Elon Musk Is Right. ULA Receives $1B From The Government, But Is It A Subsidy?

On July 17, 2017, Futurism posted the following:

THE BILLION DOLLAR MYTH?

On July 13, Elon Musk posted a graph on Twitter that showed SpaceX was completely cornering the commercial rocket market. Musk specifically highlighted the fact that his venture is entirely privately funded while other major companies listed get billions of dollars in grants each year despite a profound lack of launches.

About 11 years ago, two of these companies — Boeing and Lockheed Martin — merged to become the United Launch Alliance (ULA). Tory Bruno, President and CEO of the ULA, disagreed with Musk on Twitter, calling the billion dollar subsidy a “myth.” The tweet has since been deleted. Futurism reached out to ULA for comment at 1:53PM ET, and noted the presence of the tweet not long after. It was removed by 2:30 PM ET.

*5* Data Supports Elon Musk’s Claim that ULA Receives “Billion Dollar Subsidy”
The tweet from Bruno that was later deleted. Credit: Twitter

Today, Futurism received documentation that shows ULA does indeed receive this amount of money. According to the Department of Defense Fiscal Year (FY) 2018  Budget Estimates:

  • The Air Force budgeted $737.273M for ULA’s ELC in FY17 and $918.609M in FY18 (p. 105).
  • These Air Force contributions represent only 75 percent of the total ELC funding to ULA. The National Reconnaissance Office (NRO) funds the remaining 25 percent.
  • Thus, the full combined AF/NRO ELC financial contribution to ULA is $983.031M in FY17 and $1.224B in FY18.

It would seem that the biggest argument here isn’t about cost, though. It’s more about the definition of a subsidy. Is the $1.224B indeed a subsidy as Musk originally asserted?

AN OPPOSING ARGUMENT

One of the primary reasons this funding is needed, as discussed in the 2016 ELC contract itself, is the high cost of maintaining a large workforce and the constant depreciation of launch vehicles. An article from Teslarati points out the specifics:

“Due to contracting, ULA is required to maintain both the workforce and facilities necessary to produce and launch Delta vehicles, in spite of having nearly no ‘business’ thanks to Atlas V. Maintaining a workforce and set of facilities that is in part or whole redundant is not efficient or cost-effective, but it is contractually required. So, while the ELC contract Musk deemed a nearly pointless subsidy does have some major flaws, inefficiencies, and illogical aspects, it is not technically correct to label it a subsidy.”

Futurism reached out to ULA for a comment on the tweet and above data. A ULA representative referred us to a 2016 op-ed for SpaceNews on the topic in which Bruno addressed the criticism:

“Critics have asserted that ULA receives $800 million per year in a contract ‘for doing nothing,’ stating that it was a ‘retainer’ or ‘subsidy’ for ULA to “stay in business” for the Air Force. This is untrue and reveals a fundamental lack of understanding of this innovative contracting mechanism.”

Whether or not ULA would still receive this payment despite a lack of actual launches is not clear.

Regardless of how the money is labeled, however, SpaceX is still leading the launch race. In addition to launching rockets with an ever-increasing frequency over the next few years, Musk also plans to launch 4,000 satellites to provide the world with unilateral internet coverage and continue work on his mission to terraform Mars.

Elon Musk Is Right. ULA Receives $1B From the Government, but Is It a Subsidy?

Gary Reber Comments:

While I am opposed to subsidies and tax loopholes, as long as they are in place they should require the corporations receiving the grants, loan guarantees, tax breaks, etc. be fully employee owned using justice-managed Employee Stock Ownership Plans (ESOPs). Otherwise, taxpayer dollars are used to further concentrate the ownership of technological capital wealth among the already wealthy capital ownership class.

Optimally, we should eliminate all subsidies and tax loopholes. We should finance all future productive capital expansion of the economy by issuing and selling new stock with full-dividend earning payout requirements to the new owners. EVERY citizen would qualify to receive an equal Capital Homestead Account (ACA), a sorta IRA-account, with the requirement of past pavings to pledge as loan security for the banks. Such capital credit would be extended to EVERY citizen annually to specifically invest in qualified, viable corporations that are growing the economy. The full-payout of earnings dividend would first go to pay off the annual capital credit, and once paid would 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. 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 security must be provided. Loan security can be facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). The promissory note can be offset to the government’s central Federal Reserve Bank in return for the cash equivalent of the amount of the loan, less an administrative fee. The only cost to the direct lending bank in making a loan to CHA user accounts would be the administrative fee, or about 2 percent of the loan’s principal and then another 2 percent for capital credit insurance, with an additional quarter of a percent paid to the Federal Reserve Bank to monetize the loan and give the lender the same cash as it would have had if it had actually loaned money to the corporation. The lender’s cash loaned to the CHAa is replenished with the Federal Reserve Bank cash. When the company pays the CHAs enough money to enable the CHAs to repay the lender, the lender has to retrieve the note and pay back the Federal Reserve Bank. Thus, the loan cost would be essentially not more than 5 percent to allow ownership broadening financial capital to be invested in ownership broadening CHAs to create new capitalists. Thus, national capital credit insurance replaces the requirement past savings to pledge security.

Bad News for Automakers: The Average US Household Can’t Afford A New Car

On June 28, 2017, Sarah O’Brien writes on CNBC:

As wages stagnate and the cost of living continues to rise, paying for a new car is a challenge for consumers, according to a new study.

The report by Bankrate.com shows that in all but one of the 25 largest U.S. metro areas, households with median incomes cannot afford the average price of a new car. In six of the surveyed areas, they can afford less than half the amount.

“The [average] household can’t comfortably afford to buy a new vehicle,” said Claes Bell, a Bankrate.com analyst. “That means a lot of households are overextending themselves on car costs, and that can potentially crowd out other priorities such as saving for retirement.”

As a way to measure affordability, the study applied the so-called 20/4/10 rule: a 20 percent down payment, a four-year loan, and payments and insurance comprising 10 percent of a household’s gross (pre-tax) income.

With the average new-car price at more than $33,000 in May, according to the latest data from Kelley Blue Book, only the Washington, D.C., metro area’s nearly $100,000 median income could qualify.

In the worst market for affordability — Miami/Fort Lauderdale/West Palm Beach — a median-income household (around $51,000) could afford a $13,577 car, while the average new car there would cost more than double that ($35,368 including local sales tax), according to Bankrate data.

“This issue of affordability isn’t just about the price of cars. It’s about the stagnation of wages,” Bell said. “Car costs are not rising all that quickly over time, but things like health care and college costs are going up and wages aren’t [keeping up]. Budgets are being stretched.”

Auto loan delinquencies — when payments are 30 or more days overdue — rose more than other types of household debt in last year’s fourth quarter, according to the American Bankers Association. Separately, data from the Federal Reserve Bank of New York shows that 90-day delinquencies stood at 3.8 percent of all loans as of March 31.

“People fall in love with cars they can’t afford, and that’s how they get in trouble,” said John Gajkowski, a certified financial planner and co-founder of Money Managers Financial Group.

Lured by low interest rates and dealer incentives, consumers now carry close to $1.2 trillion in auto debt including both loans and leases. While high, it’s only about 10 percent of the $12.73 trillion that households carry in total debt, according to the Federal Reserve.

Part of what causes people to overextend themselves when it comes to car buying, Bell said, is lack of planning.

“People should prepare for a car purchase by saving for a down payment,” Bell said. “Sometimes people impulsively go to a car lot and get sold on buying a new car. But if they don’t have a sufficient down payment saved, it will be hard to fit the payment into their budget.”

https://www.thefiscaltimes.com/2017/06/28/Bad-News-Automakers-Average-US-Household-Cant-Afford-New-Car

Gary Reber Comments:

Automobile purchases are part of the massive consumer debt problem in the United States. As the study  notes, “lured by low interest rates and dealer incentives, consumers now carry close to $1.2 trillion in auto debt including both loans and leases.”

As the factory picture shows, 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. Companies strive to achieve cost efficiencies to maximize profits for the owners, thus keeping labor input and other costs at a minimum. 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.

The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services in order to generate profits and thus return on investment (ROI).

Furthermore, 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. 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.

This is why tectonic shifts in the technologies of production and competitive globalization destroys jobs and devalues the worth of labor, leaving the vast majority of Americans struggling week to week and month to month.

But instead of broadening capital ownership and sharing the opportunity among all Americans to be productive and earn income through capital ownership, institutionalizes greed (creating concentrated capital ownership, monopolies, and special privileges) empowers 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.

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.

Without this necessary balance hopeless poverty, social alienation, and economic breakdown will persist, even though the American economy is ripe with the physical, technical, managerial, and engineering prerequisites for improving the lives of the 99 percent majority. Why? Because there is a crippling organizational malfunction that prevents making full use of the technological prowess that we have developed. The system does not fully facilitate connecting the majority of citizens, who have unsatisfied needs and wants, to the productive capital assets enabling productive efficiency and economic growth.

For putting us on the path to inclusive prosperity, inclusive opportunity and inclusive economic justice, see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

For how to make EVERY citizen PRODUCTIVE see my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

Support the Agenda of The JUST Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

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/.

 

 

Globalization: The Rise And Fall Of An Idea That Swept The World

It’s not just a populist backlash – many economists who once swore by free trade have changed their minds, too. How had they got it so wrong?

The annual January gathering of the World Economic Forum in Davosis usually a placid affair: a place for well-heeled participants to exchange notes on global business opportunities, or powder conditions on the local ski slopes, while cradling champagne and canapes. This January, the ultra-rich and the sparkling wine returned, but by all reports the mood was one of anxiety, defensiveness and self-reproach.

The future of economic globalisation, for which the Davos men and women see themselves as caretakers, had been shaken by a series of political earthquakes. “Globalisation” can mean many things, but what lay in particular doubt was the long-advanced project of increasing free trade in goods across borders. The previous summer, Britain had voted to leave the largest trading bloc in the world. In November, the unexpected victory of Donald Trump, who vowed to withdraw from major trade deals, appeared to jeopardise the trading relationships of the world’s richest country. Forthcoming elections in France and Germany suddenly seemed to bear the possibility of anti-globalisation parties garnering better results than ever before. The barbarians weren’t at the gates to the ski-lifts yet – but they weren’t very far.

In a panel titled Governing Globalisation, the economist Dambisa Moyo, otherwise a well-known supporter of free trade, forthrightly asked the audience to accept that “there have been significant losses” from globalisation. “It is not clear to me that we are going to be able to remedy them under the current infrastructure,” she added. Christine Lagarde, the head of the International Monetary Fund, called for a policy hitherto foreign to the World Economic Forum: “more redistribution”. After years of hedging or discounting the malign effects of free trade, it was time to face facts: globalisation caused job losses and depressed wages, and the usual Davos proposals – such as instructing affected populations to accept the new reality – weren’t going to work. Unless something changed, the political consequences were likely to get worse.

