How Should Governments Address Inequality?

In the November/December 2017 issue of Foreign Affairs, Melissa S. Kearney writes:

In 2014, an unusual book topped bestseller lists around the world: Capital in the Twenty-first Century, an 816-page scholarly tome by the French economist Thomas Piketty that examined the massive increase in the proportion of income and wealth accruing to the world’s richest people. Drawing on an unprecedented amount of historical economic data from 20 countries, Piketty showed that wealth concentration had returned to a peak not seen since the early twentieth century. Today in the United States, the top one percent of households earn around 20 percent of the nation’s income, a dramatic change from the middle of the twentieth century, when income was spread more evenly and the top one percent’s share hovered at around ten percent. Piketty predicted that without corrective action, the trend toward ever more concentrated income and wealth would continue, and so he called for a global tax on wealth.

Like much of the popular commentary about inequality, Piketty’s book rested on an implicit moral claim—that wealth concentration beyond a certain degree violates the inherent sense of fairness on which a just society depends. But antipathy toward inequality alone cannot drive a policy agenda that will create a more egalitarian society. Critics of inequality need a compelling, evidence-based explanation for how and why the concentration of income and wealth at the top is problematic. Is this inequality the result of a purposely rigged game, or is it caused by unintentional distortions in a basically fair system? Whatever its causes, does inequality impede overall economic growth? Does it undermine widespread opportunity and upward mobility? Does it pose a threat to global capitalism and liberal democracy?



AI Will Put 10 Million Jobs At High Risk — More Than Were Eliminated By The Great Recession

On October 6, 2017, this article appeared on Research Briefs:

Automation is coming after jobs, from fast food workers to accountants. We analyzed which jobs are most — and least — at risk, given factors including tasks involved, the current commercial deployment of technology, patent activity, regulations, and more.

And the next phase of technological evolution is already underway: advanced neural networks that learn, adapt, and respond to situations.

With AI and automation advancing at a breakneck pace, society’s capacity to respond is being stretched to the limit.

10 million US jobs at high risk of disruption

Automation is already all around us. Cities are seeing front-end automated restaurants like Eatsa gaining popularity, while in factories automation has already arguably been a part of life for years (if not decades) in the form of heavy industrial and agricultural robots.

Analyzing the automation landscape, we found that 10 million service and warehouse jobs are at high risk of displacement within the next 5 – 10 years in the US alone. This includes jobs like cooks and servers, cleaners and janitors, as well as warehouse workers.

Meanwhile, nearly 5 million retail workers are at a medium risk of automation within 10 years.

To put these numbers into perspective, estimates are that over a few years the Great Recession of 2007 – 2010 destroyed 8.7 million jobs in the US.


With the emergence of industry-specific AI, the effects of automation — initially felt in manufacturing — are seeping into retail sales, restaurants, e-commerce, marketing, and even software development.

In this report, we take a closer look at the trend, including:

The rise of automation (thanks to open source and corporate interest)

How did we get here?

The concept of artificial intelligence was introduced in the 1950s. But the expectations for what an AI system is capable of achieving have changed over the years.

Innovation in microprocessors — particularly Nvidia’s graphic processing units (GPUs) — have played a large role. While Nvidia GPUs were initially targeted at the gaming industry, they have showed promising results in artificial intelligence, and are now widely used in training deep neural networks.

This, combined with easy access to massive amounts of data (from the internet, IoT devices, etc.), led to a new age for AI.

Meanwhile, several big corporations have open sourced their AI software libraries in recent years — another major accelerant for AI.

For example, Google open sourced its TensorFlow machine learning library in 2015, and hundreds of users have contributed back to it and sought to improve it. It’s a two-way street: startups can now build on existing frameworks instead of starting from scratch, and at the same time Google’s own AI research is accelerated by contributions from outside the organization.

Other libraries include Deeplearning4J from startup Skymind and Microsoft’s Cognitive Toolkit.

How corporations are beginning to harness automation

Last year, Foxconn — the largest contract manufacturer of iPhones — laid off 60,000 workers, replacing them with industrial robots.

Some of these were manufacturing robots called “Foxbots” that were developed internally by the company and can reportedly perform up to 20 common manufacturing tasks.

Foxconn has also backed external robotics startups. In Q3’17, it participated in a $20M seed round to Canada-based Kinova Robotics, which focuses on industrial service robots. Earlier this year, it also backed China-based cloud robotics company CloudMinds in a $100M Series A round.

In an interview with Digitimes last year, Dai Jia-peng, general manager in Foxconn’s Automation Technology Development Committee, outlined a 3-phase strategy for complete factory automation: automating dangerous tasks, process line automation, and a third phase that would leave only a minimum number of humans on board for tasks like logistics and quality control.

Nike and Reebok are looking to speed up the supply chain & logistics process as well, and will automate the manufacturing process in coming years to keep up with high consumer demand and quick turnaround times. In 2013, Nike invested in California-based industrial robotics startup Grabit, which is currently deployed in some of Nike’s manufacturing facilities.

But there are hurdles on the road to automation.

Dai Jia-peng told the South China Morning Post that “highly automated manufacturing is still an ideal,” since ever-changing consumer demands require highly flexible manufacturing robots that are able to adapt rapidly to design and manufacturing changes. However, Foxconn has fallen short of its 2011 forecast of installing 1 million robots in its factories in 3 years.

