of Main Street, the collapse of the housing market, the obscene escalation of the cost of private health care, the metastatic cancerous military leviathan point to a massive ethical failure in a society where egalitarian principles have been discarded in favor of a warped, Darwinian, meritocratic society built by gamblers insured by the government, insurance companies subsidized by the government, defense contractors made extravagantly rich by the government, banks that forced people out of their homes and were then bailed out by the government.

Growing poverty and inequality in America and other countries can be tied to a dismantling of the public sphere through the privatization of public services, which imposes the rentier’s premium on parking meters, toll booths, waste and sanitation services, water and sewer fees, and health care, to name a few.

In urban areas privatization looms as a major economic issue. People, through taxes, fees and utility rates, pay once for public services to be created. Once services are privatized, the public is forced to pay again and again, at higher rates, for less service.

The public is told that money is saved. Whose? Wages are cut, services are reduced, increased rates and fees follow. The loss of public accountability and political control shifts onto the public as increased economic burdens and the social and economic costs borne by displaced public workers.

In such a climate, unions are under attack, since they exist to promote economic justice. The right to organize, the right to collective bargaining, the right to strike, the right to decent wages and benefits, the right to a secure retirement, the right to sue an employer for maintaining an unsafe work place, all these rights and more are at risk. Labor unions helped to build economic equality. Their demise means less bargaining power for all American workers.

The ability to bargain collectively is essential in a democratic society, for upholding opportunities for advancement.

A recent article in The Atlantic estimates that “$1 trillion of America’s $6 trillion in annual federal, state and local government spending goes to private companies.”

A few examples are in[fra]structive. In Chicago an investigation showed that the city received $974 million less than the parking-meter franchise was worth.

Forty years ago, I was elected mayor of Cleveland, a city of 700,000, on a commitment to block the privatization of an electrical system which was worth at least a quarter of a billion dollars and was to be sold for $88.1 million, a scheme promoted by the state’s largest bank, a business partner of the private utility seeking to acquire the city’s division of light and power.

When I refused to sell the system, the bank forced the city into default over $5 million in debt, taken out by my predecessor. Subsequently, its municipal electric system intact, the people of Cleveland saved as much as a half-billion in combined charges for taxes and electricity bills.

Tom Johnson, mayor of the City of Cleveland at the turn of the 20th century, disciple of social reformer and progressive economist Henry George, brought to Cleveland the cheapest streetcar fares and the lowest-cost electricity through public ownership.

He once said, “I believe in municipal ownership of waterworks, of parks, of schools. I believe in the municipal ownership of these monopolies because if you do not own them, they in turn, will own you. They will rule your politics, corrupt your institutions and finally destroy your liberties.”

The ultimate privatization that reframed the entire of our economic and social system and set the stage for a permanent debt mentality occurred in 1913, when the money supply of the United States was privatized through the creation of the Federal Reserve.

Prior to the passage of the Federal Reserve Act, the US Constitution, Article 1, Section 8, placed the power to coin or create money with the United States Congress. That changed under the Federal Reserve. Central banks took over control of the money supply.

From that point on, money equaled debt. The Federal Reserve usurped the power of the government to spend money into circulation and assumed for central banks the power to create money out of nothing, a device called quantitative easing, and give it to their member banks.

In Cleveland, the banks focused a profit-taking scheme on lower-income black and white neighborhoods, touting low-documentation and no-documentation loans, which were bundled into securities and became the collateralized-debt obligations that collapsed and pulled the entire economy down 10 years ago.

It was all fraud, and it was underwritten by the never-audited Federal Reserve, the erstwhile cop who walked off the beat when the pinstripe-wearing robbers were casing the neighborhoods of our cities, bankers cum croupiers, trolling for unsuspecting dreamers in search of that elusive first home, or an upgraded second home, not really knowing about adjustable rates, balloon mortgages, and penalties attached to late payments, but trusting the assurances of their friendly banker, who suddenly reversed years of redlining policies and made loans available without proof of ability to repay.

When you are desperate for a home, you sign on the dotted line. I think back to my parents, who never owned a home, and I can tell you that, if given the offer extended to thousand in Cleveland’s neighborhoods, they would have signed on the dotted line, taken the keys, celebrated, and months later been devastated by foreclosure.

The privatization of the money supply is one of five major factors in poverty and inequality today, the other four being the emergence of the military-industrial-intelligence-congressional complex, the maintenance of the for-profit health-care system, and the erosion of public education through the creation of charter schools and the tremendous lifelong debt burden placed on those seeking higher education.

Today we face a renewed threat of privatization that could dramatically thrust the American people deeper into poverty. The privatization of Medicare will make health services inaccessible to millions of elderly. The privatization of Social Security would cause the jackpot lights to flash and spin at Wall Street’s casino as retirees check stock advances, declines, and unchanged to discern what the value of the monthly check will be when it arrives at the mailbox.

The planned privatization of the Post Office will mean the end of universal service, less rural delivery, higher costs pricing people out of basic mail service, and cuts to three-days-a-week delivery.

The prison-industrial complex is set for growth with privatization schemes that raise serious constitutional questions.

More and more military services are being privatized, which of course makes for an additional incentive for businesses to support wars and to support the politicians who vote for wars.

As the national debt rises toward $20 trillion, the debate intensifies over privatization of Medicare, Social Security, the Post Office, and government service at all levels, a practice that steals the commonwealth and institutionalizes poverty and inequality as wealth accelerates upwards, furthering economic divisions and erasing the cultural memory of public service, devouring the civic soul, once the animating principle of community, the spirit breath of participatory democracy.

As wealth accelerates upwards, the mass of people are told we cannot afford a living wage, cannot afford a full-employment economy, cannot afford universal pre-K, cannot afford school breakfast and lunch programs, cannot afford supplementary-nutrition programs, cannot afford women’s and infant-care assistance, cannot afford more adult education, cannot afford free public college and universities, cannot afford guaranteed retirement security, cannot afford Medicare for all, cannot afford a guaranteed annual income. We are constantly told that the country cannot do these things because it would add to the debt, or destroy individual initiative.

Let me tell you that we can reverse this entire system. Thanks to my wife, Elizabeth, who came to the United States to study monetary policy with Stephen Zarlenga of the American Monetary Institute, I began to explore the equation of money with debt, and the ways of the Central bank that create money out of nothing for the benefit of private banking through quantitative easing and another device known to the industry as fractional reserve banking and recognized by the rest of society as great moral hazard.

As a result of studying the structure of the system, as a member of Congress, I drafted the National Emergency Employment Defense act, which reclaims the power appropriated by the Federal Reserve through the Federal Reserve Act of 1913 and enables the government to issue money debt-free to meet the job creation, infrastructure repair, health care, education, and retirement-security needs of Americans.

Some believe that such a system would be inflationary. Then let me ask: Why has the Federal Reserve created trillions of dollars and placed us in a deflationary period? The middle class does not have enough money to buy goods.

The consumer economy is stalled. The Fed-created money did not get into the right hands. How is it that 19 of 20 new dollars of increased income have gone to the top 1 percent? Really? It is because the system is engineered to transfer wealth upwards, a perpetual inequality machine.

Through reclaiming our constitutional heritage, we can lower taxes and have a full-employment economy, universal pre-kindergarten, school breakfast and lunch programs, full funding for public education K-12, free college and university, guaranteed retirement security, Medicare for All, and a guaranteed annual income, eliminating poverty.

This is not magic. It requires a shift in federal policy, away from private banks’ running the economy, solely in the interest of private banks, to the government’s reclaiming its ability to be able to spend money into existence to meet the needs of the country, without going into debt.

Private banking would continue through dollar-for-dollar reserves, and have to survive without its government-granted license to speculate.

The government could reduce taxes, increase productivity, enable America to reach new heights of wealth shared by all, or we can stumble along our present course, with the children of the 99 percent being indentured servants to the 1 percent, with more than 50 million in poverty while political parties tinker with a totally corrupt system en route to death on the installment plan institutionalized by a government in thrall to banks, insurance companies, and the military-industrial complex.

Imagine an America whose government was not prepossessed with military force projection around the world, a government that set aside failed doctrines of interventionism, unilateralism, and first strike to concentrate on the practical needs of its citizens for jobs, for health care, for housing, for education, for retirement security, for safe neighborhoods, for clean air and clean water; a government that derived its support not from the power of its armaments but from the power of its commitment to the humanity of its citizens.

Abraham Lincoln spoke at Gettysburg of a nation, “conceived in liberty and dedicated to the proposition that all men are created equal.” The inner equality of our political heritage must be matched by our constant striving for economic justice.

If we have the intent, the vision, and the courage to reclaim the reality of equality, we can make poverty a thing of the past. Now, perhaps, you can understand that when I first began my public career, 50 years ago, as a candidate for City Council, I focused on economic issues, making sure phone, gas, electric, water, and sewer bills were kept low; that privatization schemes were rejected; that perishable foods were labeled and dated; that neighborhoods were safe, recreation facilities in repair, and the quality of life in the city was optimum, wherever it intersected with city services, especially the police, fire department, and housing.

Forty-five years ago, I advocated free public transit in Cleveland and was met with objections that, if transportation was free, why, everyone would be riding the bus!

Exactly.

Our Political Economy Is Designed to Create Poverty and Inequality

I applaud former Congressman Denis Kucinich for a insightful treatise on economic inequality.