The backlash to globalisation has helped fuel the extraordinary political shifts of the past 18 months. During the close race to become the Democratic party candidate, senator Bernie Sanders relentlessly attacked Hillary Clinton on her support for free trade. On the campaign trail, Donald Trump openly proposed tilting the terms of trade in favour of American industry. “Americanism, not globalism, shall be our creed,” he bellowed at the Republican national convention last July. The vote for Brexit was strongest in the regions of the UK devastated by the flight of manufacturing. At Davos in January, British prime minister Theresa May, the leader of the party of capital and inherited wealth, improbably picked up the theme, warning that, for many, “talk of greater globalisation … means their jobs being outsourced and wages undercut.” Meanwhile, the European far righthas been warning against free movement of people as well as goods. Following her qualifying victory in the first round of France’s presidential election, Marine Le Pen warned darkly that “the main thing at stake in this election is the rampant globalisation that is endangering our civilisation.”

It was only a few decades ago that globalisation was held by many, even by some critics, to be an inevitable, unstoppable force. “Rejecting globalisation,” the American journalist George Packer has written, “was like rejecting the sunrise.” Globalisation could take place in services, capital and ideas, making it a notoriously imprecise term; but what it meant most often was making it cheaper to trade across borders – something that seemed to many at the time to be an unquestionable good. In practice, this often meant that industry would move from rich countries, where labour was expensive, to poor countries, where labour was cheaper. People in the rich countries would either have to accept lower wages to compete, or lose their jobs. But no matter what, the goods they formerly produced would now be imported, and be even cheaper. And the unemployed could get new, higher-skilled jobs (if they got the requisite training). Mainstream economists and politicians upheld the consensus about the merits of globalisation, with little concern that there might be political consequences.

Back then, economists could calmly chalk up anti-globalisation sentiment to a marginal group of delusional protesters, or disgruntled stragglers still toiling uselessly in “sunset industries”. These days, as sizable constituencies have voted in country after country for anti-free-trade policies, or candidates that promise to limit them, the old self-assurance is gone. Millions have rejected, with uncertain results, the punishing logic that globalisation could not be stopped. The backlash has swelled a wave of soul-searching among economists, one that had already begun to roll ashore with the financial crisis. How did they fail to foresee the repercussions?

In the heyday of the globalisation consensus, few economists questioned its merits in public. But in 1997, the Harvard economist Dani Rodrikpublished a slim book that created a stir. Appearing just as the US was about to enter a historic economic boom, Rodrik’s book, Has Globalization Gone Too Far?, sounded an unusual note of alarm.

Rodrik pointed to a series of dramatic recent events that challenged the idea that growing free trade would be peacefully accepted. In 1995, France had adopted a programme of fiscal austerity in order to prepare for entry into the eurozone; trade unions responded with the largest wave of strikes since 1968. In 1996, only five years after the end of the Soviet Union – with Russia’s once-protected markets having been forcibly opened, leading to a sudden decline in living standards – a communist won 40% of the vote in Russia’s presidential elections. That same year, two years after the passing of the North American Free Trade Agreement (Nafta), one of the most ambitious multinational deals ever accomplished, a white nationalist running on an “America first” programme of economic protectionism did surprisingly well in the presidential primaries of the Republican party.

What was the pathology of which all of these disturbing events were symptoms? For Rodrik, it was “the process that has come to be called ‘globalisation’”. Since the 1980s, and especially following the collapse of the Soviet Union, lowering barriers to international trade had become the axiom of countries everywhere. Tariffs had to be slashed and regulations spiked. Trade unions, which kept wages high and made it harder to fire people, had to be crushed. Governments vied with each other to make their country more hospitable – more “competitive” – for businesses. That meant making labour cheaper and regulations looser, often in countries that had once tried their hand at socialism, or had spent years protecting “homegrown” industries with tariffs.

Anti-globalisation protesters in Seattle, 1999
 Anti-globalisation protesters in Seattle, 1999. Photograph: Eric Draper/AP

These moves were generally applauded by economists. After all, their profession had long embraced the principle of comparative advantage – simply put, the idea countries will trade with each other in order to gain what each lacks, thereby benefiting both. In theory, then, the globalisation of trade in goods and services would benefit consumers in rich countries by giving them access to inexpensive goods produced by cheaper labour in poorer countries, and this demand, in turn, would help grow the economies of those poorer countries.

But the social cost, in Rodrik’s dissenting view, was high – and consistently underestimated by economists. He noted that since the 1970s, lower-skilled European and American workers had endured a major fall in the real value of their wages, which dropped by more than 20%. Workers were suffering more spells of unemployment, more volatility in the hours they were expected to work.

While many economists attributed much of the insecurity to technological change – sophisticated new machines displacing low-skilled workers – Rodrik suggested that the process of globalisation should shoulder more of the blame. It was, in particular, the competition between workers in developing and developed countries that helped drive down wages and job security for workers in developed countries. Over and over, they would be held hostage to the possibility that their business would up and leave, in order to find cheap labour in other parts of the world; they had to accept restraints on their salaries – or else. Opinion polls registered their strong levels of anxiety and insecurity, and the political effects were becoming more visible. Rodrik foresaw that the cost of greater “economic integration” would be greater “social disintegration”. The inevitable result would be a huge political backlash.

As Rodrik would later recall, other economists tended to dismiss his arguments – or fear them. Paul Krugman, who would win the Nobel prize in 2008 for his earlier work in trade theory and economic geography, privately warned Rodrik that his work would give “ammunition to the barbarians”.

It was a tacit acknowledgment that pro-globalisation economists, journalists and politicians had come under growing pressure from a new movement on the left, who were raising concerns very similar to Rodrik’s. Over the course of the 1990s, an unwieldy international coalition had begun to contest the notion that globalisation was good. Called “anti-globalisation” by the media, and the “alter-globalisation” or “global justice” movement by its participants, it tried to draw attention to the devastating effect that free trade policies were having, especially in the developing world, where globalisation was supposed to be having its most beneficial effect. This was a time when figures such as the New York Times columnist Thomas Friedman had given the topic a glitzy prominence by documenting his time among what he gratingly called “globalutionaries”: chatting amiably with the CEO of Monsanto one day, gawking at lingerie manufacturers in Sri Lanka the next. Activists were intent on showing a much darker picture, revealing how the record of globalisation consisted mostly of farmers pushed off their land and the rampant proliferation of sweatshops. They also implicated the highest world bodies in their critique: the G7, World Bank and IMF. In 1999, the movement reached a high point when a unique coalition of trade unions and environmentalists managed to shut down the meeting of the World Trade Organization in Seattle.

In a state of panic, economists responded with a flood of columns and books that defended the necessity of a more open global market economy, in tones ranging from grandiose to sarcastic. In January 2000, Krugman used his first piece as a New York Times columnist to denounce the “trashing” of the WTO, calling it “a sad irony that the cause that has finally awakened the long-dormant American left is that of – yes! – denying opportunity to third-world workers”.

Where Krugman was derisive, others were solemn, putting the contemporary fight against the “anti-globalisation” left in a continuum of struggles for liberty. “Liberals, social democrats and moderate conservatives are on the same side in the great battles against religious fanatics, obscurantists, extreme environmentalists, fascists, Marxists and, of course, contemporary anti-globalisers,” wrote the Financial Times columnist and former World Bankeconomist Martin Wolf in his book Why Globalization Works. Language like this lent the fight for globalisation the air of an epochal struggle. More common was the rhetoric of figures such as Friedman, who in his book The World is Flat mocked the “pampered American college kids” who, “wearing their branded clothing, began to get interested in sweatshops as a way of expiating their guilt”.

Arguments against the global justice movement rested on the idea that the ultimate benefits of a more open and integrated economy would outweigh the downsides. “Freer trade is associated with higher growth and … higher growth is associated with reduced poverty,” wrote the Columbia University economist Jagdish Bhagwati in his book In Defense of Globalization. “Hence, growth reduces poverty.” No matter how troubling some of the local effects, the implication went, globalisation promised a greater good.

The fact that proponents of globalisation now felt compelled to spend much of their time defending it indicates how much visibility the global justice movement had achieved by the early 2000s. Still, over time, the movement lost ground, as a policy consensus settled in favour of globalisation. The proponents of globalisation were determined never to let another gathering be interrupted. They stopped meeting in major cities, and security everywhere was tightened. By the time of the invasion of Iraq, the world’s attention had turned from free trade to George Bush and the “war on terror,” leaving the globalisation consensus intact.

Above all, there was a widespread perception that globalisation was working as it was supposed to. The local adverse effects that activists pointed to – sweatshop labour, starving farmers – were increasingly obscured by the staggering GDP numbers and fantastical images of gleaming skylines coming out of China. With some lonely exceptions – such as Rodrik and the former World Bank chief and Columbia University professor Joseph Stiglitz – the pursuit of freer trade became a consensus position for economists, commentators and the vast majority of mainstream politicians, to the point where the benefits of free trade seemed to command blind adherence. In a 2006 TV interview, Thomas Friedman was asked whether there was any free trade deal he would not support. He replied that there wasn’t, admitting, “I wrote a column supporting the Cafta, the Caribbean Free Trade initiative. I didn’t even know what was in it. I just knew two words: free trade.”

In the wake of the financial crisis, the cracks began to show in the consensus on globalisation, to the point that, today, there may no longer be a consensus. Economists who were once ardent proponents of globalisation have become some of its most prominent critics. Erstwhile supporters now concede, at least in part, that it has produced inequality, unemployment and downward pressure on wages. Nuances and criticisms that economists only used to raise in private seminars are finally coming out in the open.

A few months before the financial crisis hit, Krugman was already confessing to a “guilty conscience”. In the 1990s, he had been very influential in arguing that global trade with poor countries had only a small effect on workers’ wages in rich countries. By 2008, he was having doubts: the data seemed to suggest that the effect was much larger than he had suspected.

In the years that followed, the crash, the crisis of the eurozone and the worldwide drop in the price of oil and other commodities combined to put a huge dent in global trade. Since 2012, the IMF reported in its World Economic Outlook for October 2016, trade was growing at 3% a year – less than half the average of the previous three decades. That month, Martin Wolf argued in a column that globalisation had “lost dynamism”, due to a slackening of the world economy, the “exhaustion” of new markets to exploit and a rise in protectionist policies around the world. In an interview earlier this year, Wolf suggested to me that, though he remained convinced globalisation had not been the decisive factor in rising inequality, he had nonetheless not fully foreseen when he was writing Why Globalization Works how “radical the implications” of worsening inequality “might be for the US, and therefore the world”. Among these implications appears to be a rising distrust of the establishment that is blamed for the inequality. “We have a very big political problem in many of our countries,” he said. “The elites – the policymaking business and financial elites – are increasingly disliked. You need to make policy which brings people to think again that their societies are run in a decent and civilised way.”

That distrust of the establishment has had highly visible political consequences: Farage, Trump, and Le Pen on the right; but also in new parties on the left, such as Spain’s Podemos, and curious populist hybrids, such as Italy’s Five Star Movement. As in 1997, but to an even greater degree, the volatile political scene reflects public anxiety over “the process that has come to be called ‘globalisation’”. If the critics of globalisation could be dismissed before because of their lack of economics training, or ignored because they were in distant countries, or kept out of sight by a wall of police, their sudden political ascendancy in the rich countries of the west cannot be so easily discounted today.