Like Foxconn, most manufacturing- and logistics-focused corporations are progressing on the road to automation in fits and starts.

The road to automation passes through warehouses and factories where robots collaborate with humans (rather than simply replace them).

Amazon, for example, already uses 45,000 robots in various warehouses, but at the same time is creating thousands of new jobs for humans in its new fulfillment centers.

Robots are still less-than-perfect at gripping, picking, and handling items in unstructured environments. Amazon’s collaborative warehouse robots perform much of the heavy lifting, while workers focusing on delicate tasks like “picking” items off shelves and slotting them into separate orders.

The trend stretches deep into physical retail, although we believe e-commerce is the much greater threat to retail jobs.

Walmart has patents for autonomous robots that attach themselves to shopping carts in order to move them around stores, along with drone delivery systems. (A detailed analysis of Walmart patents can be found here).

Robotics are penetrating deep into large businesses including retail, consumer, and medical applications.

At financial institutions, AI is transforming how investment decisions are made.

“It means some functions will change significantly in nature… And it might mean that positions will no longer be there in the future. All-in-all, over the coming five years, around 7,000 functions might be impacted by these effects…” Ralph Hamers, CEO of ING

In financial markets, global risk and asset management firm BlackRock laid off around 40 employees earlier this year, including portfolio managers and stock managers. BlackRock is moving towards robotic stock pickers instead.

Quant hedge fund Two Sigma is hiring researchers for its new deep learning team.

And well-known hedge fund Man Group is betting on AI to power algorithmic trading.


Beyond financial institutions, AI software has penetrated deeply into industries including healthcare, cybersecurity, and e-commerce.

The outsize impacts on the labor markets

The majority of AI applications today still require humans in the loop. For many blue- and white-collar jobs at risk, this means employers will still need hands on deck — just fewer of them.

We used US Bureau of Labor Statistics data to compile a list of occupations that are key to labor markets and job growth in the US. We diagrammed the key tasks involved, and used our diagram to determine the relative level of immediate risk from automation.

Our time frame was the next 5-10 years, and the relative risk of automation was based on factors including tasks involved, current commercial deployment of technology, patent activity, investment activity, technological challenges, and regulations.

We excluded categories such as heavy manufacturing and agribusiness where large-scale automation is already taking place.

Specifically, we looked at over 25 million jobs across 7 industries:

  • Nurses and health aides (6.9M workers)
  • Retail salesperson (4.6M)
  • Cooks and servers (4.3M)
  • Cleaners (3.8M)
  • Movers and warehouse workers (2.4M)
  • Truck drivers (1.8M)
  • Construction laborers (1.2M)

In addition to the jobs listed above, we take a look at the impact of automation on white collar jobs in later sections.


From auto tech to healthcare, startups are transforming industries with artificial intelligence. Look for Artificial Intelligence in the Collections tab.

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2050+ items items

These are the professions at the greatest risk

Risk of automation is highest in predictable work environments in industries with lower regulations. This has already happened in manufacturing, and now at risk are over 10.5 million jobs in restaurants, janitorial roles, and warehouses.


“We are adding progressive automation right now. And we’re being transparent about it… We invest [the captured surplus] in retraining. We have people move from kitchen to finance…” – Zume Pizza CEO Alex Garden, This Week In Startups

Ease of automation is high for repetitive tasks like making coffee or preparing specific dishes.

This is particularly true in “fast-casual” chains with highly structured processes and menus.

Early-stage food-preparation startups using robotics and AI are proliferating, and operating in both B2B and B2C models.

California-based Zume Pizza, for instance, has raised $70.7M in funding. It uses the IoT and robotics for both automating pizza prep and cooking as well as direct-to-consumer delivery.

Other startups are building robots for specific tasks like flipping burgers or making salads and coffee. Their clientele includes cafeterias, fast food chains, and restaurants.

These startups have already piqued the interest of top VCs and corporate investors.

Google Ventures and Khosla Ventures recently funded burger-flipping robot Mometum Machines (funding and patents below).

Khosla Ventures also backed Cafe X Technologies in Q1’17, alongside The Thiel Foundation, Felicis Ventures, and Social Capital. Smart money VC Foundry Group backed Chowbotics in a $5M Series A round.

The chart below highlights recent deals to commercial food preparation robotics startups.

Startups working on digital payment and tabletop-ordering software are automating the tasks of cashiers and servers.

An example is fast-casual restaurant chain Eatsa. Its self-checkout and ordering process is gaining popularity, and Eatsa has expanded beyond San Francisco to New York and Washington DC. Fast food chains like McDonalds are following suit to maximize profits and cut costs: this year, McDonalds announced that it would replace cashiers with kiosks in 2,500 locations.

(You can read a detailed breakdown of the restaurant tech landscape here).


Consumer demand for smart home cleaning robots is increasing, and deals to on-demand home cleaning services are dwindling.

iRobot launched its Roomba home cleaning robots in 2002, and later developed robots for pool cleaning and floor mopping. It reported an $84M increase in US consumer robot revenue in 2016 compared to the previous year.

The company went public in 2005 after raising $37M from investors including FA Technology Ventures, Fenway Partners, iD TechVentures, iD Ventures America, and Trident Capital. It has applied for 480 patents since 2009.