 

Household Debt Makes A Comeback In The U.S.

On May 17, 2017, Michael Corkery and Stacy Cowley write in The New York Times:

A New Milestone in Household Debt

In the first quarter of 2017, consumer debt rose to $12.73 trillion, exceeding its peak in the third quarter of 2008. Student loans account for 10.6 percent of that total, up from 3.3 percent in 2003, while housing’s share, though still great, has fallen back to 2003 levels.

It took nearly a decade, but debt has made a comeback.

Americans have now borrowed more money than they had at the height of the credit bubble in 2008, just as the global financial system began to collapse.

The Federal Reserve Bank of New York said Wednesday that total household debt in the United States had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the nation’s economy.

The growing debt level shows that many of the millions of Americans who struggled during the recession have sufficiently repaired their credit to qualify for loans. It also suggests a rising optimism about economic growth among banks and other lenders.

Debt can fuel consumer spending, which accounts for nearly 70 percent of all economic activity in the United States. It also allows Americans to make large investments in education and housing, which can help build personal wealth and financial stability.

Yet the borrowing peak also signals the potential for new risks to the economy.

One of the major factors behind the latest debt binge has been student loans, a mounting burden that can stifle economic growth by preventing Americans from buying homes or spending on big-ticket consumer items.

The fear is that ballooning debt from student loans — and from auto loans and credit cards — could put many Americans back into a hole, prompting a new wave of defaults, much like the one that accompanied the mortgage meltdown a decade ago.

“This is not a marker we should be superexcited to get back to,” said Heather Boushey, the executive director and chief economist at the Washington Center for Equitable Growth, a liberal think tank. “In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don’t support.”

Since World War II, total household debt had been increasing, with only a few interruptions. The financial crisis changed that steady upward march.

In late 2008, household debt began a decline that would last for 19 consecutive quarters, an unprecedented period of deleveraging during which many Americans shied away from new borrowing. Total debt began to rise again in 2013, finally hitting a new high in this year’s first quarter.

There is reason to believe that borrowers should be able to better manage their debt now than they did during the financial crisis. The nation’s debt load is reaching new heights at a moment when the economy is expanding, a dynamic that makes the latest peak in borrowing less worrisome to economists.

And households today are borrowing differently than they did nine years ago. Student loan debt, driven by soaring tuition costs, now makes up 11 percent of total household debt, up from 5 percent in the third quarter of 2008.

By comparison, mortgage debt is 68 percent of total debt, down from 73 percent during the same period. The household debt figures are not adjusted for inflation.

Student borrowers today owe $1.3 trillion, more than double the $611 billion owed nearly nine years ago. About one in 10 student borrowers is behind on repaying the loans, the highest delinquency rate of any type of loan tracked by the New York Fed’s quarterly household debt report.

The student loan market is nowhere near the size of the $8.6 trillion mortgage market, making student borrowing less of a threat to the global financial system than the bad housing loans that touched off the financial crisis in 2008.

But there are similarities in how student loan debt — like mortgage debt a decade ago — has managed to pile up.

Photo

The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year. CreditBrendan Mcdermid/Reuters..

One idea underpinning the mortgage boom was that homeownership was a clear-cut route to building wealth. That notion was shaken by the housing collapse, which left millions of Americans in foreclosure and their finances in ruins.

Students have gone deep into debt in the belief that a college degree will eventually lead to a higher income. But many students have graduated into a job market where wages have been rising slowly, leaving them with more debt than they can pay off.

Economists are now unsure about how this mountain of student debt will affect the broader economy. Unlike mortgages, student loans cannot typically be shed or restructured, which means that more Americans are shouldering a type of debt that could weigh them down for the rest of their lives, preventing them from buying homes or starting businesses.

“Student debt is a different animal with different rules,” said Diane Swonk, founder of DS Economics in Chicago. “It has some good effects, but not always.”

Alyssa Pascarosa, 26, owes $100,000 related to the bachelor’s degree in sociology she received from the University of Pittsburgh in 2013. The debt shapes nearly all of her financial choices. Ms. Pascarosa initially planned to attend law school but changed her mind after realizing that pursuing that career path would double or triple her debt load.

Instead, Ms. Pascarosa moved back in with her mother in Easton, Pa., where she works as a graphic designer.

“I would like to move out at some point soon,” she said, “but with my loans, I can’t justify spending money on rent.”

Economists have found signs that high student debt levels have contributed to a slowdown in young adults’ household formation and a decline in early homeownership.

There are many benefits, of course, to the boom in student lending. More Americans now have college degrees, which will probably increase job opportunities and wages over time.

Workers with a four-year college degree earn significantly more than those without one, in aggregate. And borrowing money to obtain a college degree often proves to be a better investment than taking out a mortgage to buy a home. But how that plays out can vary widely in individual geographic areas and career fields.

Student loans are not the only area in which debt has grown rapidly.

The New York Fed report also shows how growth in auto lending over the past decade has made up for slower mortgage lending. Auto loans totaled about $1.1 trillion, or 9 percent of all household debt, in the first quarter of 2017, up from 6 percent in the third quarter of 2008.

Defaults have crept up in auto loans, one of the few sectors in which lenders were willing to extend credit to subprime borrowers after the 2008 crisis.

Mark Zandi, chief economist at Moody’s Analytics, said defaults on student and auto loans were a “financial blemish” on otherwise healthy household balance sheets.

“It is not an existential threat to households and the economy,” Mr. Zandi said. “It is an area where there is some stress.”

More broadly, the economic picture looks far less precarious than it did in late 2008. The amount of monthly income that Americans must spend paying off their debt is smaller, and employment is flush.

That made last month feel like an opportune time for Caitlin Farrell, 34, and her husband to buy their first home, a 1,500-square-foot, two-bedroom house in Sacramento. Ms. Farrell, who works as an education policy researcher, got her home loan from SoFi, a start-up online lender that moved into the mortgage market last year.

“We had been renting and moving all through our 20s,” Ms. Farrell said, “and now seemed like the right time to get in.”

The fundamental reason for high levels of usurious consumer debt (borrowed monies with interest to purchase consumption products and services, not productive capital asset formation investment) is Americans are struggling to attain and retain a “middle class” lifestyle. Because they have insufficient income, Americans go into personal unsecured and secured debt to satisfy their consumption wants and needs.

The fundamental problem is insufficient income to pay for the consumption wants and needs of the vast majority of Americans. Forget about saving for the future, the vast majority of Americans can barely make ends meet on a week-to-week or month-to-month basis. They do not possess the ability to save but still want to satisfy their consumption wants and needs and thus go into unsecured and secured debt ala credit cards, automobile loans, student loans, home mortgages and home equity loans.

The challenge is how do we reform the financial system so that EVERY American can earn an income sufficient to enable them to satisfy their consumption wants and needs while building a wealth-creating capital asset estate?

Fundamentally, that means they need a second income source other than a job. They need to become wealthy through acquiring OWNERSHIP in future wealth-creating, income-producing capital asset formation simultaneously with the growth of the economy, without the requirement of “past savings.”

To become wealthy, without dependency on inherited wealth (past savings) or denying their consumption wants and needs and saving, requires capital credit debt. But unlike consumer debt, which does not generate income and requires another source of income to pay the debt, capital credit debt is based on the logic of corporate business finance.

Capital acquisition takes place on the logic of self-financing and asset-backed credit for productive uses. People invest in capital ownership on the basis that the investment will pay for itself. The basis for the commitment of loan guarantees is the fact that nobody who knows what he or she is doing buys a physical capital asset or an interest in one unless he or she is first assured, on the basis of the best advice one can get, that the asset in operation will pay for itself within a reasonable period of time — 5 to 7 or, in a worst case scenario, 10 years (given the current depressive state of the economy). And after it pays for itself within a reasonable capital cost recovery period, it is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Still, there is at least a theoretical chance, and sometimes a very real chance, that the investment might not pay for itself, or it might not pay for itself in the projected time period. So, there is a business risk. This is why the lender has no reason to loan unless it has two sources of repayment. In addition to determining that the investment is viable and that the business corporation is credit worthy and reliably expected to make loan repayments, there needs to be security against default. Thus, for the lender to make the loan the borrower must provide the security.

On a large scale, there is a path to solve the security issue, that is, the risk can be absorbed by capital credit insurance or commercial risk insurance and reinsurance. Thus, in order to achieve national economic democracy, we need a way to handle risk management in finance by broadly insuring the risks. Such capital credit insurance would substitute for the security demanded by lenders to cover the risk of non-payment, thus enabling the poor and others with no or few assets (the 99 percenters) to overcome the collateralization barrier that excludes the non-halves from access to acquiring wealth-creating, income-generating productive capital.

One feasible way is to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers.

You see, commercial banks of issue can create money by accepting bills of exchange and issuing promissory notes. If money is created properly, that is, only by issuing promissory notes to discount bills of exchange with real value (new viable capital formation projects), the money supply for an economy will be elastic (that is, expand and contract as needed), stable, uniform, and asset-backed.

The amount of loans a commercial bank of issue can make is, in theory, limited only by the present value of financially feasible capital projects in the area served by the bank, and on which bills are drawn and offered to the bank.

We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings.