Over the past year, the opinion pages of prestigious newspapers have been filled with belated, rueful comments from the high priests of globalisation – the men who appeared to have defeated the anti-globalisers two decades earlier. Perhaps the most surprising such transformation has been that of Larry Summers. Possessed of a panoply of elite titles – former chief economist of the World Bank, former Treasury secretary, president emeritus of Harvard, former economic adviser to President Barack Obama – Summers was renowned in the 1990s and 2000s for being a blustery proponent of globalisation. For Summers, it seemed, market logic was so inexorable that its dictates prevailed over every social concern. In an infamous World Bank memo from 1991, he held that the cheapest way to dispose of toxic waste in rich countries was to dump it in poor countries, since it was financially cheaper for them to manage it. “The laws of economics, it’s often forgotten, are like the laws of engineering,” he said in a speech that year at a World Bank-IMF meeting in Bangkok. “There’s only one set of laws and they work everywhere. One of the things I’ve learned in my short time at the World Bank is that whenever anybody says, ‘But economics works differently here,’ they’re about to say something dumb.”

Over the last two years, a different, in some ways unrecognizable Larry Summers has been appearing in newspaper editorial pages. More circumspect in tone, this humbler Summers has been arguing that economic opportunities in the developing world are slowing, and that the already rich economies are finding it hard to get out of the crisis. Barring some kind of breakthrough, Summers says, an era of slow growth is here to stay.

In Summers’s recent writings, this sombre conclusion has often been paired with a surprising political goal: advocating for a “responsible nationalism”. Now he argues that politicians must recognise that “the basic responsibility of government is to maximise the welfare of citizens, not to pursue some abstract concept of the global good”.

One curious thing about the pro-globalisation consensus of the 1990s and 2000s, and its collapse in recent years, is how closely the cycle resembles a previous era. Pursuing free trade has always produced displacement and inequality – and political chaos, populism and retrenchment to go with it. Every time the social consequences of free trade are overlooked, political backlash follows. But free trade is only one of many forms that economic integration can take. History seems to suggest, however, that it might be the most destabilising one.

Nearly all economists and scholars of globalisation like to point to the fact that the economy was rather globalised by the early 20th century. As European countries colonised Asia and sub-Saharan Africa, they turned their colonies into suppliers of raw materials for European manufacturers, as well as markets for European goods. Meanwhile, the economies of the colonisers were also becoming free-trade zones for each other. “The opening years of the 20th century were the closest thing the world had ever seen to a free world market for goods, capital and labour,” writes the Harvard professor of government Jeffry Frieden in his standard account, Global Capitalism: Its Fall and Rise in the 20th Century. “It would be a hundred years before the world returned to that level of globalisation.”

In addition to military force, what underpinned this convenient arrangement for imperial nations was the gold standard. Under this system, each national currency had an established gold value: the British pound sterling was backed by 113 grains of pure gold; the US dollar by 23.22 grains, and so on. This entailed that exchange rates were also fixed: a British pound was always equal to 4.87 dollars. The stability of exchange rates meant that the cost of doing business across borders was predictable. Just like the eurozone today, you could count on the value of the currency staying the same, so long as the storehouse of gold remained more or less the same.

When there were gold shortages – as there were in the 1870s – the system stopped working. To protect the sanctity of the standard under conditions of stress, central bankers across the Europe and the US tightened access to credit and deflated prices. This left financiers in a decent position, but crushed farmers and the rural poor, for whom falling prices meant starvation. Then as now, economists and mainstream politicians largely overlooked the darker side of the economic picture.

In the US, this fuelled one of the world’s first self-described “populist” revolts, leading to the nomination of William Jennings Bryan as the Democratic party candidate in 1896. At his nominating convention, he gave a famous speech lambasting gold backers: “You shall not press down upon the brow of labour this crown of thorns, you shall not crucify mankind upon a cross of gold.” Then as now, financial elites and their supporters in the press were horrified. “There has been an upheaval of the political crust,” the Times of London reported, “and strange creatures have come forth.”

Businessmen were so distressed by Bryan that they backed the Republican candidate, William McKinley, who won partly by outspending Bryan five to one. Meanwhile, gold was bolstered by the discovery of new reserves in colonial South Africa. But the gold standard could not survive the first world war and the Great Depression. By the 1930s, unionisation had spread to more industries and there was a growing worldwide socialist movement. Protecting gold would mean mass unemployment and social unrest. Britain went off the gold standard in 1931, while Franklin Roosevelt took the US off it in 1933; France and several other countries would follow in 1936.

The prioritisation of finance and trade over the welfare of people had come momentarily to an end. But this wasn’t the end of the global economic system.

The trade system that followed was global, too, with high levels of trade – but it took place on terms that often allowed developing countries to protect their industries. Because, from the perspective of free traders, protectionism is always seen as bad, the success of this postwar system has been largely under-recognised.

Over the course of the 1930s and 40s, liberals – John Maynard Keynes among them – who had previously regarded departures from free trade as “an imbecility and an outrage” began to lose their religion. “The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success,” Keynes found himself writing in 1933. “It is not intelligent, it is not beautiful, it is not just, it is not virtuous – and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it.” He claimed sympathies “with those who would minimise, rather than with those who would maximise, economic entanglement among nations,” and argued that goods “be homespun whenever it is reasonably and conveniently possible”.

The international systems that chastened figures such as Keynes helped produce in the next few years – especially the Bretton Woods agreement and the General Agreement on Tariffs and Trade (Gatt) – set the terms under which the new wave of globalisation would take place.

The key to the system’s viability, in Rodrik’s view, was its flexibility – something absent from contemporary globalisation, with its one-size-fits-all model of capitalism. Bretton Woods stabilised exchange rates by pegging the dollar loosely to gold, and other currencies to the dollar. Gatt consisted of rules governing free trade – negotiated by participating countries in a series of multinational “rounds” – that left many areas of the world economy, such as agriculture, untouched or unaddressed. “Gatt’s purpose was never to maximise free trade,” Rodrik writes. “It was to achieve the maximum amount of trade compatible with different nations doing their own thing. In that respect, the institution proved spectacularly successful.”

Construction workers in Beijing, China
 Construction workers in Beijing, China. Photograph: Ng Han Guan/AP

Partly because Gatt was not always dogmatic about free trade, it allowed most countries to figure out their own economic objectives, within a somewhat international ambit. When nations contravened the agreement’s terms on specific areas of national interest, they found that it “contained loopholes wide enough for an elephant to pass”, in Rodrik’s words. If a nation wanted to protect its steel industry, for example, it could claim “injury” under the rules of Gatt and raise tariffs to discourage steel imports: “an abomination from the standpoint of free trade”. These were useful for countries that were recovering from the war and needed to build up their own industries via tariffs – duties imposed on particular imports. Meanwhile, from 1948 to 1990, world trade grew at an annual average of nearly 7% – faster than the post-communist years, which we think of as the high point of globalisation. “If there was a golden era of globalisation,” Rodrik has written, “this was it.”

Gatt, however, failed to cover many of the countries in the developing world. These countries eventually created their own system, the United Nations conference on trade and development (UNCTAD). Under this rubric, many countries – especially in Latin America, the Middle East, Africa and Asia – adopted a policy of protecting homegrown industries by replacing imports with domestically produced goods. It worked poorly in some places – India and Argentina, for example, where the trade barriers were too high, resulting in factories that cost more to set up than the value of the goods they produced – but remarkably well in others, such as east Asia, much of Latin America and parts of sub-Saharan Africa, where homegrown industries did spring up. Though many later economists and commentators would dismiss the achievements of this model, it theoretically fit Larry Summers’s recent rubric on globalisation: “the basic responsibility of government is to maximise the welfare of citizens, not to pursue some abstract concept of the global good.”

The critical turning point – away from this system of trade balanced against national protections – came in the 1980s. Flagging growth and high inflation in the west, along with growing competition from Japan, opened the way for a political transformation. The elections of Margaret Thatcher and Ronald Reagan were seminal, putting free-market radicals in charge of two of the world’s five biggest economies and ushering in an era of “hyperglobalisation”. In the new political climate, economies with large public sectors and strong governments within the global capitalist system were no longer seen as aids to the system’s functioning, but impediments to it.

Not only did these ideologies take hold in the US and the UK; they seized international institutions as well. Gatt renamed itself as the World Trade Organization (WTO), and the new rules the body negotiated began to cut more deeply into national policies. Its international trade rules sometimes undermined national legislation. The WTO’s appellate court intervened relentlessly in member nations’ tax, environmental and regulatory policies, including those of the United States: the US’s fuel emissions standards were judged to discriminate against imported gasoline, and its ban on imported shrimp caught without turtle-excluding devices was overturned. If national health and safety regulations were stricter than WTO rules necessitated, they could only remain in place if they were shown to have “scientific justification”.

The purest version of hyperglobalisation was tried out in Latin America in the 1980s. Known as the “Washington consensus”, this model usually involved loans from the IMF that were contingent on those countries lowering trade barriers and privatising many of their nationally held industries. Well into the 1990s, economists were proclaiming the indisputable benefits of openness. In an influential 1995 paper, Jeffrey Sachs and Andrew Warner wrote: “We find no cases to support the frequent worry that a country might open and yet fail to grow.”

But the Washington consensus was bad for business: most countries did worse than before. Growth faltered, and citizens across Latin America revolted against attempted privatisations of water and gas. In Argentina, which followed the Washington consensus to the letter, a grave crisis resulted in 2002, precipitating an economic collapse and massive street protests that forced out the government that had pursued privatising reforms. Argentina’s revolt presaged a left-populist upsurge across the continent: from 1999 to 2007, leftwing leaders and parties took power in Brazil, Venezuela, Bolivia and Ecuador, all of them campaigning against the Washington consensus on globalisation. These revolts were a preview of the backlash of today.

Rodrik – perhaps the contemporary economist whose views have been most amply vindicated by recent events – was himself a beneficiary of protectionism in Turkey. His father’s ballpoint pen company was sheltered under tariffs, and achieved enough success to allow Rodrik to attend Harvard in the 1970s as an undergraduate. This personal understanding of the mixed nature of economic success may be one of the reasons why his work runs against the broad consensus of mainstream economics writing on globalisation.

“I never felt that my ideas were out of the mainstream,” Rodrik told me recently. Instead, it was that the mainstream had lost touch with the diversity of opinions and methods that already existed within economics. “The economics profession is strange in that the more you move away from the seminar room to the public domain, the more the nuances get lost, especially on issues of trade.” He lamented the fact that while, in the classroom, the models of trade discuss losers and winners, and, as a result, the necessity of policies of redistribution, in practice, an “arrogance and hubris” had led many economists to ignore these implications. “Rather than speaking truth to power, so to speak, many economists became cheerleaders for globalisation.”

In his 2011 book The Globalization Paradox, Rodrik concluded that “we cannot simultaneously pursue democracy, national determination, and economic globalisation.” The results of the 2016 elections and referendums provide ample testimony of the justness of the thesis, with millions voting to push back, for better or for worse, against the campaigns and institutions that promised more globalisation. “I’m not at all surprised by the backlash,” Rodrik told me. “Really, nobody should have been surprised.”