Another startup, Neato Robotics, entered the market with a competing product, Botvac. Both companies were quick to ride the smart home wave, making their robots compatible with Amazon’s Echo device.

Neato was acquired in Q3’17 by Vorwerk Group, a German supplier of household products. Neato will continue selling its products in the United States post-acquisition.

On-demand cleaning and laundry startup deals have dropped in recent months, which could indicate decreasing market demand. Startups like HomeJoyTaskBob, and Happy Home Company all closed up shop after raising VC money.


Startups are also developing commercial cleaning robots.

Many early-stage commercial cleaning startups like CleanRoboticsRanMarineAdlatus Robotics, and Avidbots have cropped up in the last 2 years.

One of the late-stage companies here, Xenex Robots, develops UV disinfectant robots to reduce the rate of hospital-acquired infections. Over 400 healthcare facilities, including The New United Hospital Center, St Luke’s Hospital, and the Henry Ford Health System, reportedly use these robots. The startup recently raised $38M in a Series E round.


Robot-run warehouses are already in operation.

After Amazon acquired Kiva Systems in 2012 to automate its warehouse tasks, new startups emerged to fill Kiva’s shoes for the broader ecosystem.

As more people shop for products online, there is greater pressure on order fulfillment centers to ship items on time. Currently, “cooperative robots” work in collaboration with humans, although this would mean employers need fewer hands on deck.

As robots do most of the moving and heavy lifting, retailers and supermarkets want in on the trend.

Supermarket Giant Eagle took a minority stake in Pittsburgh-based Seegrid in Q3’16 for $12M. Seegrid develops vision guided vehicles (VGVs) as well as a fleet management platform.

In another example, DHL’s supply chain unit will use robots developed by startup Locus Robotics at its Tennessee life sciences facility. The robots will focus on picking and transporting items. DHL said this pilot project will “inform the potential for broader deployment across different parts of our business,” adding, “This is a natural evolution of our robotics program.”

There are still some challenges in warehouse automationStartups are beginning to address these.

Startups are beginning to address the challenges in robotic gripping and handling of delicate goods (considered to be some of the automation pain points). For instance, RightHand Robotics raised $8M in Q2’17 to develop piece-picking robots. Rethink Robotics, which focuses on the manufacturing sector, is also developing robots for logistics and material handling. It is backed by investors like CRV, Draper Fisher Jurvetson, and GE Ventures, and has raised $150M in total funding.

Professions at lower risk

Risk of automation is lower in unstructured or unpredictable work environments, as well as in industries involving high regulatory scrutiny. In some of the occupations below, there are also technological challenges to overcome.


E-commerce is a more immediate threat to in-store sales jobs than robots.

With name brand retail chains like Macy’s, Bebe, and Limited closing thousands of stores across the country, and rising competition from Amazon, retail salespersons are at a more immediate risk of job displacement from the rise of e-commerce than from in-store robots.

“The costs out of the gate for these robots are high, especially to run many of the tests. The use cases are still being understood… right now most retailers are trying to focus on their e-commerce integration with stores.” – Bill Lewis, consumer products EVP, Capegemini

Even though technologies like AI-based in-store advertising and self-checkout lines automate some aspects of a salesperson’s job, retail salespeople face a much more immediate risk of job loss due to the shift towards online shopping rather than the impact from in-store automation.

As consumers shift online, skills transfer may not follow a similar pattern for employees.

Startups are already developing AI-based chatbots, product recommendation algorithms, and targeted marketing analytics solutions for e-commerce. The new e-commerce “stack” is built around an AI core, from product recommendations to customer management and merchandising, leaving less room for job transfer from retail to e-commerce sales.

Some stores are beginning to test in-store robots.

In an effort to drive foot traffic and assist employees, however, some retail stores are turning to robots, testing the technology for inventory management and customer interactions.

The Lowe’s Innovation Lab partnered with startup Fellow Robots to build retail robots OSHBot and LoweBot. The lab is also experimenting with AR/VR solutions for customer assistance.

Target tested out Tally, a robot developed by Simbe Robotics, in San Francisco last year. California-based Bossa Nova Robotics is developing a retail robot to scan shelves and assist employees.

The adoption of in-store robots is still in its early stages, with no concrete measure yet of improved customer experience or cost-effectiveness for retailers.


Dynamic decision making in unpredictable environments make these patient-facing jobs hard to automate.

An Oxford University study published in 2013 estimated that nursing jobs have less than 1% probability of being automated. The high stakes in healthcare, unpredictable work environments, and the degree of emotional intelligence required combine to make the job of nurses and healthcare aides hard to automate.

Although research institutions in countries like Japan, which is home to a large elderly population, are focusing their R&D efforts on robots that can perform tasks like lifting and moving chronically ill patients, most startups are focused on support tasks like hospital logistics and virtual assistance.

Startups working on AI-based virtual assistants serve as middlemen between nurses and patients, reducing the need for frequent in-hospital visits. Consumer-focused robots and apps engage patients post-discharge in simple conversations. While startups like babylon assess a patient’s level of risk based on the response, others like integrate with biosensors and IoT devices to regularly monitor vitals.

Another area of focus for startups is support services like transportation and inter-hospital logistics, freeing up time for healthcare professionals by moving items for one room to another.