The Federal Reserve Bank should be used to provide interest-free “pure” capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation ((ala the Federal Housing Administration concept), through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

The Federal Reserve Board is already empowered under Section 13, paragraph 2 of the Federal Reserve Act to reform monetary policy to discourage non-productive uses of credit, to encourage accelerated rates of private sector growth, and to promote widespread individual access to productive credit as a fundamental right of citizenship. The Federal Reserve Board needs to re-activate its discount mechanism to encourage private sector growth linked to expanded capital ownership opportunities for all Americans.

The challenge we face is to free economic growth from the slavery of past savings by abolishing any fractional reserve requirement and providing that all bills of exchange accepted for pure credit loans made for financially feasible qualified capital projects be immediately rediscounted at the central bank. This would effectively result in 100 percent reserves of cash or cash equivalents in the form of commercial bank demand deposits at the central bank. The other use of past savings (the privy of the already wealthy ownership class), as collateral for pure credit loans, would be obviated by the use of capital credit insurance and reinsurance.

Pure credit financing of new capital and the replacement of traditional collateral with capital credit insurance and reinsurance would radically reduce dependency on existing accumulations of savings owned by the top 1 percent. This would allow rapid economic growth in which the poorest of the poor as well as everyone else to take advantage of equal ownership opportunities in the future. These opportunities, construed as a “new right of citizenship,” would be secured by means of the monetary and tax reforms offered by the Center for Economic and Social Justice’s (www.CESJ.org) proposal for a “Capital Homestead Act.”

The fact is money power rules. When money power is broadly distributed in the hands of the citizens, not the politicians or bankers, the people shall rule and the people shall be free of dependency on usurious consumer debt with their income rising simultaneously with the growth of the economy propelled by “consumers with money” (the people) wanting to satisfy their consumption wants and needs.

The end result is that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

How Do Americans Get Rich? (And Stay Rich?)

On January 2 , 2017, Steve Roth writes on Economics:

It’s the American dream. A third of Americans think they’ll be rich someday. More than half of 18–29 year olds think they will be.

Less than 5% actually make it.* And many of those do it the old-fashioned way: they inherit it. About 60% of U.S. household wealth is inheritedBetween a quarter and a third of Forbes 400 billionaires got rich that way. It may not be the most common way to get there, but it’s widespread, and it’s surely the easiest way.

That aspiration to wealth is deeply understandable. Getting high income from a good job is all well and good, but because wealth begets more wealth — people are compensated simply for owning things — wealth is, potentially, forever. It persists, and spreads through families and dynasties. Wealth can, and often does, endure for generations.

So it’s worth asking: how do Americans accumulate wealth? And how does that vary across income and wealth classes? How do the bottom 50% accumulate wealth, for instance, compared to the top 1%?

The Distributional National Accounts

A huge aid to answering that question arrived last month. Gabriel Zucman, Emmanuel Saez, and Thomas Piketty (PSZ) released one of the most important pieces of economic research in the last century. Their Distributional National Accounts (DINAs) reveal the distribution of national income to different income classes, wealth classes, age groups, and genders (and potentially different races, etc. etc.). This has been unavailable in the national accounts, and as a result it’s absent in most macroeconomic empirical work.

Here’s one poster exhibit:

Collect the whole set.

Zucman and company explicitly hope this distributional data “will be adopted by government agencies down the road” (see Conclusion slide). Here’s to it. The DINAs are a magisterial achievement, a treasure trove for empirical economists that merits easy access and prominent, front-and-center presentation in each release of the national accounts.

Income versus Wealth Accrual

But impressive as they are, the DINAs don’t fully answer the question of how Americans accumulate wealth. Because the DINAs only tally income, and income doesn’t include households’ holding (or “capital”) gains on stock portfolios, real estate, etc. Income does include much “property income” — dividends, interest, etc. That’s income from owning things. But it’s not everything that households receive from ownership. Holding gains figure large in that picture.

Any investor will tell you: cap [capital] gains are a big part of their wealth accumulation. Total return — dividends plus capital gains — is the measure that most savvy stock-market investors care about, long-term (and that fund managers like to tout, loudly). And much of Americans’ retirement saving — especially middle-class Americans — is accrued through capital gains on their homes.

The DINAs’ central goal is to match income as presented in the national accounts, and to reveal a multidimensional pyramid of distributional data underneath that income measure. A deeply worthy goal. But as a result, the DINAs can’t and don’t reveal the whole picture of household wealth accumulation (change in assets and net worth), or its distribution.

Here’s a rough picture of that disparity, showing a wealth-accrual measure compared to the PSZ income share, for the top one percent:**

Clearly, holding gains are much more volatile that income. But this kind of graph can still tell a long-term, secular story — and even give important insights into shorter-term trends and business cycles.

To get a feel for this: Of $22 trillion in contributions to household wealth in 2013 (income plus holding gains), the top 1% captured $8 trillion, or 35%, compared to 21% of income. That measure has exceeded 30% in eight of the last seventeen years; in the three and a half decades before 1997, it never went above 26%. (2008 is an arithmetic anomaly here, by the way. Household wealth accrual was negative that year, but one-percenters’ wealth accrual, the numerator, was even more negative.)

Concentration of total wealth accrual is almost always far higher, and has been rising faster, than concentration of income alone. The rich are getting richer, faster. It’s an inequality picture more dire even than that depicted in the DINAs. And because wealth begets more wealth, it’s a self-perpetuating picture.

We pay people for doing things, and we pay people for owning things. Increasingly, the latter.

Before expanding and detailing this picture, it’s important to say that Zucman, Piketty, and Saez are deeply aware of this reality — have discussed it many times — even though footnote 10 in their DINA working paper serves rather to obscure than reveal that understanding:

“In the long-run, a large fraction of capital gains arises from the fact that corporations retain part of their earning, which leads to share price appreciation. Since retained earnings are part of national income, these capital gains are in effect included in our series on an accrual basis. In the short run, however, most capital gains are pure asset price effects. These short-term capital gains are excluded from national income and from our series.”

Gabriel Zucman has given me permission to share his understanding of the issue, sent in private correspondence:

“You are correct that there can be pure asset valuation effects in the long run (i.e., capital gains in excess of those mechanically caused by retained earnings). These pure valuation effects are not part of national income, hence not included in our measure of income and our distributional series. However, they could be included down the road by computing income as delta wealth + consumption (i.e., Haig-Simon income). We have wealth in our database so we’re not far from being able to do this.”

Such an effort would be very welcome. (Doing so properly would require producing a reconstructed, alternate version of the DINAs calculated based on wealth accrual rather than income, from the ground up — far beyond the rough and ready estimate of one measure provided above.)

That effort would be welcome because: capital gains/losses are not just short-term fluctuations in household wealth, oscillating around some ideal book value determined by income and saving. Wealth accumulation greatly exceeds saving from income, pretty much always and everywhere, over very long periods. And holding gains are not a small part of wealth accumulation, especially for already-wealthy households.

Building the Wealth of a Nation

Below are some more pictures to get a feel for that disparity, based on the Integrated Macroeconomics Accounts (IMAs). They just show contributions to household wealth — additions to the asset side of household balance sheets. They don’t show outflows, deductions from the asset side (the primary one being consumption). Likewise, they only show “market” income — in IMA terms, “balance of primary incomes.” They don’t show nonmarket in- and outflows (mostly government taxes and transfers) that are outside of primary income.*** Holding gains are depicting the IMAs’ accrual-based, mark-to-market accounting for asset values.

2013 is is a recent anomaly here that may surprise people, worth pointing out. Households saw nominal holding gains of $8 trillion that year — equivalent to 60% of income — mostly from gains on equity shares ($3.8 trillion) and real estate ($2.2 trillion).

The share of accumulated, accrued wealth contributions attributable to previous years’ holding gains hit a high of 20% on the eve of The Great Whatever, after creeping up for decades. It dropped precipitously to 15%, and has started slowly climbing since. Absent a far more complete accounting, it’s not clear how that percentage has changed for different income and wealth classes.

Here’s the previous graph with income removed, zooming in on the proportion of holding gains received from different asset classes:

Holding gains from equities deserve some special discussion, because they’re something of a hybrid:

When firms retain earnings (profits) rather than distributing them to shareholders, the firms’ book value goes up. That increase is the firms’ net saving — think of it as firms saving on behalf of their shareholders. Stock markets certainly consider that increased book value when bidding up shares, so some portion of households’ gains on equities is arguably attributable to firms’ saving. But that portion isn’t delivered as income; households receive it as holding gains. The retained-earnings portion is hidden in those gains.

So is that portion saving from income (by firms), or holding gains (by households)? The answer is yes. It’s a floor wax and a dessert topping.

The key point here is that household holding gains on corporate equities far outstrip corporate saving, and not just over the short term. Over the last several decades those gains have delivered 31 trillion (2015) dollars onto the asset side of household balance sheets — $13 trillion more than corporations saved on households’ behalf.

So What Does it All Mean?

What’s the end result of all this wealth accumulation? I’ll point you to a somewhat outdated picture that puts across today’s massive scale of wealth inequality — far, far exceeding income inequality. Here. Be prepared to scroll.

Looking at all these pictures, you might be tempted to ask: are we just seeing a huge, many-decade, asset-price bubble? (Starting, if the nominal-dollar picture holds any meaning, with the demise of Bretton-Woods in ’71?) It’s possible that this will all revert, rather catastrophically. But I’d suggest otherwise: that we’ve actually been underestimating GDP for decades.