But what, in any case, would “more globalisation” look like? For the same economists and writers who have started to rethink their commitments to greater integration, it doesn’t mean quite what it did in the early 2000s. It’s not only the discourse that’s changed: globalisation itself has changed, developing into a more chaotic and unequal system than many economists predicted. The benefits of globalisation have been largely concentrated in a handful of Asian countries. And even in those countries, the good times may be running out.

Statistics from Global Inequality, a 2016 book by the development economist Branko Milanović, indicate that in relative terms the greatest benefits of globalisation have accrued to a rising “emerging middle class”, based preponderantly in China. But the cons are there, too: in absolute terms, the largest gains have gone to what is commonly called “the 1%” – half of whom are based in the US. Economist Richard Baldwin has shown in his recent book, The Great Convergence, that nearly all of the gains from globalisation have been concentrated in six countries.

Barring some political catastrophe, in which rightwing populism continued to gain, and in which globalisation would be the least of our problems – Wolf admitted that he was “not at all sure” that this could be ruled out – globalisation was always going to slow; in fact, it already has. One reason, says Wolf, was that “a very, very large proportion of the gains from globalisation – by no means all – have been exploited. We have a more open world economy to trade than we’ve ever had before.” Citing The Great Convergence, Wolf noted that supply chains have already expanded, and that future developments, such as automation and the use of robots, looked to undermine the promise of a growing industrial workforce. Today, the political priorities were less about trade and more about the challenge of retraining workers, as technology renders old jobs obsolete and transforms the world of work.

Rodrik, too, believes that globalisation, whether reduced or increased, is unlikely to produce the kind of economic effects it once did. For him, this slowdown has something to do with what he calls “premature deindustrialisation”. In the past, the simplest model of globalisation suggested that rich countries would gradually become “service economies”, while emerging economies picked up the industrial burden. Yet recent statistics show the world as a whole is deindustrialising. Countries that one would have expected to have more industrial potential are going through the stages of automation more quickly than previously developed countries did, and thereby failing to develop the broad industrial workforce seen as a key to shared prosperity.

For both Rodrik and Wolf, the political reaction to globalisation bore possibilities of deep uncertainty. “I really have found it very difficult to decide whether what we’re living through is a blip, or a fundamental and profound transformation of the world – at least as significant as that one brought about the first world war and the Russian revolution,” Wolf told me. He cited his agreement with economists such as Summers that shifting away from the earlier emphasis on globalisation had now become a political priority; that to pursue still greater liberalisation was like showing “a red rag to a bull” in terms of what it might do to the already compromised political stability of the western world.

Rodrik pointed to a belated emphasis, both among political figures and economists, on the necessity of compensating those displaced by globalisation with retraining and more robust welfare states. But pro-free-traders had a history of cutting compensation: Bill Clinton passed Nafta, but failed to expand safety nets. “The issue is that the people are rightly not trusting the centrists who are now promising compensation,” Rodrik said. “One reason that Hillary Clinton didn’t get any traction with those people is that she didn’t have any credibility.”

Rodrik felt that economics commentary failed to register the gravity of the situation: that there were increasingly few avenues for global growth, and that much of the damage done by globalisation – economic and political – is irreversible. “There is a sense that we’re at a turning point,” he said. “There’s a lot more thinking about what can be done. There’s a renewed emphasis on compensation – which, you know, I think has come rather late.”

https://www.theguardian.com/world/2017/jul/14/globalisation-the-rise-and-fall-of-an-idea-that-swept-the-world

Gary Reber Comments:

Globalization is the pursuit of dominating the ownership of productive capital throughout the world by an already wealthy capital asset ownership class. The system has been rigged to facilitate this world dominance.

And yet author Nikil Saval does not once use the phrase “concentrated capital ownership” in his analysis nor does he advocate for any solutions except for “more redistribution,” as called for by the World Economic Forum.

My citing that the system has been rigged to further the constant acquisition interests of the already capital asset ownership class, I am referring to the monetary system, tax laws, non-existent tariffs (protectionism) and dismantled protective regulations. Failed trade unions, who never fought for workers owning the corporations who employed them, became easy targets to be crushed. Governments, not by or for the people but controlled by the elite wealthy capital asset ownership class vie with each other to be more “competitive” for attracting businesses, providing taxpayer subsidies, tax loopholes, reduced cost or no-cost resources and reduced or no regulations.

In a nutshell, 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, often forced to slavery in sweatshops, 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 all other economies, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being. Without a correctional course, soon there will not be enough “customers with money” to support sustainable economic growth with slow growth here to stay.

And while some conventional economists argue that economic growth reduces poverty, this is a false argument as economic growth financed to further concentrate capital asset ownership among the already wealthy capital ownership class does not reduce poverty; instead it makes the rich even more rich and the non-propertyless, in the capital asset sense, less- or non-productive, as they own no wealth-creating, income-producing capital assets, and more dependent for their economic well-being on businesses who benefit from the increasing downward pressure on wages with more and more workers competing for jobs and on the State and whatever elites control the coercive powers of government. The elites are the wealthy policymaking business and financial individuals and their lobbyists who buy and control elections and occupy and control representation in government.

Morally, those who seek 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.

Nearly 60 years ago, binary economist Louis Kelso postulated: “When consumer earning power is systematically acquired in the course of the normal operations of the economy by people who need and want more consumer goods and services, the production of goods and services should rise to unprecedented levels; the quality and craftsmanship of goods and services, freed of the corner-cutting imposed by the chronic shortage of consumer purchasing power, should return to their former high levels; competition should be brisk; and the purchasing power of money should remain stable year after year.”

Without this necessary balance hopeless poverty, social alienation, and economic breakdown will persist, even though the American economy is ripe with the physical, technical, managerial, and engineering prerequisites for improving the lives of the 99 percent majority. Why? Because there is a crippling organizational malfunction that prevents making full use of the technological prowess that we have developed. The system does not fully facilitate connecting the majority of citizens, who have unsatisfied needs and wants, to the productive capital assets enabling productive efficiency and sustainable economic growth.

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.”

Economic democracy has yet to be tried.

Economic democracy, or what could be termed economic personalism, is founded on the principal that economic power has to be universally distributed amongst individual citizens and never allowed to concentrate. It is a value system based on the importance and dignity of every human person. America was founded on the principle that the basic responsibility of government is to maximize the welfare of its citizens. 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. Democratizing economic power 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.

America has tried the Republican “cut spending, cut taxes, and cut ‘entitlements,’ eliminate government dependency and shift to private individual responsibility” and the Democrat “protect ‘entitlements,’ provide tax-payer supported stimulus, lower middle and working class taxes, tax the rich and redistribute” through government brands of economic policy, as well as a mixture of both. Republican ideology aims to revive hard-nosed laissez-faire appeals to hard-core conservatives but ignores the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor.

Some conservative thinkers have acknowledged the damaging results of a laissez-faire ideology, which furthers the concentration of productive capital ownership. They are floundering in search of alternative thinking as they acknowledge the negative economic and social realities resulting from greed capitalism. This acknowledgment encompasses the realization that the troubling economic and social trends (global capitalism, free-trade doctrine, tectonic shifts in the technologies of production and the steady off-loading of American manufacturing and jobs) caused by continued concentrated ownership of productive capital will threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood.

In a democratic growth economy, the ownership of productive capital assets would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate capital asset wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen (children, women and men), including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income, from full earnings dividend payouts, would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth and more profitable enterprise. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of an environmentally responsible growth economy. As a result, our business corporations would be enabled to operate more efficiency and competitively, while broadening wealth-creating, income-producing ownership participation, creating new capitalists and “customers with money” to support the products and services being produced.

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.

Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment — thus the political focus on job creation and redistribution of wealth rather than on equal opportunity to produce, full production and broader capital ownership accumulation. This is manifested in the myth that labor work is the ONLY way to participate in production and earn income, and that individual talent and effort are what distinguish the wealthy from the non-wealthy. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Physical capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable, except while building a future economy that can support general affluence for EVERY citizen. When the “tools” of capital owners replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another.

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.

For putting us on the path to inclusive prosperity, inclusive opportunity and inclusive economic justice, see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

For how to make EVERY citizen PRODUCTIVE see my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

Support the Agenda of The JUST Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

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/.

Norman Kurland, President Center for Economic and Social Justice (www.cesj.org) Comments:

Please find the time to read the article below that just appeared in the UK’s paper The Guardian.

It reveals the complete confusion among academic economists globally and academia generally to the moral basis of “private property.” It ignores the logic of the four pillars of a just global market economy, as well as the basic principles for promoting global justice from the bottom-up by lifting monetary, tax, trade and other systemic barriers for every child, woman and man, no matter how poor or in what country in the world, to gain an equal opportunity to acquire and contribute as a future owner of ever-advancing productive capital to a more just and prosperous future global economy.  Note its total silence to Article 17 of the Universal Declaration of Human Rights or any of the publications presented at the websites of CESJ or the Just Third Way version of the “Global Justice Movement.”

Compare the moral blindness of the short-sighted version of global justice peddled by the so-called “scholarly community” with that presented by the Global Justice Movement launched by Dan Parker in Alberta, Canada at www.globaljusticemovement.org.

Why Capitalism Is Just Shitbag Science

On July 14, 2017, Holly Wood writes on Renegade Inc.:

Pure capitalism is beginning to look really similar to pure feudalism. Renegade sociologist, Holly Wood explores how we’ve passively accepted the private expropriation of public wealth. 

Illustration by Rachael Bolton

Capitalism is very simple. Capitalism as an economic system is essentially defined as the process of private expropriation of public wealth. Technically, the Earth is every creature’s inheritance but we in our late modern wisdom have conceded that only a select handful of people will get to profit from its resources while the rest are forced by either gunpoint or starvation to serve them forever or die.

But of course, ironically, defining capitalism for what it is has you thinking me perfectly barbaric. What, no, you gasp and sputter. Surely, capitalism is the most just and fair distribution system of all time! No one could dream of a better, more equitable, more efficient, more beautiful social machinery than that which is spontaneously engineered by the invisible hand of the free market!

Right, the invisible hand fracking our water supply.

The invisible hand that makes our rivers flammable.

The invisible hand that cooks the ocean.

The invisible hand that is melting Antartica.

The invisible hand that chains teenage girls to sewing machines

The invisible hand that traffics children into sex slavery.

You know, the invisible hand holding humanity down by the throat.

That one.

Good stuff that, apparently.

Remember about ten years ago, the government rewarded failed banks trillions of dollars for irreparably fucking up the economy? Remember how virtually no individual responsible for the collapse lost their jobs? In fact, most of them were rewarded with very large bonus checks from their shareholder boards for demonstrating their genius in making the American taxpayer clean up the mess when they all shat the floor.

My god, it was brilliant. Hardly capitalist in the traditional, value-producing sense, but nevertheless masterful in the new capitalist art of shitbag science.

Brava, Goldman Sachs. Brava.