Pittsburgh-based Aethon (acquired in Q3’17 by ST Kinetics) has developed a robot called TUG for delivery and transportation of meals, medication, bed linens, and other goods in hospitals. Apart from strengthening its foothold in the United States, ST Kinetics plans to expand its Asia Pacific footprint through the acquisition. 


“Even putting aside the direct safety risks, truck driving is a grueling job that young people don’t really want to do. The average age of a commercial driver is 55 and rising every year, with projected driver shortages that will create yet more incentive to adopt driverless technology in the years to come .” –  Ryan Petersen, CEO of Flexport, LinkedIn Pulse

Fully autonomous vehicles are still in early stages of R&D.

The two biggest incentives for automating long-distance truck driving are road safety and driver shortage. The United States alone had a shortage of 48,000 truck drivers in 2015, according to the American Trucking Associations.

Although big tech companies and major auto giants like Apple, Baidu, Daimler, Ford, and Tesla are investing heavily in autonomous vehicle research, driverless trucks are still in early stages of testing, and on the whole the autonomous driving startup ecosystem is still in its early stages.

Companies are working on different aspects of automation, like sensors, perception systems, vision-based driver assistance, and high-accuracy maps, among other things. Two notable deals this year were Ford’s $1B investment in Argo AI, and Uber’s acquisition of self-driving truck company Otto.

Deals to startups specifically developing self-driving trucks (excluding driverless car startups like Zoox) started emerging in 2016.

California-based driverless truck startup, Starsky Robotics, raised seed funds from investors including smart money VC Data Collective, Unshackled Ventures, Y Combinator, and Trucks VC. Embark, which was backed by FundersClub in a seed round, later received a grant from The Thiel Foundation.

Even technologies like platooning require a human for initial/final legs.

Truck platooning has garnered interest from auto companies like Daimler and Volvo, the Department of Energy, and CVCs like Intel Capital and Nokia Growth Partners.

Although highway driving is considered easier to automate than in-city driving, initial/final legs in more congested areas will be more challenging, requiring a human driver. This is the case even with platooning, where a lead truck controls trucks behind it via Wi-Fi. While this technology has the potential to reduce manual labor, it faces regulatory challenges and still requires a human driver for non-highway driving.

Regulation is a point of friction slowing down automation.

Although trucking is thought to be at high risk of automation, this is unlikely to happen widely in the next decade due to regulatory challenges.

In addition to regulatory uncertainties, uncertain weather conditions and sharing the road with unpredictable human drivers are other challenges for fully autonomous cars/trucks.


The construction environment is unstructured and dynamic, requiring human supervision.

Parts of the process that are repetitive may be automated, but construction workers overall are at a low risk of displacement from robots.

Specifically, companies focused on mobile-first solutions have seen an uptick in deals. Some companies are also automating repetitive tasks like brick laying (such as Fastbrick Robotics, which was acquired by Australian holding company DMY Capital in 2015).

The demand for construction workers and a shortage of labor is giving rise to off-site solutions.

As shortage of construction laborers continues across the United States, some companies, like Blueprint Robotics, are focusing on assembly-line manufacturing solutions. The prefab housing sector has also seen some private market deals recently.

There is rising interest in using drones for site inspection to improve on-site worker safety.

Rising interest in inspection drones (over 40 deals went to inspection drone starups in 2016, compared to less than 25 the previous year) across industries for field survey and mapping functions has affected construction as well.

Construction and mining equipment manufacturer Caterpillar had invested in California-based Airware, which focuses on commercial drones and also is backed by investors like Intel Capital and Andreessen Horowitz. Airware’s solutions for the construction industry include topographic surveying, detecting breaklines, and computing stockpile volumes.

Other startups are working on both hardware and software solutions for inspection drones. While Kespry and Dronomy make their own drones, Skycatch develops analytics solutions for data collected using DJI drones.

Although there is renewed interest in 3D printing, it is still in nascent stages.

3D printing saw a resurgence of interest in 2016. Some of the recent news includes Apis Cor 3D-printing a house in 24 hours, and Google, IBM and Lowe’s investment in a metal 3D printing startup, Desktop Metal, with potential applications in a variety of industries.

But 3D printing in construction tech is still in its nascent stages. It also faces regulatory uncertainties — the materials used will go through significant regulatory scrutiny before commercial approval is granted.

White-collar jobs are also beginning to be automated

Startups developing what we call expertise automation and augmentation software (EaaS) will replace entry-level white collar jobs in areas like law (automatic document analysis and auditing), media (AI-based news curation and summaries), and even software development (early development phase and debugging).

Expertise Automation & Augmentation Software (EaaS) is focused on algorithms and technology that replicate human cognition. This software will augment and/or replace white-collar jobs — starting with low-level professional jobs. As with other disruptive trends, EaaS technology will become more sophisticated with time.


Artificial intelligence has huge potential to reduce time and improve efficiency in legal work. On the litigation side, natural language processing (text analytics) can summarize thousands of pages of legal documents within minutes — a task that might take a human counterpart several days to complete — while reducing the probability of error. As AI platforms become more efficient and commercialized, this will impact the fee structure of external law firms that charge by the hour.