Coming back to our question, how Americans get and stay rich: holding gains are only one way that they get rich. But they may be the primary way that households, families, and dynasties stay rich. Because the wealthier a household is, the more it’s compensated for simply…being wealthy — for owning things, “holding” assets. (Maybe that’s why they call them households.)

That’s the kind of issue that might be well-explored with a DINA-style accounting based on wealth accrual, that includes holding gains. Here’s hoping that messieurs Piketty, Saez, and Zucman think it would be a useful effort.

On that subject, returning to one line of Gabriel Zucman’s:

“[Holding gains] could be included down the road by computing income as delta wealth + consumption (i.e., Haig-Simon income)”.

I’ll just offer one piece of advice based on years proposing and presenting exactly that: think twice about calling it “income” — even with the Haig-Simons tag attachedI’ve received almost-universal pushback on the “comprehensive income” label, even from the most enlightened (and progressive) accounting-based economists, even the proudly heterodox. (Including some at extraordinary length, and occasionally even borderline hysterical in their negativity.) PSZ may have the professional moxie to bruit the label and make it stick. But for whatever reasons — maybe just tradition and convention, but maybe the vested interests of incumbent wealthholders — people are deeply averse to any definition of “income” that includes holding gains.

Instead, call it wealth (or asset, or net worth) accumulation, or accrual, or similar. Those are arguably better labels anyway, easier for most people to understand at a glance.

———————————

* If you were in the top 5% of wealthholders in 2013, you had north of $1.9 million in net worth — not terribly rich, though you could lead a comfortable middle-class life without working (or even better than that, if you don’t have many years left to live and spend).

** This is based on 65% of capital gains going to the top 1% of income recipients — a somewhat conservative estimate according to a 2013 study (Figure 14) based on IRS data, which estimated that measure for 2010 at 85%. This percentage undoubtedly changes over time, but an authoritative time series is not available. It’s also possible, though, that 65% percent is a big overestimate. According to Edward Wolff (in private correspondence), who has studied wealth and asset shares for decades, in 2013 the top 1% of income recipients owned about 24% of household assets. If they only receive 24% of capital gains, in proportion to those holdings (a pretty big assumption), you can stop reading this article entirely; income and wealth accumulation (and change in those measures) are roughly the same. Note that the “% of assets held by” measure seems to be completely unavailable — much less a time series. Professor Wolff was only able to provide that one-year spot estimate for total assets, and PSZ have no such measure — only percent of wealth (net worth).

Bottom line: the distribution of household assets, and especially the distribution of holding gains (relative to the IMAs’ annual mark-to-market revaluation estimates), are in need of further study.

A personal note on that “big assumption” — that households’ capital gains shares are equivalent to their asset shares: I’m an investor in a private, family-held commercial property firm. Actually: in one of the firms’ SPVs or “special-purpose vehicle” LLCs, which owns two other SPV LLCs, each of which owns a middlebrow hotel. The firm quite reliably returns about 8% a year to its investors in income. But over even quite short 5- to 10-year periods, investors’ total returns (including properties’ valuation increases) run more like 16%. All to say: only a minuscule portion of the population has access to returns even vaguely in that ballpark, much less reliable returns at that level. Wondering how Donald Trump got rich(er)?

*** The calculation from household income to net saving isn’t just “income minus outflows equals saving”; there are inflows as well.

If that confuses you, join the party. It’s because (primary) income is supposed to represent market income. (And even that is reported after first deducting a significant “use” of household funds: interest payments.) Nonmarket outflows and inflows are jumbled together to derive disposable income, and consumption spending is subtracted from that to yield net saving. You could instead add the nonmarket inflows to market income, then subtract both market and nonmarket outflows, but that’s not how it’s done. Try here to see household sources and uses, inflows and outflows, tallied separately.

How Do Americans Get Rich? (And Stay Rich?)

Steve Roth, the author of this article, fails to address that fundamentally, economic value is created through human and non-human contributions, though he does state: “We pay people for doing things, and we pay people for owning things. Increasingly, the latter. And, most importantly, what needs to be done to reform a rigged system that ensures the wealthy capital ownership class will continue to monopolize the OWNERSHIP of the future.

This refers to the two distinct, independent factors of productive contribution: human (labor) and non-human (capital) both owned by individuals.

In simple terms, binary economics recognizes that there are two independent factors of production: humans (labor workers who contribute manual, intellectual, creative and entrepreneurial work) and non-human capital (land; structures; infrastructure; tools; machines; robotics; computer processing; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like which are owned by people individually or in association with others).

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). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

NOTE, real physical productive 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. Financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things. As binary economists Louis Kelso and Patricia Hetter put it, “Money is not a part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.”

The wealthy are wealthy because they OWN wealth-creating, income-producing capital assets. They are directly connected via ownership rights to real productive assets, a far less engaged in the speculative market exchanges that smaller speculators are engaged in. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners. Statistically, stock market wealth is held by a relatively small number of the most affluent. In reality, most Americans don’t have any stocks to their name. In fact, many Americans don’t even have any savings to their name. A Pew Research survey found that 53 percent of Americans say they have no money at all invested in the stock market, including retirement accounts.

According to Kelso: “The pre-tax yield of corporate assets of prosperous companies varies from 25 to 60 percent. The yield on secondhand securities is around five or six percent. Sure, with capital gains, you can get a little more, but don’t forget, that’s a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t fly any airplanes or raise any corn or do anything else in the way of producing products and services. It just plays games with your dough. And when you take it out in pensions, you’re going to get less than the company put in for you. You have to; that’s the dynamics of it.”

Roth does state: “…households’ holding (or “capital”) gains on stock portfolios, real estate, etc. Income does include much “property income” — dividends, interest, etc. That’s income from owning things. But he never distinguishes how the system perpetuates the constant concentration of capital asset ownership among the same wealthy ownership class. As stated by Roth, “because wealth begets more wealth — people are compensated simply for owning things — wealth is, potentially, forever. It persists, and spreads through families and dynasties. Wealth can, and often does, endure for generations.” This result is because the financial system is rigged to ensure that ONLY those with past savings (a denial of consumption), and thus equity collateral to pledge to secure capital credit to  invest in future self-liquidating capital asset formation, will benefit via wealth accumulation. Thus, wealth is concentrating in the 1 percent because more money can be made by investing in machines and land (capital) than paying people to perform work (wages). Because capital is worth more than wages, those with an advantage to invest now in capital become the source of long-term dynasties of wealth and inequality.

Roth points to “… much of Americans’ retirement saving — especially middle-class Americans — is accrued through capital gains on their homes.” But the reality is that only approximately 62 percent of American own a home, which is really a consumption item, with a gain or loss only realized when sold.

Roth refers to retained earnings of companies: “When firms retain earnings (profits) rather than distributing them to shareholders, the firms’ book value goes up. That increase is the firms’ net saving — think of it as firms saving on behalf of their shareholders.” Retained earnings financing of new productive capital formation (reinvesting the corporate earnings already earned) is common among companies as well as debt financing. Both retained earnings and debt financing only enhance the ownership holding value of the existing corporate ownership class and do nothing to create new owners. Thus, the rich get richer systematically and capital ownership concentration is furthered, facilitated by financing further productive capital acquisition out of the earnings of existing productive capital (past savings).

The real problem is systemic monopoly ownership of the non-human factor of production. Such privileged ownership has been designed into the system, and our financial institutions are structured to continually enhance the capital wealth accumulation of the few, because the system does not free economic growth from the slavery of past savings.

Without reform we are looking at a future where there will be hordes of citizens of zero economic value. That is, unless the system can be reformed to empower EVERY citizen to acquire ownership in future wealth-creating, income-producing capital assets resulting from technological invention and innovation, without the requirement of past savings and without taking anything from those who already own.

Because productive capital is increasingly the source of the world’s economic growth it should become the source of added property ownership incomes for all. The reality is if both labor and capital are independent 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 productive capital is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal costs, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

People invented “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 invention and innovation. Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

Furthermore, according to Kelso, 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. Kelso postulated that if both labor and capital are independent 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. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive, and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.

In Kelso’s words, “a democratic capitalist economy is a private-property, free-market economy in which goods and services are produced through the voluntary and universal cooperation of concurrent labor workers and ‘capital workers’ [those who own the “tools] under a politically democratic government.” At present the United States economy, nor for that matter any other economy does not operate as a private-property democratic-capitalist, free-market economy. What needs to transpire is an understanding of binary economics along with instituting capital credit mechanisms that will implement the goal of broadening productive capital ownership in ways wholly compatible with the U.S. Constitution and the protection of private property.

Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.

As long as working people are limited by earning income solely through their labor worker wages, they will be left behind by the continued gravitation of economic bounty toward the top 1 percent of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in turmoil and upheaval, if not revolution.

Economic democracy has yet to be tried. We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies (such as a universal basic income) to redistribute income or not to redistribute income. If Americans do not demand that the contenders for the office of the presidency of the United States, the Senate, and the Congress address these issues, we will have wasted the opportunity to steer the American economy in a direction that will broaden affluence. We have adequate resources, adequate knowhow, and adequate manpower to produce general affluence for EVERY citizen, but we need as a society to properly and efficiently manage these resources while protecting and enhancing the environment so that our productive capital capability is sustainable and renewable. Such issues are the proper concern of government because of the human damage inflicted on our social fabric as well as to economic growth in which every citizen is fairly included in the American dream.