Have you ever stopped to consider that the majority of the wealthiest people don’t actually perform any kind of employment whatsoever? Sure, a few wealthy people run companies and shit, but most don’t. They don’t have to. Being rich means you never have to work. You earn money sitting on the toilet.
The most typical rich person lives on the compounding interest of their forebears’ estates. They don’t manage this estate portfolio themselves, no, dear god, because that would mean working. It would mean researching opportunity horizons and studying futures. Taking investment seriously would mean having to learn shit. While there are many Brahmin sons who live for investment, most of the rich kids I know waste their inheritance flitting from one rehab to the next until they shit out a kid who then wastes their share of the inheritance flitting from one rehab to the next. Rehab migration: the natural lifecycle of the bourgeoisie.

But between stints “recuperating” from doing absolutely fuck all with their lives, these shitbirds outsource their financial obligations to wealth management firms and hedge funds who take their money and make hundreds of little gambles in an effort to make them more money. And with their money so well-taken care of, the rich go back to doing fuck all while earning thousands of dollars a day in passive investment income for absolutely no godly reason.

And because the wealthy truly do not give a fuck about what these wealth managers do with their piles of money so long as those piles get appreciably bigger over time, these wealth managers in turn simply invest in shit they know will keep making money. Like deforestation. And pipelines. Or Israeli bullets that will scream through Palestinian children. Whatever sells. It’s not exactly hard to make money if you’re willing to invest in the strangling of the planet.

All this so Shitbird Jr. can Snapchat his first nervous breakdown on a yacht anchored in Ibiza.
Innovation is a distraction. Don’t kid yourself thinking our GDP grows because smart inventors are getting rich off good ideas. No. Most money is still made the old-fashioned way — through sheer violence.

Rich people force poor people to work for them for wages. The poor do not get to negotiate these wages. Wages are what the market dictates is a fair price for one hour of their labor. Though a cashier at McDonald’s handles easily hundreds of dollars in an hour, she will be paid $7.25 an hour regardless of what her employer earns from her labor and they will insist this is fair. She may hate her job and cry every night on her mother’s pullout couch wishing she could find a better, higher-paying job, but all of this suffering is her choice, obviously.

Oh, that’s right — a lot of people think that if you’re not being coerced to work by top-heavy goons by gunpoint, you’re somehow not being coerced to work. They like to spin these weird pretzels of logic where those without money or resources are actually free to live in a world where the rich have now privatized the commons and kicked out the ladder. When confronted with the reality that single moms work because if they don’t their kids are taken away, they shrug and insist those moms shouldn’t have had kids. When confronted with the bleak dilemma that many millions of chronically ill people face staying in horrible jobs every day to keep their health insurance, they shrug and insist it’s their own fault for getting sick in a country where medical care is prohibitively expensive. So on and so forth.
Capitalist shitbag science means the rationalizations for injustice never end. No, unless you’re literally being held down by gunpoint, none of this will ever qualify as coercion. They always win because you’re always free to choose something else — apparently.

Before Capitalism, what is now the United States was just a sandbox of tribes living off little more than the fish, nuts and berries they found in the woods for thousands of years. Where I live now in Northeast Pennsylvania, the Delaware tribe lived long, healthy lives primarily eating the same kind of deer that today live to fuck up my garden.

Now Capitalism has my neighbors spending most of their days driving to a job that I know pays them less than they need to feed their kids. But surely this isn’t coercion. They are free to work. And, of course, their kids are free to starve.

For reasons that lay beyond my comprehension, we call this situation progress because whatever this shitbaggery is, it more closely approximates “pure capitalism” than what the Delaware were doing.
That the deer are more free than my neighbors taunts me.

So in sum, Capitalists believe that civilization is an asymptotic function where humanity is approaching but will never reach capitalist perfection. They insist that any economic system occurring before ours must be bad since ours more obviously approximates the yet unmet capitalist ideal. They insist that because we have never achieved “pure capitalism,” the problems of modern society can and will be solved by further freeing regulated markets.

This is shitbag science. This is the argument that because we have never quite achieved perfect capitalism, none of the consequences of contemporary capitalism are problems we should solve. Instead, we should think of society as on the mend, improving as we approach greater, purer capitalism.

But the true capitalist ideal isn’t an ideal you would really want. The endgame of capitalism would be the massive expropriation of the world’s resources into the hands of a few obscenely wealthy people, leaving the vast, vast majority of Earth’s denizens propertyless and without access to the necessities for life. There would be constant violence as those at the bottom drown each other, gulping for air. We’d be seeing armed security employed in the sad work of mowing down the dispossessed. Children would be selling themselves on the street for bread and shelter. Grandparents would be swallowing the last of their pills to spare their children the extra mouth to feed.

But of course none of that is happening now because we have yet to reach “pure capitalism.”

Can’t wait to see what that looks like.

Why Capitalism Is Just Shitbag Science

Gary Reber Comments:

This author is angry and frustrated. Yes “pure capitalism” is similar to feudalism in term of who owns and controls the non-human means of production.

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.

Nearly 60 years ago, binary economist Louis Kelso postulated: “When consumer earning power is systematically acquired in the course of the normal operations of the economy by people who need and want more consumer goods and services, the production of goods and services should rise to unprecedented levels; the quality and craftsmanship of goods and services, freed of the corner-cutting imposed by the chronic shortage of consumer purchasing power, should return to their former high levels; competition should be brisk; and the purchasing power of money should remain stable year after year.”

Without this necessary balance hopeless poverty, social alienation, and economic breakdown will persist, even though the American economy is ripe with the physical, technical, managerial, and engineering prerequisites for improving the lives of the 99 percent majority. Why? Because there is a crippling organizational malfunction that prevents making full use of the technological prowess that we have developed. The system does not fully facilitate connecting the majority of citizens, who have unsatisfied needs and wants, to the productive capital assets enabling productive efficiency and economic growth.

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.”

Economic democracy has yet to be tried.

America has tried the Republican “cut spending, cut taxes, and cut ‘entitlements,’ eliminate government dependency and shift to private individual responsibility” and the Democrat “protect ‘entitlements,’ provide tax-payer supported stimulus, lower middle and working class taxes, tax the rich and redistribute” through government brands of economic policy, as well as a mixture of both. Republican ideology aims to revive hard-nosed laissez-faire appeals to hard-core conservatives but ignores the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor.

Some conservative thinkers have acknowledged the damaging results of a laissez-faire ideology, which furthers the concentration of productive capital ownership. They are floundering in search of alternative thinking as they acknowledge the negative economic and social realities resulting from greed capitalism. This acknowledgment encompasses the realization that the troubling economic and social trends (global capitalism, free-trade doctrine, tectonic shifts in the technologies of production and the steady off-loading of American manufacturing and jobs) caused by continued concentrated ownership of productive capital will threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood.

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.

For putting us on the path to inclusive prosperity, inclusive opportunity and inclusive economic justice, see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

For how to make EVERY citizen PRODUCTIVE see my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

Support the Agenda of The JUST Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

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/.

Minimum Wage Hikes Are An Act Of Cruelty

San Francisco’s minimum wage hike to $15 an hour was followed by a slew of restaurant closures. (Photo: iStock Photos)

On July 12, 2017, Walter E. Williams writes on The Daily Signal:

There are political movements to push the federal minimum hourly wage to $15.

Raising the minimum wage has popular support among Americans. Their reasons include fighting poverty, preventing worker exploitation, and providing a living wage.

For the most part, the intentions behind the support for raising the minimum wage are decent. But when we evaluate public policy, the effect of the policy is far more important than intentions.

So let’s examine the effects of increases in minimum wages.

The average wage for a cashier is around $10 an hour, about $21,000 a year. That’s no great shakes, but it’s an honest job for full- or part-time workers and retirees wanting to earn some extra cash.

In anticipation of a $15-an-hour wage becoming federal law, many firms are beginning the automation process to economize on their labor usage.

Panera Bread, a counter-serve cafe chain, anticipates replacing most of its cashiers with kiosks. McDonald’s is rolling out self-service kiosks that allow customers to order and pay for their food without ever having to interact with a human.

Momentum Machines has developed a meat-flipping robot, which can turn out 360 hamburgers an hour. These and other measures are direct responses to rising labor costs and expectations of higher minimum wages.

Here’s my question to supporters of higher minimum wages: How compassionate is it to create legislation that destroys an earning opportunity?

Again, making $21,000 a year as a cashier is no great shakes, but it’s better than going on welfare, needing unemployment compensation, or idleness. Why would anybody work for $21,000 a year if he had a higher-paying alternative?

Obviously, the $21,000-a-year job is his best-known opportunity. How compassionate is it to call for a government policy that destroys a person’s best opportunity? I say it’s cruel.

San Francisco might give us some evidence for what a $15 minimum wage does.

According to the East Bay Times, about 60 restaurants around the Bay Area closed between September and January.

A recent study by Michael Luca of Harvard Business School and Dara Lee Luca of Mathematica Policy Research calculated that for every $1 hike in the minimum hourly wage, there is a 14 percent increase in the likelihood that a restaurant rated 3 1/2 stars on Yelp will go out of business.

Fresno Bee reporter Jeremy Bagott says that even some of San Francisco’s best restaurants fall prey to higher minimum wages. One saw its profit margins fall from 8.5 percent in 2012 to 1.5 percent by 2015.

Most restaurants are thought to require profit margins between 3 and 5 percent to survive.

Some think that it’s greed that motivates businessmen to seek substitutes for labor, such as kiosks, as wages rise. But don’t blame businessmen; just look in the mirror.

Suppose both McDonald’s and Burger King are faced with higher labor costs as a result of higher minimum wages. McDonald’s lowers its labor costs by installing kiosks and laying off workers, but Burger King decides to not automate but instead keep the same amount of labor.

To cover its higher labor costs, Burger King must charge higher prices for its meals, whereas McDonald’s gets by while charging lower prices.

Which restaurant do you think people will patronize? I’m guessing McDonald’s. What customers want is an important part of a company’s decision-making.

But there are other actors to whom companies are beholden. They are the companies’ investors, who are looking for returns on their investments.

If one company responds appropriately to higher labor costs, it will produce a higher investor return than one that does not.

That means “buy” signals for the stock of a company that responds properly and “sell” signals for the stock of one that does not, as well as possible outside takeover attempts for the latter.

The best way to help low-wage workers earn higher wages is to make them more productive, and that’s not accomplished simply by saying they are more productive by mandating higher wages.

Minimum Wage Hikes Are an Act of Cruelty

Gary Reber Comments:

Professor of Economics Walter Williams nails it when he concludes an alternative to raising the minimum wage: “The best way to help low-wage workers earn higher wages is to make them more productive, and that’s not accomplished simply by saying they are more productive by mandating higher wages.”

But, as with virtually all articles that address economic inequality, Professor Williams puts forth no concrete policies or financial mechanisms to make people more productive. Virtually every article concludes with either raise the minimum wage or provide an Unconditional Basic Income.

What Professor Williams is pointing out, which should be obvious to anyone with common sense, a minimum wage increase is fundamentally a wage cost increase to business owners without increasing productivity on the part of the people employed.

For centuries technological change has make 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. And as businesses are faced with increased costs and competitive forces to maintain competitive pricing of their goods, products and services, they are in constant search for solutions to lower their operational costs, which ultimately translates to employing the non-human means of production. 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 owners of productive capital and progressively less to workers who make their contribution through labor.