Big multinational law firms are already preparing for the change AI will bring to the industry and capitalizing on it. For instance, Europe-based Pinsent Masons claims it has developed its own AI technology, called Term Frame, which has reportedly helped the firm in 7,000 matters ranging from dispute resolution to contract reviews.

Others are keeping tabs on the latest in tech through accelerator programs. For instance, NextLaw Labs, a wholly owned subsidiary of multinational law firm Dentons, invested in IBM Watson-powered AI legal tech startup ROSS Intelligence.

Legal tech AI startups saw about 7 deals last quarter. The top disclosed round was a $12M Series B round raised by Palo Alto-based Casetext, which is developing an AI-based legal research assistant, CARA. The round was backed by 8VC, Canvas Ventures, Red Sea Ventures, and Union Square Ventures.

Another startup, Israel-based LawGeex, raised a $7M Series A last quarter to use AI to automatically review business contracts. Smart money VC Floodgate seed-funded Text IQ, which is using natural language processing to help enterprise legal departments with investigations and document reviews.



Robo-advisors, or digital wealth managers/financial planners, have made the most progress towards fully-automating a conventional fintech business model. Private market investors have poured over $1.9B across 169 deals spanning 18 countries into robo-advisors since 2013.

Few other models within financial services have seen incumbent firms respond to an insurgent attack by launching competitive services as quickly. Looking at the wealth management market, it’s not hard to understand why. At risk is an estimated $36T that is projected to be passed from the Baby Boomers to millennials by 2061. Moreover, 70% of the non-retired population have no retirement savings, the Fed reports.

By automating the human advisor, robo-advisor startups have lower overhead, and in turn, have waged an industry pricing war by lowering fees and in some cases even eliminating them. Robo-advisors use a combination of algorithms to make risk-adjusted portfolio allocations and machine learning to learn from investor’s behavior to automatically tailor the portfolio when it swings outside of the prescribed recommendations. This is more cost efficient and in the long run could prove more profitable for the customers as compared to the traditional human management model.

The two earliest robo-advisors, Betterment and Wealthfront, are also the largest in terms of customer growth and assets under management. Combined, they manage approximately $17.5B in assets for over 535K client accounts, and have established themselves as household names.

While both are actively leveraging technology to further automate the wealth management profession, Wealthfront has been more actively moving away from the traditional human-advisor model. This year, Wealthfront launched a fully-automated financial planning service called Path, and a portfolio line of credit that streamlines the traditional bank loan process.

If robo-advisors continue to invest in building out their technology, by applying machine learning, the algorithm could learn to automatically adjust to a customer’s risk management thresholds throughout each life phase.


Although digital media deals dropped to the lowest number since Q2’12 last quarter, this year saw a $1B investment into China-based Toutiao, backed by CCB International and Sequoia Capital China. The startup, currently valued at $11B, uses artificial intelligence for personalized news recommendations, and is also reportedly developing an artificial news reporter.

Other startups in this space include Narrative Science, which develops a natural language generation tool called Quill, and Automated Insights, which was acquired in 2015 by Vista Equity Partners.


Early stage deals are emerging to startups focused on AI-based software testing, debugging, and basic frontend development.

One of the top rounds this year went to UK-based DiffBlue, which is developing AI to automate traditional coding tasks like bug fixing, custom code development, and translating code from one programming language to another. An Oxford University spinoff, it raised $22M in Series A from Goldman Sachs, Oxford Investment Consultants, and Oxford Sciences Innovation.

One of the earliest deals to startups using AI for software testing went to Applitool, which went on to raise $8M in Series B this year, backed by Smart Money VC Bessemer Venture Partners.

The image below shows recent deals to the space on the CB Insights platform (clients can track all AI deals by industry here).

What are the jobs of the future?

The scale of automation and progression in AI in recent years has created panic about a rapidly changing labor force.

Some industry experts and startup founders have been optimistic about the new jobs that will be created, enabling fewer people to do boring, dirty, or dangerous jobs.

However, what the jobs of the future will look like remains to be seen.

“A few years ago, Peter Lee, a vice president inside Microsoft Research, said that the cost of acquiring a top AI researcher was comparable to the cost of signing a quarterback in the NFL.” – Wired

Obviously if current trends are any indication, AI talent will continue to be in high demand. This was underscored recently by Chinese unicorn Toutiao (mentioned above), which is reportedly scouting top AI talent with $3M pay packages.

With big corporations like Google, Amazon, Apple, and Intel doubling down on their AI efforts, and top employees moving to competing companies or startups, there is a heated race to nab the crème-de-la-crème. The demand will continue to grow as AI is integrated into every industry.

But jobs in industries involving complex human interactions and high emotional intelligence, such as healthcare and education, will be least susceptible to automation.

Finally, as mundane jobs are automated, market competition for creative intelligence and the arts will increase. In-demand skills will include things like storytelling, strategic planning, and product design.


The advances in robotics — where AI software meets hardware — is taking automation beyond heavy industrial and manufacturing processes. This trend is already touching areas like physical security, transportation, cleaning services, warehouses, and restaurants.

In some occupations like trucking, technology and regulation have not caught up to the hype yet. But in others like restaurant services and commerce, the impact is already being felt.

Companies purely focused on AI software are removing the safety net from many white-collar jobs that were traditionally considered safe from automation. Startups are automating tasks in marketing, legal, HR, real estate, and financial services.