The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor — physical capital — is owned by a handful of people, to a world where the same factor is owned by a majority — and ultimately 100 percent — of the consumers, while respecting all the constitutional rights of present capital owners?”

I am not going to elaborate further, as I have already written extensively in other writings on my blog site at www.foreconomicjustice.org, about solutions that create universally equal opportunity  for EVERY child, woman, and man be become a capital owner and put our nation on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.

To read more about how to universally distribute economic power amongst individual citizens and never allow capital ownership to concentrate see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/. See the article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.nationofchange.org/solution-america-s-economic-decline-1367588690 and “Education Is Critical To Our Future Societal Development” at http://www.nationofchange.org/education-critical-our-future-societal-development-1373556479. And also “Achieving The Green Economy” at http://www.nationofchange.org/achieving-green-economy-1373980790. Also see it complete with the footnotes at http://foreconomicjustice.org/?p=9082.

Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.

Don’t Like Capitalism And Free Market Economics? You’re Really Not As Cool As You Think You Are.

millionmaskmarch4.jpgA protester lights a flare near Big Ben PA

On November 4, 2015, Kristian Niemeitz writes on UK’s Independent:

There is a law that forms one of the most basic concepts in economics. It’s called “the law of diminishing marginal utility”. What it means is that the more you have of something, the less you enjoy getting more of it. Among other things, it explains why even in booming markets, many sellers struggle: no matter how popular the product, there comes a saturation point. There are only so many Vatican-conspiracy-themed mystery thrillers that we can read, and only so many pints of craft beer we can quaff.

And yet, there is one market which seems to consistently defy the law of diminishing marginal utility: the market for books moaning about the evils of neoliberalism and free markets. We are flooded with titles like How Politics Makes Us Sick: Neoliberal EpidemicsUndoing the Demos: Neoliberalism’s Stealth Revolution, Postcapitalism, Austerity, Breadline Britain, Why We Can’t Afford the Rich, and Captive State: The Corporate Takeover of Britain.

Blaming neoliberalism for all of society’s ills might shift copies and provide a neat straw man for left-wingers, but the line of thinking these books are capitalising on is pure nonsense. Here’s why:

1. The state is larger than ever

It has often been pointed out that resistance to immigration is inversely related to the number of actual immigrants, and strongest in places where there are hardly any of them. Something similar is true for resistance to neoliberalism. It is strongest in France, where, with government spending approaching 60 per cent of GDP, there is actually not much of a market economy left. It is also ludicrously strong in Britain, where the state has never been larger in size, never been more encompassing in scope, and never been more intrusive.

Forget the waffle about “austerity”: The long-term trend has been one of almost continuous government expansionism. When A.J.P. Taylor said that “Until August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state”, he was exaggerating, but not grotesquely so. Up until the First World War, government spending used to account for less than 15 per cent of GDP. It then rose to around 30 per cent in the interwar period, and still did not cross the 40 per cent mark until the mid-1960s. Today, despite five years of so-called “cuts”, it still stands above that level. At the outbreak of WWI, only about one in twenty people worked for the public sector, today, the figure is closer to one in five.

2. The state is more centralised than ever

There was once a time when “government” usually meant “local government”. Today, it is almost synonymous with “Whitehall”. Ninety-five per cent of all tax revenue accrues to the national level, which makes the UK one the most centralised countries in the world. The tradition of local autonomy, of voting with one’s feet, and of tax competition between local authorities, has been almost completely wiped out. Local governments are now so devoid of any real autonomy that we might as well abolish them, and replace them with Whitehall branch offices.

http://www.independent.co.uk/voices/against-capitalism-and-free-market-economics-youre-really-not-as-cool-and-radical-as-you-think-you-a6721091.html

“Capitalism” and “Big Government” are terms that are “hated” depending one’s perspective.

On the one hand “capitalism” meant that individual citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, but instead, due to the design of the system ONLY a tiny group of individuals have accumulated the wealth-creating, income-producing capital asset wealth of nations, thus the accelerating global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government to redistribute the earnings of the productive class, whether through their human labor contributions or their capital asset contributions, which they own and control.

The cause of the concentration of capital asset wealth, and the subsequent reaction for bigger government is what I term “Hoggism.” It is the hoggists that are destroying the promise of “personalism” that broadly-owned capital would facilitate.

As mentioned above, the capitalism practiced today is what, for a long time, I have termed “Hoggism,” propelled by greed and the sheer love of power over others. “Hoggism” institutionalizes greed (creating concentrated capital ownership, monopolies, and special privileges). “Hoggism” is about the ability of greedy rich people to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success — always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” 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 is a national discussion on the topic of the importance of capital ownership and how we can expand the base of private capital ownership simultaneously with the creation of new physical capital formation, with the aim of building long-term financial security for all Americans through accumulating a viable capital estate.

We need a recognition in America that we should deliberately begin to broaden the capital ownership base in a way that is consistent with the laws of property and the Constitutional safeguards of the rights of men and women to own property and be productive.

What needs to be our focus is to adjust the opportunity to produce, not the redistribution of income after it is produced.

The government should acknowledge its obligation to make productive capital ownership economically purchasable by capital-less Americans (the 99 percent) using insured, interest-free capital credit, and, as binary economist Louis Kelso stated, “substantially assume financial responsibility for the economy through establishing and supervising the implementation of an economic, labor and business policy of democratized economic power.” Historically, capital has been the primary engine of industrialization. But as used, as Kelso has argued, has, as well, “been the chief cause of the institutional deformities that have created and maintained two incompatible classes: the overcapitalized and the undercapitalized.”

We need to arrive at a new market economy structure in which on one level the employees of a corporation could walk into management and demand, in collective bargaining, the use of a justice-based managed (see http://www.cesj.org/?s=Justice+Based+Management) full-voting, full-dividend-earnings-payout ESOP — not just to trade a single block of stock for wage concessions, but to redesign the future of the corporation and its employees. We need, as a society, the assurance that as a corporate employer grows, it builds ownership into its employees. All of them as individuals, not just the upper management, and not collectively! When people are in a position to earn the income produced by their physical capital as well as the wages of their labor, their company is in a position to be more competitive through lower labor costs and increased technological invention and innovation, while achieving higher employee incomes through the employee-owned productive capital.

Once this goal becomes the national political focus we will see an unbelievable discussion of workable plans to realize the goal. Remember that planning begins with a vision and a goal. This is not rocket science but it does require national leadership. Implementation requires amending a few laws that basically authorize the transactions that will broaden capital ownership paid for with the future earnings of capital investment. Allowing such transactions will provide incentives for profitable opportunities to employ unused capacity and promote stable and robust economic growth.

Still, after a half-century, we have no leaders with a growth strategy that could restore the economic productiveness of the American economy. The growth strategy I have presented is not new, though relatively obscure It has not yet registered in the minds of leaderless politicians and their advisors from the left to the right of the political spectrum and a population of people who have been mis-educated and misled by conventional economists from all the conventional schools of economics. This will require a personal commitment to acquiring this knowledge and thinking in new ways.

It is imperative that leaders seeking new solutions cease the opportunity to implement effective programs for expanded ownership of productive capital, and address the problem of education on this subject.

One of my favorite Kelso quotes is: “The low credibility of government and of all lesser institutions in America today is a consequence of our own increasingly hollow democracy. It is reflected in the rising domestic crime rate and the social and political alienation of people in all walks of life, except for the rich and their sycophants. The real collapse of American ideological leadership in the world can best be seen in the feebleness and confusion that characterizes American foreign policy. The handwriting on the wall is clear: America must rethink the meaning of democracy and set about within its borders to rationalize its economic policy into one that synchronizes the shift from labor intensive to capital intensive production, with universal capital ownership and the payment of the full wages [earnings] of capital to capital owners, so to restore economic democracy to our economy. We should democratize our plutocratic capitalist economy before we preach democracy to others.”

At one point in 1976, the discussion led to The Joint Economic Committee of Congress endorsing the two-factor policy to broaden capital ownership as an economic goal for America. The 1976 Joint Economic Report stated: “To provide a realistic opportunity for more U.S. citizens to become owners of capital, and to provide an expanded source of equity financing for corporations, it should be made national policy to pursue the goal of broadened capital ownership. Congress also should request from the Administration a quadrennial report on the ownership of wealth in this country, which would assist in evaluating how successfully the base of wealth was being broadened over time.”

Unfortunately the Congress or any President has never paid any attention to this policy, and the goal has subsequently been unacknowledged and unheeded by our plutocratic political leaders.

The stark reality is that we are in a depression reflected in rising “real” (not statistical) unemployment and underemployment and instability that we will never escape from until we change our economic policy. Increasingly, more Americans will not be able to ever purchase a home, due to the packed inflationary wage and welfare base factored into the cost of building homes, which inflate prices, and will be forced to rent their entire life or depend on government living assistance — not able to accumulate equity that can help to sustain them in their retirement years. And this is the new reality now facing people in the middle class. The uncertainty of holding onto a good job is frightening to an increasingly wider base of middle-class working citizens. When you factor in the average non-salaried worker, even with a government-mandated minimum labor wage rate of $10.00+ per hour in some states and cities, the outcome is grim. Never mind that consumer demand continues to dwindle because of insufficient income, solely tied to labor worker wages. The impact of the decline in consumer demand due to declining labor worker wages is that production will decline or desist without sustainable consumer demand. Furthermore, those corporations growing the economy, both nationally and globally, will expand globally with investment in new productive capital projects and seek “customers with money” abroad.