Furthermore, if businesses cannot offset increased costs outside of their control, the result is they raises prices, which results in inflation, and if they lose customers as a result, they face going out of business.

Unfortunately, those who are not business owners themselves say so what, what is a few cents or dollars more?

And while the price of goods, products and services produced by industries that employ low-wage workers isn’t completely determined by minimum-wage workers and what they make, other factors have to do with the cost of building or franchise leases, the cost of raw materials, transport and taxes and other non-human factors. And these other factors are under the same pressure to reduce costs. So, I think that people forget that full employment or paying above market pricing for labor is not an objective of businesses nor is conducting business statically in terms of geographical location. Companies strive to achieve cost efficiencies to maximize profits for the owners, at times, where profit margins are competitively low, thus keeping labor input and other costs at a minimum. 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 invention and 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.

The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their good, products or services in order to generate profits and thus return on investment (ROI).

Over the past century there has been an ever-accelerating shift to productive capital (efficient use of land, structures, mechanism, automation, robotics, computerization, etc.) — 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 239 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery and use 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 goods, products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advances amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today, resulting in 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 goods, products and services are produced from labor intensive to capital intensive — the core function of technological invention and innovation. The reality is that most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Productive capital 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, binary economist Louis Kelso asserted more than 60 years ago 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.”

At some point, hopefully people will wake up and grasp the wisdom (today’s word for yesterday’s common sense) of what the late labor statesman Walter Reuther pointed out half a century ago in his testimony before the Joint Economic Committee of Congress, February 20, 1967:

The breakdown in collective bargaining in recent years is due to the difficulty of labor and management trying to equate the relative equity of the worker and the stockholder and the consumer in advance of the facts. . . . If the workers get too much, then the argument is that that triggers inflationary pressures, and the counter argument is that if they don’t get their equity, then we have a recession because of inadequate purchasing power. We believe this approach (progress sharing) is a rational approach because you cooperate in creating the abundance that makes the progress possible, and then you share that progress after the fact, and not before the fact.  Profit sharing would resolve the conflict between management apprehensions and worker expectations on the basis of solid economic facts as they materialize rather than on the basis of speculation as to what the future might hold. . . . If the workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing as such cannot be said to have any inflationary impact upon costs and prices. . . . Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth.”

Louis Kelso’s Employee Stock Ownership Plan (ESOP) was one step on the path Reuther laid out. Capital Homesteading is another. Perhaps it’s time world leaders took economic reality and common sense into account. . . .

Instead of engaging in inflationary bandaids and capping earnings of workers by solely focusing on wage levels, the logical answers are to think outside the one-factor LABOR/WAGE box and begin to think how to make EVERY citizen PRODUCTIVE through OWNING interests in the corporations growing the economy and employing fewer and fewer people. To acquire OWNERSHIP, financial mechanism are needed to provide interest-free capital credit without the requirement of “past savings” (loan default security), repayable out of the future earnings of the investments in our economy’s growth and the building of a future economy that can support quality, affluent living standards. How to solve the “past savings” security collateral problem to make good on the relatively few bad loans that are inevitable, is to insure banks against such risks using commercial capital credit insurance and reinsurance (ala the Federal Housing Administration concept).

Researchers should start with this proposal and study its impact.

For how to make EVERY citizen PRODUCTIVE see my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

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/.

Seattle Shows The Way To Higher Pay

People demonstrating for a $15 minimum wage in Seattle, in 2014.

On July 8, 2017, the Editorial Board of The New York Times writes:

A recent study on Seattle’s $15-an-hour minimum wage law reignited the debate over whether higher minimums help workers by lifting pay or harm them by leading employers to cut hours. The study, by University of Washington researchers, found more harm than good, a result that was at odds with a large body of previous research and was challenged by other economists who saw flaws in the study.

The dispute has been healthy. The critics have been specific and data driven, not ideological. The study’s authors have said they welcome criticism and have acknowledged that other conclusions are plausible. The dispute could actually advance the cause for higher minimums and give them a better chance of delivering the desired benefits.

For starters, the debate has underscored the validity of decades of rigorous research and real-life experience showing that moderate increases in the minimum raise the pay of low-wage workers without reducing job growth or work hours. The only question is whether big increases would also work. The federal minimum is a mere $7.25 an hour and most of the 30 states with higher minimums require less than $10 an hour. Large minimum-wage increases are generally defined as those calling for $12 to $15 an hour.

In Seattle, the minimum rose in 2015 from $9.47 an hour to either $10 or $11, depending mainly on the size of a business. In 2016 it rose to a range of $10.50 to $13. (The period studied covers 2015 and 2016.) In 2017, it hit $11 to $15. By 2021, all Seattle businesses will pay at least $15.

In attempting to assess the effects of the increase, the Seattle study excluded workers at businesses that also have locations outside the city, including chains and franchises like Starbucks and McDonald’s. The intent was to isolate the impact on Seattle employers, independent of outside business concerns. But the consequence was to overlook — and most likely underestimate — the experiences of employers who can best afford the raises. Similarly, the study blames the minimum wage increase for a decline in low-wage work in Seattle, when a likely cause is the city’s strong economy in which competition, not the minimum wage, bids up pay.

Seen in that light, it seems safe to conclude that Seattle has tolerated its minimum wage increase well and that, by extension, other strong economies could do so. It also suggests that a key to successful large increases is a gradual phase-in that gives businesses time to adjust and experts time to study the impacts as they unfold.

Caution is advisable, because large increases are largely untested. What is not acceptable is to do nothing in the face of uncertainty. Minimum wages have to go up: If the federal minimum of $7.25 had simply kept pace over the decades with inflation, it would be nearly $10 an hour today. If it had kept pace with other relevant benchmarks, like average wages and productivity growth, it would be $11 to nearly $19 today. Cities and states are experimenting with higher minimums because Congress has failed to raise the federal minimum. The experiment appears to be working.

https://mobile.nytimes.com/2017/07/08/opinion/sunday/seattle-minimum-wage.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&referer=https%3A%2F%2Ft.co%2Fgr2z2QVDzx%3Famp%3D1

Gary Reber Comments:

The squabbling debate between pro minimum-wage advocates and free market advocates continues.

The real issue we should be addressing is how to empower EVERY citizen to earn more income through ownership of the non-human factor of production – technological invention and innovation that results in more efficient “tools” (what economists call productive physical capital) that reduce or eliminate the necessity for human labor.

Yet, it appears that no leaders or media or conventional economists are willing to say: “Stop, there is a better way to increasing earnings of EVERY citizen by focusing on financial mechanism that create wealth-creating, income-producing capital asset ownership simultaneously with the future capital asset formation of the future.”

But no, they are stuck in one-factor thinking – labor – as the ONLY way to increasing earnings of the vast majority of Americans who are locked out of the system to become a substantial capital owner.

Just the other day I commented on a Harvard study (http://www.foreconomicjustice.org/?p=17155) that points to minimum wage increases resulting in worker layoffs, increased pricing and hour-cuts for existing workers, resulting in reduced employment. Furthermore, as profit margins are further squeezed, those with the ability to automate are doing so and those who don’t are closing their doors. All this is happening and yet the minimum wage of $15 set by some cities won’t become law until, at the earliest, July of 2018.

But raising the minimum wage was supposed not to kill jobs or create operational costs that would squeeze profit margins and result in business closures. Wasn’t it?

Using common sense, if raising the minimum wage will not kill jobs then why not raise the minimum wage to $25.00 or $50.00 or $100.00 per hour? Of course there are consequences that either are reflected in job elimination, increased prices or business closures. Virtually never are the OWNERS of corporations willing to reduce profits, which often are marginal.

Competition drives businesses to constantly figure out ways to reduce operational costs. Full employment is not an objective of businesses nor is conducting business statically in terms of geographical location. Companies strive to achieve cost efficiencies to maximize profits for the owners, thus keeping labor input and other costs at a minimum.

If wage levels were not a factor there would be also no reason for ANY company to exit production in the United States and move production to foreign lands with significantly less labor costs. Also, there is the impact on pricing levels, as any increases in the cost of production or service always results in pricing increases – inflation.

If this were not the case, then no companies would be compelled to seek other non-human more cost-efficient means of production or to move production to foreign countries whose workers are paid far less than  Americans.  Increasingly, companies are seeking more efficient and less long term costs that non-human technology can deliver to reduce their operating costs, provide higher build quality, automate service, and maximize profits for their OWNERS. As is virtually always the case, the OWNERS of companies do not want to reduce profits.

What the proponents of raising the minimum wage fundamentally are addressing is that low-paid American workers need to earn more income.

We need to begin focusing on the means for people to earn more income, and not solely dependent on earnings from jobs, which are being destroyed with tectonic shifts in the technologies of production. We need to implement financial mechanisms to finance future economic growth and simultaneously create new capital asset owners. This can be accomplished with monetary reform and using insured, interest-free capital credit (without the requirement of past savings, a job or any other source of income), repayable out of the future earnings in the investments in our economy’s growth.

But how, you ask, can such an OWNERSHIP CREATION solution be implemented?

We can and should do more to create universal capital ownership not only for workers of corporations but ALL citizens. What I believe is crucial to solving economic inequality and building a future economy that can support general affluence for EVERY citizen is to address concentrated capital ownership, the fundamental cause of economic inequality. The obvious solution is to de-concentrate capital ownership by ensuring that all future wealth-creating, income-producing capital asset formation will be financed using insured, interest-free capital credit, repayable out of the future earnings of the investments, creating ownership participation by EVERY child, woman, man. This should be about investment in real productive capital growth, not speculation as with the stock exchanges. But the problem is the vast majority of Americans have no savings, or at best extremely limited savings, insufficient to be meaningful as increasingly Americans are living week to week, month to month, and deeply in consumer debt. So forget about proposals for tax credits, retirement and health savings accounts.  There is no feasible way that past savings can continue to be a requirement for investment if we are to simultaneously create new capital owners with the productive growth of the economy. The current economic investment system is structured based on the requirement of past savings used directly or as security collateral for capital credit loans. But past savings are not necessary as viable capital formation projects pay for themselves. This is the logic of corporate 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 can be solved using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). On a larger scale, the path to solve the security issue, that is, the risk can be absorbed by capital credit insurance or commercial risk insurance. 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 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. 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. 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 of 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 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, 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 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 (Section 13(2) Federal Reserve Act).

Until we address concentrated capital ownership and implement solutions to simultaneously broaden capital ownership by creating new capital owners with the growth of the productive economy, money power will reside in the hands of politicians and bankers, not in the hands of the citizens. That is why, to reform the system leaders and advocates for economic justice must focus on money, how it should be created and measured, how it should be controlled and why a more realistic and just money system is the key to universal and equal citizen access to future ownership opportunities as a fundamental human right. Then prosperity and economic democracy can serve as the basis for effective and non-corruptible political democracy, an ecologically sustainable environment, and global peace through justice.

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/.