Retraining employees is a recurring theme. But with AI software now beginning to automate even white-collar jobs, it remains to be seen how many new jobs will be created, what they will be, and whether those who lose positions due to automation will be able to fill these new roles.

Gary Reber Comments:

This is the reality facing our society and the future for our children and grandchildren.

The choices for an economic system two failed system: capitalism, which should be properly called HOGGISM, due to the severe concentration of capital (non-human, such as IT) assets among a tiny already wealthy capital ownership class; and socialism, whereby the STATE is all-powerful and controlled by a tiny elite group of the wealthy.
The third alternative, which is called the JUST Third Way, ensures that EVERY child, woman and man is empowered to become an individual OWNER of wealth-creating, income-producing capital and to grow their ownership of productive capital assets (non-human, such as IT) simultaneously with the growth of the economy, using pure credit financial mechanisms such as insured, interest-free capital credit, repayable out of the future earnings of the capital assets formed and financed.
Support Monetary Justice at

Ralph Nader: How CEO Stock Buybacks Parasitize The Economy

On October 6, 2017, Ralph Nader writes on Evonomics:

The monster of economic waste—over $7 trillion of dictated stock buybacks since 2003 by the self-enriching CEOs of large corporations—started with a little noticed change in 1982 by the Securities and Exchange Commission (SEC) under President Ronald Reagan. That was when SEC Chairman John Shad, a former Wall Street CEO, redefined unlawful ‘stock manipulation’ to exclude stock buybacks.

Then after Clinton pushed through congress a $1 million cap on CEO pay that could be deductible, CEO compensation consultants wanted much of CEO pay to reflect the price of the company’s stock. The stock buyback mania was unleashed. Its core was not to benefit shareholders (other than perhaps hedge fund speculators) by improving the earnings per share ratio. Its real motivation was to increase CEO pay no matter how badly such burning out of shareholder dollars hurt the company, its workers and the overall pace of economic growth. In a massive conflict of interest between greedy top corporate executives and their own company, CEO-driven stock buybacks extract capital from corporations instead of contributing capital for corporate needs, as the capitalist theory would dictate.

Yes, due to the malicious, toady SEC “business judgement” rule, CEOs can take trillions of dollars away from productive pursuits without even having to ask the companies’ owners—the shareholders—for approval.

What could competent management have done with this treasure trove of shareholder money which came originally from consumer purchases? They could have invested more in research and development, in productive plant and equipment, in raising worker pay (and thereby consumer demand), in shoring up shaky pension fund reserves, or increasing dividends to shareholders.

The leading expert on this subject—economics professor William Lazonick of the University of Massachusetts—wrote a widely read article in 2013 in the Harvard Business Review titled “Profits Without Prosperity” documenting the intricate ways CEOs use buybacks to escalate their pay up to  300 to 500 times (averaging over $10,000 an hour plus lavish benefits) the average pay of their workers. This compared to only 30 times the average pay gap in 1978. This has led to increasing inequality and stagnant middle class wages.

To make matters worse, companies with excessive stock buybacks experience a declining market value. A study by Professor Robert Ayres and Executive Fellow Michael Olenick at INSEAD (September 2017) provided data about IBM, which since 2005 has spent $125 billion on buybacks while laying off large numbers of workers and investing only $69.9 billion in R&D. IBM is widely viewed as a declining company that has lost out to more nimble competitors in Silicon Valley.

The authors also cite General Electric, which in the same period spent $114.6 billion on its own stock only to see its stock price steadily decline in a bull market. In a review of 64 companies, including major retailers such as JC Penny and Macy’s, these firms spent more dollars in stock buybacks “than their businesses are currently worth in market value”!

On the other hand, Ayes and Olenick analyzed 269 companies that “repurchased stock valued at 2 percent or less of their current market value (including Facebook, Xcel Energy, Berkshire Hathaway and Amazon). They were strong market performers. The scholars concluded that “Buybacks are a way of disinvesting – we call it ‘committing corporate suicide’—in a way that rewards the “activists” (e.g. Hedge Funds) and executives, but hurts employees and pensioners.”

Presently, hordes of corporate lobbyists are descending on Washington to demand deregulation and tax cuts. Why, you ask them? In order to conserve corporate money for investing in economic growth, they assert. Really?! Why, then, are they turning around and wasting far more money on stock buybacks, which produce no tangible value? The answer is clear: uncontrolled executive greed!

By now you may be asking, why don’t the corporate bosses simply give more dividends to shareholders instead of buybacks, since a steady high dividend yield usually protects the price of the shares? Because these executives have far more of their compensation package in manipulated stock options and incentive payments than they own in stock.

Walmart in recent years has bought back over $50 billion of its shares – a move benefitting the Walton family’s wealth – while saying it could not afford to increase the meagre pay for over one million of their workers in the US. Last year the company bought back $8.3 billion of their stock which could have given their hard-pressed employees, many of whom are on welfare, a several thousand dollar raise.

The corporate giants are also demanding that Congress allow the repatriation of about $2.5 trillion stashed abroad without paying more than 5% tax. They say the money would be used to grow the economy and create jobs. Last time CEOs promised this result in 2004, Congress approved, and then was double-crossed. The companies spent the bulk on stock buybacks, their own pay raises and some dividend increases.