This is all coming about because we have severely mismatched the power to produce with the possession of unsatisfied needs and wants. Those capital owners who have unsatisfied needs and wants have ready access through conventional finance to get as much or more productive capital as they want. Our tax laws are designed to further benefit the 1 percent by providing enormous write offs and credits to producers (corporations) who are owned by the few, who already produce more than they can consume. Those who have only their labor power and its precarious value held up by coercive rigging and who desperately need capital ownership to enable them to be capital workers as well as labor workers to have a way to earn more income, cannot satisfy their unsatisfied needs and wants. With only access to labor wages, the 99 percenters will continue, in desperation, to demand more and more pay for the same or less work, as their input is exponentially replaced by productive capital.

But if we change direction and systematically build earning power into consumers, we have the opportunity to reverse the depression perpetrated by systematically limiting the 99 percent to labor wages alone and through technology eliminating their jobs. We need solutions to grow the economy in ways that create productive jobs and widespread equity sharing. We need to systematically make insured, interest-free capital credit to purchase capital accessible to economically underpowered people (the 99 percent) in which the income from the capital investment is isolated until it pays for itself, and then begins to produce a stream of dividend income to the new capital owners. This can only be accomplished by enabling every person to have access to capital ownership and purchase the capital, and pay for it out of what the capital produces. It’s time good and well-intentioned people woke up and adopted a JUST Third Way paradigm (http://cesj.org/learn/just-third-way/) beyond the greed model of monopoly, “hoggist” capitalism and the envy model of the traditional welfare state. This will promote peace, prosperity, and freedom through harmonious justice.

CESJ’s (Center for Economic and Social Justice — www.cesj.org) Norman Kurland argues, “The haves represent a tiny fraction of humanity. Our ideas will split them between those who see our point and understand that they would benefit everyone without taking anything away from them during their lives, and those who want to keep ownership in an exclusive club. The latter cannot publicly attack the institution of private property without threatening the legal foundation that gives them their monopoly over the money system and the ownership system.”

We need leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every child, woman, and man as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every child, woman, and man to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.

On the basic issue of economic empowerment of each individual, the essential goal needs to be economic democracy, which will finally make political democracy a meaningful reality.

As Kurland points out, the emphasis on the systemic injustices of monopoly capitalism can only be addressed by comprehensive reforms to the tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

The unworkability of the traditional market economy is evidenced by the diverse and growing deficits —  federal budget deficit, trade deficit, city, county and state budget deficits — which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation — taking from the legitimate producers and giving to the non- or under-producers — to make up the economy’s ever wider income and purchasing power shortfalls.

The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to contribute productively to the economy as a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.

The question that requires an answer is now timely before us. It was first posed by Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what ownership is. Therefore, by ignoring such issues of economic justice and ownership, our leaders are ignoring the concentration of power through ownership of productive capital, with the result of denying the 99 percenters equal opportunity to become capital owners.

The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor — physical capital — is owned by a handful of people, to a world where the same factor is owned by a majority — and ultimately 100 percent — of the consumers, while respecting all the constitutional rights of present capital owners?”

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.See the article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.nationofchange.org/solution-america-s-economic-decline-1367588690 and “Education Is Critical To Our Future Societal Development” at http://www.nationofchange.org/education-critical-our-future-societal-development-1373556479. And also “Achieving The Green Economy” at http://www.nationofchange.org/achieving-green-economy-1373980790. Also see it complete with the footnotes at http://foreconomicjustice.org/?p=9082.

Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.

Amid “Constitutional Crisis,” Bernie Sanders Urges Workers To Seize Means Of Production

“When employees have an ownership stake in their company, they will not ship their own jobs to China,” Bernie Sanders said in a recent statement. (Photo: Mark H. Anbinder)

On May 16, 2017, Kate Aronoff writes on Truth Out:

The last few days have been a bit of a whirlwind, politically speaking. Most of it has to do with the onslaught of chaos that followed Donald Trump’s abrupt firing of FBI Director James Comey — a move political scientists agree is off the spectrum of normalcy in the history of the American presidency. Before his termination, Comey was leading an investigation into the Trump team’s alleged ties to the Russian government. Keith Ellison, deputy chairman of the Democratic National Committee, has said “we are witnessing a constitutional crisis.” Calls for impeachment are in the air, along with a good deal of conspiracy theorizing.

In sum, the republic as we know it may be its closest yet to tatters. Enter: Bernie Sanders, the senator from Vermont and the country’s most popular politician. He — alongside Democratic Sens. Patrick Leahy, from Vermont, Kirsten Gillibrand, from New York, and Maggie Hassan, from New Hampshire — is encouraging workers to take control of the means of production.

This isn’t some right-wing conspiracy theory, but the intended result of two bills introduced to relatively little fanfare last Thursday. The first, the WORK (“Worker Ownership, Readiness and Knowledge”) Act, would direct more than $45 million in funding to state-level employee ownership centers, aimed at providing training and technical assistance to current and prospective worker-owners. A second piece of legislation would establish something called the US Employee Ownership Bank, via $500 million in funds for low-interest rate loans and financial assistance for workers who want to buy out the businesses where they work and either incorporate them as worker-owned cooperatives or establish employee stock ownership plans (ESOPs), which give workers an ownership stake in their company.

“By expanding employee ownership and participation, we can create stronger companies in Vermont and throughout this country, prevent job losses and improve working conditions for struggling employees,” Sanders said in a statement. “Simply put, when employees have an ownership stake in their company, they will not ship their own jobs to China to increase their profits, they will be more productive, and they will earn a better living.”

Notably, a provision outlined in the second bill would give employees the first crack at taking over their workplace if owners move to offshore their jobs, according to John Duda.

Duda works for the Democracy Collaborative, a research institute that supports cooperative development. He also helped found the worker-owned cafe and bookstore Red Emma’s in Baltimore, Maryland.

“I think it would be a game changer both in terms of accelerating worker-ownership, and discouraging companies from pursuing a race to the bottom in terms of looking for cheaper wages overseas,” Duda said about the legislation.

Cooperative ownership has a long history in the United States, Duda explains. The earliest champions of organized labor in America pushed for cooperatives as a means to shore up employee control over the workplace. As a document officially adopted by the Knights of Labor in 1878 put it, “The recent alarming development and aggression of aggregated wealth … render it imperative … that a check should be placed upon its power and upon unjust accumulation, and a system adopted which will secure to the laborer the fruits of his toil.” Later, New Deal initiatives like the Rural Electrification Administration provided start-up funds for people in rural areas to create cooperatives, with rural electric cooperatives now meeting 11 percent of the country’s demand for electricity. Civil rights leaders from Ella Baker to Fannie Lou Hamer would also cut their teeth in cooperative self-help programs.

Today, companies from Cabot Creamery to REI are cooperatives of one form or another. And Publix Super Markets and Wawa convenience stores are just two of many major firms in the United States that offer their employees ESOPs. Worker-owned cooperatives, by contrast — governed by the principle of “one worker, one vote” — tend to be smaller in the United States than either ESOPs or producer and consumer cooperatives, but more widespread throughout South America and Europe. In contrast to the estimated 10.3 million Americans covered by ESOPs, just over 5,000 people are a part of worker-owned cooperatives.

Sanders himself is no stranger to cooperatives. He’s introduced similar bills before, and the legislation is partially inspired by the Vermont Employee Ownership Center, or VEOC, of which Sanders has been a longtime booster. Speaking to a forum on workers’ ownership at Burlington City Hall in 1985, then-Mayor Sanders said, “Democracy cannot just mean the opportunity to vote for a Walter Mondale or a Ronald Reagan once every four years … If we have a vision as to what democracy is about, it’s got to mean the right of a working person to control his or her job, to have some say about what’s being produced, to sit down with the other workers and say, ‘This is what I think we should do.'” (You can watch the full clip here.)

One of the other models for the kind of support programs outlined in the WORK Act emerged out of the closure of the Youngstown Sheet and Tube factory in 1977 — a siren song for the kind of deindustrialization that would plague the Rust Belt for years to come. Workers, Duda said, attempted to seize the plant and run it cooperatively in the run-up to the closure. The effort ultimately failed, but captured the attention of Ohioans interested in developing cooperative businesses. Started in 1987, the Ohio Employee Ownership Center (OEOC) has since helped some 90 companies to become employee-owned, creating an estimated 15,000 employee-owners in the Buckeye State. A like-minded push in New York City has seen some initial success after an investment of $1.2 million in worker cooperative business development efforts in 2014.

“It’s hard stuff getting all the legal ducks in a row, getting all the financing lined up, figuring out how to take advantage of the tax incentives that exist. Having technical assistance and having grant support for technical assistance is incredibly key,” Duda said.

He wasn’t overly optimistic about the bills’ chances in Congress, but thought their introduction represented a step forward in terms of bringing cooperatives further into America’s economic mainstream.