The Huge Gap Between America’s Rich And Superrich Exposes A Fundamental Misunderstanding About Inequality

On July 8, 2017, Pedro Nicolai da Costa writes on Business Insider:

Destabilizing levels of income inequality, once a problem reserved for developing nations, is now a defining social and political issue in the United States.

Donald Trump seized on the issue during the presidential campaign, vowing to become a voice for forgotten Americans left behind by decades of widening wealth disparities.

While America’s enormous gap between rich and poor and the sorry state of its middle class are well-documented, a less prominent trend tells an equally important story about the American economy: the divide between the well-off and the stratospherically rich.

This particular pattern is especially important since some economists and conservative commentators have tried to blame inequality on educational levels, arguing that those with college degrees have fared well in the so-called knowledge economy while those with a high school diploma or less lack the skills to do the jobs available.

Others, however, point to runaway salaries for top executives in industries like energy and finance as the key underlying drivers of inflation, which has been characterized by huge gains at the very top of the income distribution. Executive compensation is driven in large part by corporate boards that have cozy relationships with firms’ CEOs, rather than market forces.

From Aspen, Colorado, the New York Times columnist David Brooks recently wrote:

“There is a structural flaw in modern capitalism. Tremendous income gains are going to those in the top 20 percent, but prospects are diminishing for those in the middle and working classes. This gigantic trend widens inequality, exacerbates social segmentation, fuels distrust and led to Donald Trump.”

Gabriel Zucman, an economist at the University of California, Berkeley and a preeminent researcher of inequality, wasted little time in countering the argument.

“Tremendous gains are not going to the top 20%. They are going to top 1%,” he tweeted at Brooks, adding that this is key to understanding the Republican Party’s agenda.

ZucmanGabriel Zucman

Richard Reeves, a senior fellow at the Brookings Institution, makes a similar case as Brooks.

“The strong whiff of entitlement coming from the top 20 percent has not been lost on everyone else,” he wrote in a recent opinion piece. His book is titled “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.”

Nicholas Buffie, an economic-policy researcher in Washington, eloquently took issue with the 20% argument in a blog he wrote when he was at the Center for Economic and Policy Research.

“The problem with this type of analysis is that it misleads readers into thinking that a large group of well-educated Americans have benefited from the rise in inequality,” Buffie said. “In reality, the ‘winners’ from increased inequality are really a much smaller group of incredibly rich Americans, not a large group of well-educated, upper-middle-class workers.”

In other words, blaming America’s wealth divide merely on educational differences may be easy, but not particularly useful.

http://www.businessinsider.com/income-gap-between-upper-middle-class-and-very-rich-2017-7

Gary Reber Comments:

Interestingly, while to some degree all of the causes cited in the author’s article are true, the author does not zero in on why the rich and super-rich are wealthy. Simply, the reason they are rich is because they OWN the vast means of non-human, wealth-creating, income-producing capital assets. They will continue to get richer and richer as long as the system requires “past savings” to finance future capital asset formation,

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. 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 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, through which the loans could be guaranteed (ala the Federal Housing Administration concept). This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

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 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 binary economist Louis 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.”

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.

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/.

 

 

 

A Global Progressive Tax On Individual Net Worth Would Offer The Best Solution To The World’s Spiralling Levels Of Inequality

Published by the London School of Economics:

The issue of inequality is one of the most salient in global and European politics. Thomas Piketty writes on the economic forces which have impacted upon inequality since the end of the First World War. He argues that with disparities in income and wealth rising substantially over recent decades, a global progressive tax on individual net worth would offer the best option for keeping inequality under control. He writes that although implementing such a tax would be a major challenge politically, it would be feasible if the EU and the United States, each accounting for around a quarter of world output, put their combined weight behind it.

The distribution of income and wealth is one of the most controversial issues of the day. History tells us that there are powerful economic forces pushing in every direction – towards greater equality, and away from it. Which prevail will depend on the policies we choose.

America is a case in point. Here is a country that was conceived as the antithesis of the patrimonial societies of old Europe. Alexis de Tocqueville, the 19th century historian, saw America as the place where land was so plentiful that everyone could afford property and a democracy of equal citizens could flourish. Until the First World War, the concentration of wealth in the hands of the rich was far less extreme in the US than in Europe. In the 20th century, however, the situation was reversed.

Between 1914 and 1945 European wealth inequalities were wiped out by war, inflation, nationalisation and taxation. After that, European countries set up institutions which – for all their faults – are structurally more egalitarian and inclusive than those of the US.

Ironically, many of these institutions drew inspiration from America. From the 1930s to the early 1980s, for example, Britain maintained a balanced distribution of income by hitting what were deemed to be indecently high incomes with very high tax rates. But confiscatory income tax was in fact an American invention – pioneered in the interwar years at a time when that country was determined to avoid the disfiguring inequalities of class-ridden Europe. The American experiment with high tax did not hurt growth, which was higher at the time than it has been since the 1980s. It is an idea that deserves to be revived, especially in the country that first thought of it.

The US was also first to develop mass schooling, with nearly universal literacy – among white men, at any rate – in the early 19th century, an accomplishment that took Europe almost another 100 years. But again, it is Europe that is now more inclusive. True, the US has produced many of the world’s outstanding universities, but Europe has done better at producing solid middle-ranking ones. According to the Shanghai ranking, 53 of the 100 best universities in the world are in the US, and 31 in Europe. Look instead at the top 500 universities, however, and the order is reversed: 202 in Europe against 150 in the US.

People often talk up the virtues of their national meritocracies, but – whether in France, America or elsewhere – such rhetoric seldom fits the facts. Often the purpose is to justify existing inequalities. Access to American universities – once among the most open in the world – is highly unequal. Building higher education systems that truly combine efficiency and equal opportunity is a major challenge facing all countries.

Mass education is important, but it does not guarantee a fair distribution of income and wealth. US income inequality has sharpened since the 1980s, largely reflecting the huge incomes of people at the top. Why? Have the skills of the managerial cadre advanced further than everyone else’s? In a large organisation, it is hard to know how much each person’s work is worth. But another hypothesis – that top managers by and large have the power to set their pay themselves – is better supported by the evidence.

Even if wage inequality could be brought under control, history tells us of another malign force, which tends to amplify modest inequalities in wealth until they reach extreme levels. This tends to happen when returns accrue to the owners of capital faster than the economy grows, handing capitalists an ever larger share of the spoils, at the expense of the middle and lower classes. It was because the return on capital exceeded economic growth that inequality worsened in the 19th century – and these conditions are likely to be repeated in the 21st. According to Forbes global billionaire rankings, top wealth holders have been rising more than three times faster than the size of the world economy between 1987 and 2013. The Table below illustrates the overall trend in wealth and income growth for different groups.

Table: Average annual growth rate in the wealth/income of groups of the world’s population

Source: Capital in the 21st Century

US inequality may now be so sharp, and the political process so tightly captured by top earners, that this will not happen – much like in Europe before the First World War. But that should not stop us from aspiring to improve. The ideal solution would be a global progressive tax on individual net worth. Those who are just getting started would pay little, while those who have billions would pay a lot. This would keep inequality under control and make it easier to climb the ladder. And it would put global wealth dynamics under public scrutiny. The lack of financial transparency and reliable wealth statistics is one of the main challenges for modern democracies.

Of course there are alternatives. China and Russia, too, must deal with wealthy oligarchies, and they do it with their own tools – capital controls, and jails whose bleak walls can contain the most ambitious oligarchs. For countries that prefer the rule of law and an international economic order, a global wealth tax is a better bet. Maybe China will come round to it before we do. Inflation is another potential solution. In the past it has helped lighten the burden of public debt. But it also erodes the savings of the less well off. A tax on vast fortunes seems preferable.

A global wealth tax would require international co-operation. This is difficult but feasible. The US and the EU each account for one-quarter of world output. If they could speak with one voice, a global registry of financial assets would be within reach. Sanctions could be imposed on tax havens that refused co-operation. Short of that, many may turn against globalisation. If, one day, they found a common voice, it would speak the disremembered mantras of nationalism and economic isolation.

A global progressive tax on individual net worth would offer the best solution to the world’s spiralling levels of inequality

Gary Reber Comments:

Such redistribution schemes, which tax those who are productive either through their capital wealth or labor or both, strengthen the politicians and State control over citizens. The focus should be on empowering EVERY citizen to be productive through access to the means of acquiring and possessing property, simultaneously with the growth of the economy, while abating further concentration of capital wealth. Thomas Piketty states that people viewed America as the place where land was so plentiful that everyone could afford property and a democracy of equal citizens could flourish. But the land is now all owned; there is no more. But capital formation is virtually unlimited. And there should be the focus – broadening its ownership simultaneously with its formation so that over time EVERY child, woman and man accumulates a significant capital estate.

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.

Mark Zuckerberg: The U.S. Should Learn From This State’s Basic Income Program

Facebook founder Mark Zuckerberg writes on Futurism:

AN APPROACH WORTH EMULATING

An excursion is always a learning experience. That was certainly true for Facebook founder and CEO Mark Zuckerberg and his wife Priscilla Chan when they visited Alaska. The social media entrepreneur was impressed by the various social programs he found in America’s Last Frontier, particularly a basic income initiative that Alaska’s been running since 1982.

The Alaska Permanent Fund Dividend (PFD) is a basic income program that allots $1,000 or more per citizen. “[A] portion of the oil revenue the state makes is put into [the PFD],” Zuckerberg wrote in a Facebook post. “Rather than having the government spend that money, it is returned to Alaskan residents through a yearly dividend.”

Another basic income Zuckerberg learned about is by Native Corporations in Alaska. These privately owned corporations that develop land run and owned by Native Alaskans give annual dividends to to their native shareholders according to the resources they develop. “So if you’re a Native Alaskan, you would get two dividends: one from your Native Corporation and one from the state Permanent Fund,” Zuckerberg wrote.

UBI’S BIGGEST HURDLE

Under a universal basic income (UBI) program, individuals receive a fixed amount of income regardless of their social or employment status. UBI is an old idea that’s become more popular recently as a potential response to unemployment due to automation, but it is not without critics. An issue these critics often bring up is funding. Zuckerberg was impressed by how the Alaskan basic income model solves this. “[I]t’s funded by natural resources rather than raising taxes,” he wrote.

This means that running a UBI program isn’t impossible, at least in some cases. In fact, a number of countries already have trial programs to test UBI — most notably Finland, which launched the program in 2016. Canada has two initiatives in the works, while Hawaii recently passed legislationthat will study implementing UBI in the state.

In the end, Zuckerberg thinks it’s all about mentalities. “[W]hen you’re profitable, you’re confident about your future and you look for opportunities to invest and grow further. Alaska’s economy has historically created this winning mentality, which has led to this basic income,” he noted. “That may be a lesson for the rest of the country as well.”

Mark Zuckerberg: The U.S. Should Learn From This State’s Basic Income Program

Gary Reber Comments:

First off, the Alaskan Permanent Fund Dividend (PFD) is derived from taxes on the earnings from oil revenues generated by oil companies operating in Alaska. While the Fund uses “Dividend” in its title, this is really not a dividend in the sense that it is not tied to individual citizens owning shares of an economic development corporation or what I would prefer to call a Citizens Land Bank corporation. The PFD, a government agency, is owned by the State of Alaska. The fund is driven by the state’s royalty oil (50 percent) and the value of investments (50 percent) such as stocks, bonds and real estate. These earnings are distributed to qualified Alaskan citizens on an annual basis.