There are more shenanigans. With low interest rates that are deductible, companies actually borrow money to finance their stock buybacks. If the stock market tanks, these companies will have a self-created debt load to handle. A former Citigroup executive, Richard Parsons, has expressed worry about a “massively manipulated” stock market which “scares the crap” out of him.

Banks that pay you near zero interest on your savings announced on June 28, 2017 the biggest single buyback in history – a $92.8 billion extraction. Drug companies who say their sky-high drug prices are needed to fund R&D. But between 2006 and 2017, 18 drug company CEOs spent a combined staggering $516 billion on buybacks and dividends – more than their inflated claims of spending for R&D.

Mr. Olenick says “When managers can’t create value in the business other than buying their own stock, it seems like it’s time for a management change.”

Who’s going to do that? Shareholders stripped of inside power to control the company they own? No way. It will take Congressional hearings, a robust media focus, and the political clout of large pension and mutual funds to get the reforms under way.

When I asked Robert Monks, an author and longtime expert on corporate governance, about his reaction to CEOs heavy with stock buybacks, he replied that the management was either unimaginative, incompetent or avaricious – or all of these.

Essentially burning trillions of dollars for the hyper enrichment of a handful of radical corporate state supremacists wasn’t what classical capitalism was supposed to be about.

Ralph Nader: How CEO Stock Buybacks Parasitize the Economy



Study: Military Spending Ineffective For Creating Jobs

On September 29, 2017, the author of a study, Heidi Garrett-Peltier, is interviewed on the

Heidi Garrett-Peltier holds a Ph.D. in Economics from the University of Massachusetts, Amherst and works as an assistant research professor for Political Economy Research Institute (PERI). Her research focuses on the employment impacts of public and private investments, particularly in the realm of clean-energy programs. Heidi has written and contributed to a number of reports on the clean energy economy (see Recent publications, below). She has also written about the employment effects of defense spending with co-author Robert Pollin, consulted with the U.S. Department of Energy on federal energy programs and is an active member of the Center for Popular Economics.


Study: Military Spending Ineffective for Creating Jobs

SHARMINI PERIES: It’s the Real News Network. I’m Sharmini Peries coming to you from Baltimore. A new study by the Watson Institute at Brown University shows that defense spending is an inferior way to create jobs. The report, authored by Heidi Garrett-Peltier, compares how many jobs are created for each million dollars of public spending in different sectors.President Trump boasts a massive increase in military spending, and also promises to create jobs for Americans. Can the two things happen simultaneously? To discuss this question, I’m being joined by Heidi Garrett-Peltier, the author of the study that I mentioned. She is an Assistant Research Professor at the Political Economy Research Institute, PERI, at the University of Massachusetts, Amherst. She is a researcher in the impact of public and private investments on employment, especially investments in low-carbon economy. She authored the book, “Creating a Clean Energy Economy.” Heidi, I thank you so much for joining me today.

H. GARRETT-PELTIER: Thanks very much for having me, Sharmini.SHARMINI PERIES: Now Heidi, before we get into the nitty gritty of this study, let’s start off by giving us a sense of your general hypothesis here, and why you conducted this particular study in this economic climate.

H. GARRETT-PELTIER: Sure. We often hear the argument that military spending is good for jobs. And there are certainly lots of different sources of support for military spending. Military spending happens in just about every Congressional district, if not every single Congressional district across the U.S. So there’s been a lot of support for military spending. But one of the main arguments that we hear is that it’s good for job creation, and this argument has been around for decades. It used to be referred to as “military Keynesianism.”And so what we wanted to do was look at the question of how does public spending affect job creation? And if it’s true – and it is true that military spending creates jobs – how does that compare to other sectors? How does that compare to job creation in clean energy, or infrastructure, or education, or healthcare? So we’re not just saying “Does military spending create jobs?” It’s not a ‘yes’ or ‘no’ question. It’s what is the alternative? Is it the best way to create jobs? Could we be creating more jobs investing federal dollars in a different way? So that was really the overall theme that we wanted to look at. And the hypothesis was that some of the other sectors of the economy would actually create more jobs than the military.

SHARMINI PERIES: Now Heidi, during the Cold War, the U.S. spending on defense was even greater than today in terms of the ratio of spending to GDP. And the term “military Keynesianism” as you said, was coined by economists who argued that defense spending actually contributes to growth, which kept the U.S. ahead during Cold War, not just in terms of military power but also in terms of standard of living. What is your response to this?

H. GARRETT-PELTIER: What we should really be interested in is what is the trade off? Our federal budget comes from tax dollars, and people want to put their tax dollars to the best use possible. So if we’re looking at spending American tax dollars on something like the military, we want to know that that’s actually the best use of our tax dollars. So we can look at what are the trade-offs? What does it really cost to do this?