“We have a lot of drama going on, and it’s vitally important to pay attention to,” Duda told In These Times, “but we need to not forget that we are seeing historic levels of inequality. We need to be thinking about solutions and a transition to a broader-based ownership of the economy that allows us to tackle that question. We may not be able to pass this legislation today, but there’s going to be a time at which policymaking is possible again and we need to be ready.”

http://www.truth-out.org/news/item/40596-amid-constitutional-crisis-bernie-sanders-urges-workers-to-seize-means-of-production

One of the major reasons I supported Bernie Sanders throughout the primaries, and never voted for Hillary Clinton or Donald Trump, was because I felt that his platform statements, in support of broadening individual capital asset ownership with individual workers owning the future economy, meant that he was potentially the leader we desperately needed to forge a reform of the financial system to ensure that EVERY child, woman, and man was empowered equally to acquire  ownership shares in the future capital asset formation of a vibrant growing economy, without taking from those who already owned capital assets, and without the requirement of past savings to pledge as loan collateral.

I recognized that Sanders really did not fully understand the private property principles necessary to reform the system nor the actual financial mechanism that would do the job, but I thought we had our best shot at reform with him leading the necessary reform of the system.

I’d like to retrace some of the commentary I wrote on Sanders advocating for worker cooperatives and Employee Stock Ownership Plans (ESOP) during the primary race. After all, I founded in the late 1960s the ownership advocacy firm Agenda 2000 Incorporated with binary economics and father of the ESOP, Louis Kelso, taught binary economics in the graduate school at the University of California, Berkeley, and ran as a Democrat for Congress in 1974, always advocating broadening wealth-creating, income-producing capital ownership simultaneously with the growth of the economy.

A far better invisible incorporation structure for worker-owned corporations is the Employee Stock Ownership Plan (ESOP), which Bernie Sanders advocates. In fact, there are thousands of corporations owned by workers using an ESOP-structured S-corporations whose owners elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. But there is a limitation to worker-owned corporations, that is: ONE MUST BE AN EMPLOYEE/WORKER. That means, due to tectonic shifts in the technologies of production, millions and millions of Americans are or will be, by definition, left out and even those Americans working now may not be working in the near future as such tectonic technological shifts and the globalization of production at the lowest cost destroy jobs and devalue the worth of labor.

A cooperative is member-owned and -controlled, rather than controlled by investors as in a corporation. But this is not to say that a corporation cannot be broadly owned by its workers and other citizens (there are presently over 11,000 employee-owned corporations structured under an Employee Stock Ownership Plan), all with voting rights and entitlement to their share of full earnings dividend income. Unlike a cooperative in which all members and shareholders have to be active in the co-operative, in a corporation the shareholders elect a board who in turn hires a CEO to oversee the day-to-day operation of the corporation. As cooperatives are formed to provide a service to their members rather than a return on investment, it is difficult to attract potential members/shareholders whose primary interest is a financial return. The idea to broaden personal/individual ownership of corporations, is to create new owners and empower each to benefit fully from a return on investment. While cooperatives are not obligated to seek profit for investors, but are created to meet members’ needs, there is still the requirement, as with corporations, that the investment to create them will generate a profit. Otherwise, there would be no income to sustain the business. So both cooperatives and corporations must operate using the logic of corporate finance that investments must pay for themselves.

Both cooperatives and business corporations are legally corporations under state charters. Both structures can be broadly OWNED (cooperatives: member/shareholder/investors; corporations: shareholder/investors) with operations overseen by vote of the members or owners. The problem today with respect to corporations is that they are NARROWLY OWNED and thus a say in decisions is restricted to those who OWN the most shares.

Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners. Statistically, stock market wealth is held by a relatively small number of the most affluent. In reality, most Americans don’t have any stocks to their name. In fact, many Americans don’t even have any savings to their name. A Pew Research survey found that 53 percent of Americans say they have no money at all invested in the stock market, including retirement accounts.

The idea behind the proposed Capital Homestead Act is to use financial mechanisms that broaden the ownership of corporations, broaden decision making and operational oversight, and return fully the profit earnings to the owners, rather than retain those earnings or debt finance for reinvestment, neither of which creates ANY new capital owners.

As for financing business growth, the corporation would issue and sell new stock, which would be acquired broadly by children, women, and men using insured, interest-free capital credit, repayable out of the future earnings of the growth investment. Thus, by re-invisioning the corporation, we can achieve the full benefits of the corporate structure, controlled by the people, for the people. Broadly owned corporations would empower all current and future generations to take priority over profits (for shareholders and executives) by operating in the best interests of the well-being of people, communities, and the planet.

For a comparative structure tutorial see http://www.uwcc.wisc.edu/whatisacoop/BusinessStructureComparison/

Bernie Sanders, while a long-time advocate for and supporter of employee-owned business corporations, now needs to take this comprehensive concept to its fullest outcome and introduce legislation for the proposed Capital Homestead Act.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

Concurrently, support Monetary Justice at http://capitalhomestead.org/page/monetary-justice and Justice Based Management at http://www.cesj.org/?s=Justice+Based+Management.

The Capital Homestead Act is the fulfillment of the promise to broaden FUTURE wealth-creating, income-producing capital assets by creating millions and millions of NEW capital owners. Using financial mechanisms that provide insured, interest-free capital credit, repayable out of the FUTURE earnings of investments in the corporations growing America would empower EVERY child, woman, and man, whether employed or not, to acquire personal OWNERSHIP stakes in America’s viable and successful corporations simultaneously with their growth, without the requirement of past savings or ANY reduction in wages or benefits, if employed.

The Capital Homestead Act would facilitate the transformation of America’s corporations, now OWNED by a tiny minority wealthy ownership class, into a nation of universal capital owners, who would earn income through profit sharing and the full-earnings dividend payout of corporations, and enable America to finance its future economic prosperity while simultaneously creating new capital owners.

Norman Kurland, President of the Center for Economic and Social Justice (www.cesj.org) argues, “The haves represent a tiny fraction of humanity. Our ideas will split them between those who see our point and understand that they would benefit everyone without taking anything away from them during their lives, and those who want to keep ownership in an exclusive club. The latter cannot publicly attack the institution of private property without threatening the legal foundation that gives them their monopoly over the money system and the ownership system.”

Bernie Sanders was the ONLY candidate for president that would have provided leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every child, woman, and man as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every child, woman, and man to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.

Now is Sanders and others time to lead our nation to an end result wherein citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government.

 

 

The Crisis Of The Middle Class And American Power

On December 31, 2013, George Fridman writes on Stratfor:

When I wrote about the crisis of unemployment in Europe, I received a great deal of feedback. Europeans agreed that this is the core problem while Americans argued that the United States has the same problem, asserting that U.S. unemployment is twice as high as the government’s official unemployment rate. My counterargument is that unemployment in the United States is not a problem in the same sense that it is in Europe because it does not pose a geopolitical threat. The United States does not face political disintegration from unemployment, whatever the number is. Europe might.

At the same time, I would agree that the United States faces a potentially significant but longer-term geopolitical problem deriving from economic trends. The threat to the United States is the persistent decline in the middle class’ standard of living, a problem that is reshaping the social order that has been in place since World War II and that, if it continues, poses a threat to American power.

The Crisis of the American Middle Class

The median household income of Americans in 2011 was $49,103. Adjusted for inflation, the median income is just below what it was in 1989 and is $4,000 less than it was in 2000. Take-home income is a bit less than $40,000 when Social Security and state and federal taxes are included. That means a monthly income, per household, of about $3,300. It is urgent to bear in mind that half of all American households earn less than this. It is also vital to consider not the difference between 1990 and 2011, but the difference between the 1950s and 1960s and the 21st century. This is where the difference in the meaning of middle class becomes most apparent.

In the 1950s and 1960s, the median income allowed you to live with a single earner — normally the husband, with the wife typically working as homemaker — and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well. I know this because my family was lower-middle class, and this is how we lived, and I know many others in my generation who had the same background. It was not an easy life and many luxuries were denied us, but it wasn’t a bad life at all.

Someone earning the median income today might just pull this off, but it wouldn’t be easy. Assuming that he did not have college loans to pay off but did have two car loans to pay totaling $700 a month, and that he could buy food, clothing and cover his utilities for $1,200 a month, he would have $1,400 a month for mortgage, real estate taxes and insurance, plus some funds for fixing the air conditioner and dishwasher. At a 5 percent mortgage rate, that would allow him to buy a house in the $200,000 range. He would get a refund back on his taxes from deductions but that would go to pay credit card bills he had from Christmas presents and emergencies. It could be done, but not easily and with great difficulty in major metropolitan areas. And if his employer didn’t cover health insurance, that $4,000-5,000 for three or four people would severely limit his expenses. And of course, he would have to have $20,000-40,000 for a down payment and closing costs on his home. There would be little else left over for a week at the seashore with the kids.

“What we are facing now is a structural shift, in which the middle class’ center, not because of laziness or stupidity, is shifting downward in terms of standard of living. It is a structural shift that is rooted in social change (the breakdown of the conventional family) and economic change (the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage).”

And this is for the median. Those below him — half of all households — would be shut out of what is considered middle-class life, with the house, the car and the other associated amenities. Those amenities shift upward on the scale for people with at least $70,000 in income. The basics might be available at the median level, given favorable individual circumstance, but below that life becomes surprisingly meager, even in the range of the middle class and certainly what used to be called the lower-middle class.