While this has been casted as “The oil companies don’t own the oil, ALASKANS DO!,” it is somewhat mislead, but telling of a growing segment of the American population that is challenging the conventional notion that our natural resources can be owned by narrowly owned extraction companies.

Also, privately owned Native Corporations in Alaska develop land run and owned by Native Alaskans. The earnings from development of resources are returned annually in the form of dividends to their native shareholders.

A far more powerful alternative that would directly benefit EVERY Alaskan citizen would be to incorporate a Citizens Land Bank, which would own the public lands under which the oil fields lie and would otherwise acquire ownership of other landed oil fields.

The Citizen Land Band would be a for-profit, professionally-managed, citizen-owned-and-governed community land planning and development enterprise, designed to enable every citizen of a community of any size to acquire a direct ownership stake in local land, natural resources and basic infrastructure.

The Citizen Land Bank  would be a social vehicle for every child, woman and man to gain, as a fundamental right of citizenship, a single lifetime, non-transferable ownership interest in all the Bank’s assets, share equally in property incomes from rentals and user fees from leases or use of the Bank’s assets, accumulate appreciated equity values from enhanced land values, and gain an owner’s voice in the governance of future land development.

The Citizen Land Band would serve as an innovative legal and financing tool empowered to borrow on behalf of all citizen-shareholders and service the debt with pre-tax dollars to meet the land acquisition, capitalization and operational needs of the Bank. The CLB would shelter from taxation the equity accumulations of citizen-shareholders and protect the outside assets of the citizens in the event of loan default or if the enterprise fails.

The Citizen Land Band would serve as a social tool designed to encourage a just, free and non-monopolistic market economy. It applies the democratic principles of equal opportunity and equal access to the means to participate as an owner as well as a worker. It demonstrates that anything that can be owned by government can and should be owned, individually and jointly, by the citizens.

The Citizen Land Bank is a major feature in a proposed national economic agenda known as “Capital Homesteading for Every Citizen,” which is designed to reform existing monetary, credit and tax barriers to provide every American an equal opportunity to share in the governing powers and profits from new entrepreneurial ventures, new technologies, new structures, and new rentable space built upon the land. Capital Homesteading offers a “Just Third Way” of reversing unsustainable federal deficits and debt, and revitalizing and growing the American free enterprise system in a sustainable and environmentally sound way.

With a Citizen Land Bank in place Alaskan citizens would generate income by leasing conditioned rights of natural resource extraction to the oil companies wanting to profit from such extraction. In this way the land and the natural resources would truly Be Owned by Alaskans, each owning an equal share of the assets and benefiting from the income generated.

For more information on the Citizens Land Bank see http://www.cesj.org/?s=Citizen+Land+Trust

We are getting near to one solution to generating annual income to citizens. But we need more than Citizen Land Banks to generate more income to citizens.

So, let me address what is avoided in all articles about a universal basic income – alternatives.

While a Universal Basic Income sounds appealing to those solely dependent on a job or welfare, there is a far better way for EVERY child, woman and man to EARN more income by providing equal opportunity to acquire personal ownership in future wealth-creating, income-producing capital formation using insured (lending protection) interest-free capital credit, repayable out of the future earnings of the investments in the corporations growing the economy. This would not require anyone to pledge as collateral (past savings/equity as security for repayment).

Using such new owner-creation financial mechanisms would enable EVERY citizen to contribute productivity to the economy, create demand for a higher standard of living, while not taking from those who already are capital owners through taxation to support otherwise under-productive and non-productive citizens.

We should be looking at how “the rich are getting richer,” not on how we can take and redistribute the earnings of the rich and middle class. Obviously, the distinction between the rich and the non-rich is that the rich OWN wealth-creating, income-producing capital assets, the very essence of technological progress, and the poor only have their labor to sell to the wealthy capital ownership class.

The fact that the core function of technological invention and innovation is to invent “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive, 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 urgency is to figure out means for people to earn an income without dependency on jobs. The focus should not be on a pro-job growth future but an alternative to wage dependency as economists across the board predict further losses as AI, robotics, and other technologies continue to be ushered in.

Such future invention and innovation should be financed using mechanisms that create new owners simultaneously with the growth of the economy, while respecting the private property rights who now own, and ensuring that any further concentrated capital ownership acquisition will be abated.

The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and 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 stock ownership dividends so they can afford to purchase the products and services produced by the technology economy.

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.

The question that requires an answer is now timely before us. It was first posed by binary economist Louis 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 capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access 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?”

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.

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/.

RICH PEOPLE IN AMERICA HAVE TOO MUCH MONEY, SAYS THE WORLD’S SECOND-RICHEST MAN, WARREN BUFFETT

On June 27, 2017, Jason Le Miere writes on Newsweek:

One big problem in America is that while there is plenty of money, rich people have too much of it. So says the world’s second-richest man, Warren Buffett. The 86-year-old CEO of investing house Berkshire Hathaway has a net worth of $75.6 billion, according to Forbes, and he says massive sums like that are the reason why many people are struggling to get by.

“The real problem, in my view, is the prosperity has been unbelievable for the extremely rich people,” he told PBS Newshour Monday.

“If you go to 1982, when Forbes put on their first 400 list, those people had $93 billion. Now they have $2.4 trillion, [a multiple of] 25 for one. This has been a prosperity that’s been disproportionately rewarding to the people on top.”

Since the 1980s, the richest 1 percent of Americans have seen their share of total income roughly double, to 20 percent. Meanwhile, the bottom 50 percent have seen their share decline in a big way, to 12 percent from 20 percent. Inequality in America is now even more pronounced than in China.

“The economy is doing well, but all Americans aren’t doing well,” Buffett added. “But we have got $57,000 or $58,000 of [gross domestic product] per person. That is a lot of stuff.”

Buffett said that the inequality is a natural result of an evolving economy in the U.S., but that more needs to be done in order to help those who have seen their jobs go by the wayside.

“We actually export 12 or 13 percent of our GDP,” he said. “It was only 5 percent in 1970. But it benefits us. It benefits the rest of the world. It doesn’t benefit the steelworker maybe in Ohio. And that’s the problem that has to be addressed because when you have something that’s good for society, but terribly harmful for given individuals, we have got to make sure those individuals are taken care of.”

Buffett pointed out that the economy has been growing since 2009, following the recession the previous year. Since entering the White House in January, and even before, President Trump has been quick to claim credit for any sign of further improvement in the economy.

Buffett, though, urged Trump to be careful what he claimed responsibility for.

“If I ever get elected president, I will never claim credit for anything the market does, because I don’t want to be blamed when it goes the other direction,” he said.

http://www.newsweek.com/rich-people-america-buffett-629456?utm_source=Facebook&utm_campaign=NewsweekFacebookSF&utm_medium=Social

Gary Reber Comments:
Hmm? I know Warren Buffet is not stupid but appears to not know why economic inequality has and is getting worse, or is not willing to tell the truth. He should examine why is is fundamentally rich and what distinguishes himself from those who are not rich. Hopefully, he will see clearly the obvious why: he owns massive capital assets while the non-rich do not own capital assets.
Warren Buffet probably does not see himself as a “hoggist” capital owner with the ability 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, but effectively that is what he has become. Buffett is in solid membership standing in the wealthy capital ownership class who seeks to own productive power that they cannot or won’t use for consumption. As such, they are beggaring their neighbor — the equivalency of mass murder — the impact of concentrated capital ownership.

Buffett has said the solution is simple: “They [people] should just keep buying and buying and buying a little bit of America as they go along. And 30 or 40 years from now, they will have a lot of money.” Yet the reality is the vast majority of Americans are either in poverty, near-poverty, afloat due to consumer credit and living week-to-week or month-to-month. They are in situations that prevent them from saving and speculating, as Buffet has said he has since he was 11.

With all his wealth tied to his personal OWNERSHIP of wealth-creating, income-producing productive capital assets held by him in the business corporations that he has an ownership interest under the Berkshire Hathaway  multinational conglomerate company (18 percent share capital ownership), you would think that he would be educating himself to and advocating financial mechanisms that, with NO requirement of past savings (equity worth), would empower EVERY child, woman, and man to acquire ownership interests in new, productive and viable capital asset formation simultaneously with the growth of the economy, on the basis that the investments will generate their own earnings sufficient to repay the insured (lender security), interest-free capital credit and then go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Buffett is part of the problem by not recognizing and advocating for broadened wealth-creating, income-producing capital asset ownership. The exponential disassociation of production and consumption 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.

At the top of the order of Buffett’s and fellow billionaires’ philanthropy is a plan to use at least half of their their wealth to support causes focused on “poverty alleviation” and “education.”

I think the most good can result if the focus of their wealth is on reforming the monetary and financial system to eliminate the requirement of “past savings” to qualify for capital credit to finance viable capital asset formation projects and provide for EVERY citizen to acquire ownership stakes in future viable capital asset formation simultaneously with the growth of the economy, without taking from those who already own.

A study of billionaires would certainly result in either inheritance of large sums of capital asset ownership stakes or savings accumulated to invest in wealth-creating, income-producing capital assets, on the basis that the investments paid for themselves. In either case, the key operative is “past savings,” which the vast majority of people do not have as they are dependent on jobs in which they earn insufficient income to meet their personal and family consumption needs. And because they are trapped in poverty or near poverty, or even in middle-class status, they cannot earn sufficient income to satisfy their wants above their consumption necessities, and even then they carry high consumer debt.

If only these billionaires would support education to enlightened all Americans and politicians to reform the monetary and financial system and enact legislation to provide an annual allocation into the capital credit account of EVERY child, woman, and man strictly for investment in new viable capital asset formation projects tied to the growth of the economy, which generate their own revenue stream to initially pay off he loan and following produce a full-earnings dividend for consumption (creating further demand for the economy’s growth).

Of course, there needs to be a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital — the rich. This is because “poor” people have no security or collateral, or sufficient income resulting in savings to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home or small business that can be pledged as loan security — those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer through their continuous accumulation of capital asset ownership, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it. This is what Buffet is vaguely referring to when he says: “The real problem, in my view, is the prosperity has been unbelievable for the extremely rich people,”

Thus, the question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan. The answer is the capital credit loan security (collateral) requirement can be replaced with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).

Criteria must be created to qualify the corporations, both new start-ups and established ones, subject to this policy and those corporations that qualify overseen so as to insure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back to the lending entity, the new capital formation will continue to produce income for existing and new owners.

The non-profit Center for Economic and Social Justice (www.cesj.org) is dedicated to such education to alleviate poverty and educate on the financial mechanisms and legislation necessary to put American on a path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.

At the CESJ Web site are volumes of articles and proposed legislation focused on broadening individual capital asset wealth and income simultaneously with the growth of the economy, without redistribution by empowering EVERY citizen to be productive through their capital asset and their labor contributions to the economy.

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 the Agenda of The JUST Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

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/.