The Expectation of Upward Mobility

I should pause and mention that this was one of the fundamental causes of the 2007-2008 subprime lending crisis. People below the median took out loans with deferred interest with the expectation that their incomes would continue the rise that was traditional since World War II. The caricature of the borrower as irresponsible misses the point. The expectation of rising real incomes was built into the American culture, and many assumed based on that that the rise would resume in five years. When it didn’t they were trapped, but given history, they were not making an irresponsible assumption.

American history was always filled with the assumption that upward mobility was possible. The Midwest and West opened land that could be exploited, and the massive industrialization in the late 19th and early 20th centuries opened opportunities. There was a systemic expectation of upward mobility built into American culture and reality.

The Great Depression was a shock to the system, and it wasn’t solved by the New Deal, nor even by World War II alone. The next drive for upward mobility came from post-war programs for veterans, of whom there were more than 10 million. These programs were instrumental in creating post-industrial America, by creating a class of suburban professionals. There were three programs that were critical:

  1. The GI Bill, which allowed veterans to go to college after the war, becoming professionals frequently several notches above their parents.
  2. The part of the GI Bill that provided federally guaranteed mortgages to veterans, allowing low and no down payment mortgages and low interest rates to graduates of publicly funded universities.
  3. The federally funded Interstate Highway System, which made access to land close to but outside of cities easier, enabling both the dispersal of populations on inexpensive land (which made single-family houses possible) and, later, the dispersal of business to the suburbs.

There were undoubtedly many other things that contributed to this, but these three not only reshaped America but also created a new dimension to the upward mobility that was built into American life from the beginning. Moreover, these programs were all directed toward veterans, to whom it was acknowledged a debt was due, or were created for military reasons (the Interstate Highway System was funded to enable the rapid movement of troops from coast to coast, which during World War II was found to be impossible). As a result, there was consensus around the moral propriety of the programs.

The subprime fiasco was rooted in the failure to understand that the foundations of middle class life were not under temporary pressure but something more fundamental. Where a single earner could support a middle class family in the generation after World War II, it now took at least two earners. That meant that the rise of the double-income family corresponded with the decline of the middle class. The lower you go on the income scale, the more likely you are to be a single mother. That shift away from social pressure for two parent homes was certainly part of the problem.

Re-engineering the Corporation

But there was, I think, the crisis of the modern corporation. Corporations provided long-term employment to the middle class. It was not unusual to spend your entire life working for one. Working for a corporation, you received yearly pay increases, either as a union or non-union worker. The middle class had both job security and rising income, along with retirement and other benefits. Over the course of time, the culture of the corporation diverged from the realities, as corporate productivity lagged behind costs and the corporations became more and more dysfunctional and ultimately unsupportable. In addition, the corporations ceased focusing on doing one thing well and instead became conglomerates, with a management frequently unable to keep up with the complexity of multiple lines of business.

For these and many other reasons, the corporation became increasingly inefficient, and in the terms of the 1980s, they had to be re-engineered — which meant taken apart, pared down, refined and refocused. And the re-engineering of the corporation, designed to make them agile, meant that there was a permanent revolution in business. Everything was being reinvented. Huge amounts of money, managed by people whose specialty was re-engineering companies, were deployed. The choice was between total failure and radical change. From the point of view of the individual worker, this frequently meant the same thing: unemployment. From the view of the economy, it meant the creation of value whether through breaking up companies, closing some of them or sending jobs overseas. It was designed to increase the total efficiency, and it worked for the most part.

This is where the disjuncture occurred. From the point of view of the investor, they had saved the corporation from total meltdown by redesigning it. From the point of view of the workers, some retained the jobs that they would have lost, while others lost the jobs they would have lost anyway. But the important thing is not the subjective bitterness of those who lost their jobs, but something more complex.

As the permanent corporate jobs declined, more people were starting over. Some of them were starting over every few years as the agile corporation grew more efficient and needed fewer employees. That meant that if they got new jobs it would not be at the munificent corporate pay rate but at near entry-level rates in the small companies that were now the growth engine. As these companies failed, were bought or shifted direction, they would lose their jobs and start over again. Wages didn’t rise for them and for long periods they might be unemployed, never to get a job again in their now obsolete fields, and certainly not working at a company for the next 20 years.

The restructuring of inefficient companies did create substantial value, but that value did not flow to the now laid-off workers. Some might flow to the remaining workers, but much of it went to the engineers who restructured the companies and the investors they represented. Statistics reveal that, since 1947 (when the data was first compiled), corporate profits as a percentage of gross domestic product are now at their highest level, while wages as a percentage of GDP are now at their lowest level. It was not a question of making the economy more efficient — it did do that — it was a question of where the value accumulated. The upper segment of the wage curve and the investors continued to make money. The middle class divided into a segment that entered the upper-middle class, while another faction sank into the lower-middle class.

American society on the whole was never egalitarian. It always accepted that there would be substantial differences in wages and wealth. Indeed, progress was in some ways driven by a desire to emulate the wealthy. There was also the expectation that while others received far more, the entire wealth structure would rise in tandem. It was also understood that, because of skill or luck, others would lose.

What we are facing now is a structural shift, in which the middle class’ center, not because of laziness or stupidity, is shifting downward in terms of standard of living. It is a structural shift that is rooted in social change (the breakdown of the conventional family) and economic change (the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage).

The inherent crisis rests in an increasingly efficient economy and a population that can’t consume what is produced because it can’t afford the products. This has happened numerous times in history, but the United States, excepting the Great Depression, was the counterexample.

Obviously, this is a massive political debate, save that political debates identify problems without clarifying them. In political debates, someone must be blamed. In reality, these processes are beyond even the government’s ability to control. On one hand, the traditional corporation was beneficial to the workers until it collapsed under the burden of its costs. On the other hand, the efficiencies created threaten to undermine consumption by weakening the effective demand among half of society.

The Long-Term Threat

The greatest danger is one that will not be faced for decades but that is lurking out there. The United States was built on the assumption that a rising tide lifts all ships. That has not been the case for the past generation, and there is no indication that this socio-economic reality will change any time soon. That means that a core assumption is at risk. The problem is that social stability has been built around this assumption — not on the assumption that everyone is owed a living, but the assumption that on the whole, all benefit from growing productivity and efficiency.

If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated. Other superpowers such as Britain or Rome did not have the idea of a perpetually improving condition of the middle class as a core value. The United States does. If it loses that, it loses one of the pillars of its geopolitical power.

The left would argue that the solution is for laws to transfer wealth from the rich to the middle class. That would increase consumption but, depending on the scope, would threaten the amount of capital available to investment by the transfer itself and by eliminating incentives to invest. You can’t invest what you don’t have, and you won’t accept the risk of investment if the payoff is transferred away from you.

“The United States was built on the assumption that a rising tide lifts all ships. That has not been the case for the past generation, and there is no indication that this socio-economic reality will change any time soon.”

The agility of the American corporation is critical. The right will argue that allowing the free market to function will fix the problem. The free market doesn’t guarantee social outcomes, merely economic ones. In other words, it may give more efficiency on the whole and grow the economy as a whole, but by itself it doesn’t guarantee how wealth is distributed. The left cannot be indifferent to the historical consequences of extreme redistribution of wealth. The right cannot be indifferent to the political consequences of a middle-class life undermined, nor can it be indifferent to half the population’s inability to buy the products and services that businesses sell.

The most significant actions made by governments tend to be unintentional. The GI Bill was designed to limit unemployment among returning serviceman; it inadvertently created a professional class of college graduates. The VA loan was designed to stimulate the construction industry; it created the basis for suburban home ownership. The Interstate Highway System was meant to move troops rapidly in the event of war; it created a new pattern of land use that was suburbia.

It is unclear how the private sector can deal with the problem of pressure on the middle class. Government programs frequently fail to fulfill even minimal intentions while squandering scarce resources. The United States has been a fortunate country, with solutions frequently emerging in unexpected ways.

It would seem to me that unless the United States gets lucky again, its global dominance is in jeopardy. Considering its history, the United States can expect to get lucky again, but it usually gets lucky when it is frightened. And at this point it isn’t frightened but angry, believing that if only its own solutions were employed, this problem and all others would go away. I am arguing that the conventional solutions offered by all sides do not yet grasp the magnitude of the problem — that the foundation of American society is at risk — and therefore all sides are content to repeat what has been said before.

People who are smarter and luckier than I am will have to craft the solution. I am simply pointing out the potential consequences of the problem and the inadequacy of all the ideas I have seen so far.

https://www.stratfor.com/weekly/crisis-middle-class-and-american-power

Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.
President Obama stated: “What’s at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” As long as working people are limited by earning income solely through their labor worker wages, they will be left behind by the continued gravitation of economic bounty toward the top 1 percent of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in turmoil and upheaval, if not revolution.

The majority of Americans, dependent on labor worker wages, no longer think that jobs and labor wages will return suddenly — if at all — and at a livable earnings level, that the value of their homes will re¬bound, or that their limited retirement funds will soon be fully restored. Americans are scared but attribute their worsening finances to job losses, reduced hours, wage givebacks, and overall reduced earnings. They do not understand the role of productive capital driven by technological innovation and science and the requirement for them to become capital workers, as well as labor workers, to earn a viable economic future. And until we, as a society, understand how wealth is produced, how consumers earn the money to buy products and services and the nature of capital ownership, we will not be able to set a course to obtain an affluent quality of life for middle and working class citizens, where everyone “can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” The REAL solution is to build an economy of universally productive individuals and households through broadened wealth-creating, income-producing capital ownership.