So one trade-off is if we’re investing, excuse me, if we’re spending on the military and we don’t have the money in the budget, we go into deficit spending. Then we’re taking on interest, and we’re paying interest on the loans that we need to take out for increased military spending. If we’re not doing that, then we’re taking money from another section of the budget, from other domestic spending in order to fund the military. So we are taking money from education or healthcare or infrastructure or emergency relief, which is particularly relevant right now. So we need to ask, is it worth paying the extra interest to take on this additional military spending? Or is it worth reducing spending in some other sector in order to support a greater military budget? Because those are the two choices we have.SHARMINI PERIES: Is there any military spending that’s good for the economy and for job creation? And I’m asking this because you were recently quoted in an article about the new Columbia class of nuclear submarines which cost $2.7 billion dollars each apparently, and the contract with the Navy for this was something like $5.1 billion dollars. But maybe there are other forms of spending that are more labor intensive, and are there such things that the military can do that it has a positive impact on the economy?H. GARRETT-PELTIER: Well, it’s true that within the military, there are very different types of spending. And actually one of the things that the military is doing that I find a very positive development is they’re becoming much more energy efficient and using much more renewable energy. So the military is the sector or the segment of the economy that uses the most energy of all. If you look at one institution using energy, the military is an extreme user of energy.

SHARMINI PERIES: And carbon emission contributor as well.

H. GARRETT-PELTIER: And, therefore, carbon emissions. Exactly. So you beat me to the punch. So they are using a lot of energy; they’re emitting a lot of carbon. And so one of the positive things that they’re doing is investing in energy efficiency and investing in renewable energy, and those are both ways to create jobs. In this case, you’re creating jobs in the military and you’re also expanding clean energy. So in that sense, it’s one of the best ways that we can spend money within the military sector.But if we look at outside the military sector, other industries, other sectors like healthcare and like education are much more labor intensive. So in the military, a lot of our spending goes not just to employ military personnel and civilians, but also to support payments for various capital, for equipment, for structures, for all kinds of capital investments. And if you compare that to something like education, where there are capital investments there, too, especially for educational buildings. But much more of the spending goes directly to labor; goes directly to employing administrators and teachers and the staff that work in schools, and that work throughout the supply chain, book publishers and bus drivers and so on. And so, it’s a much more labor intensive sector, and therefore, $1 million dollars goes a lot further in employing people than it does in the military.

SHARMINI PERIES: What about the issue of corruption and transparency as far as military spending is concerned? Civilian, public expenditure is normally regulated, but with the corporations in there and the military industrial complex, military spending is much more secretive. They don’t want to have their trade secrets, A, stolen by other nations, or they don’t want other companies to steal it. And the federal agencies that actually check, do the checks and balances in terms of audits and so on, is often kept out of the process because of this, the secrecy around the model of submarine or the airplane. And so all of this secrecy is justified. So how do we actually know whether $2.7 billion dollars for a submarine is a good price, and is it a good way to spend public dollars?

H. GARRETT-PELTIER: That’s an excellent question, and it is really difficult to track the money that goes through military, payments through military contracts. And this is one of the issues, is that a lot of the federal spending, a lot of our tax dollars are going to private companies in the form of contracts. And it becomes very difficult as you have a big contractor like Lockheed-Martin or Boeing, or the big corporations that are taking on these military contracts. Then they have subcontractors, and they have subcontractors, and it becomes really difficult to trace the money.And now, on top of that, you have the issue that you just raised, which is that there has to be some level of confidentiality for reasons of national security, and then much more of the money ends up being hidden. So we don’t know exactly how all of these dollars are being spent, but we know, for example, Lockheed-Martin gets upwards of 3 percent of the federal discretionary budget. So this is one company that’s getting a giant chunk of our tax dollars. And we can’t trace all of those dollars. We know the total amount that’s paid out in terms of the contract, but then we don’t know exactly where that goes afterwards. It becomes very difficult to trace.

SHARMINI PERIES: Now, one argument that you mentioned is that we are spending so much money on defense, arguing that this is for job creation, and that there are other sectors of the economy that are suffering, like education and healthcare and so on. How do we actually determine what is healthy, good defense spending and what isn’t?

H. GARRETT-PELTIER: You know, there are people who are working on exactly that question. So there have been a number of economists and others who have, in recent years, produced something called the “unified security budget.” And so, that looks at what do we actually need, concerned about national security. And we do think that there is a need for a defense budget. And the argument is not, in this case, to completely slash it to zero, but to look at what actually would keep us safe. And there are professionals working on these questions. How many aircraft carriers do we need? How much ammunition? How much would everything tally up to, and how does that compare to what we’re actually spending? And there are many types of weapons systems that are either redundant or that have had huge cost overruns that may never actually … vehicles that may never see the light of day, that may never be put into action, but millions and billions of dollars are spent on these. So there is a way to cut back the military budget by a significant percentage and still maintain the same level of security we have now, actually.But another question I think we need to think about is what does security mean in a broader sense? So our national security is not just the threat of attack from an outside force, but it’s also the attack from climate change. It’s the potential attack on our electrical grid that we’re more vulnerable to if we continue to have centralized fossil fuel power as opposed to more decentralized, renewable energy. It’s the vulnerability to our coastal cities that are, and to places like Puerto Rico that are just being ravaged by extreme weather events. And those extreme weather events are increasing due to climate change, due to increased moisture in the atmosphere. So all of those need to be, I believe, part of what we think of as our national security.

SHARMINI PERIES: And that’s a very good point because education, having a good healthcare system, having good housing for people, are also securing the population and their well-being. It’s a good way to look at some of these issues.Heidi, I thank you so much for joining us today.

H. GARRETT-PELTIER: Thanks very much for having me.

SHARMINI PERIES: And thank you for joining us here on the Real News Network.


How Economists Turned Corporations iIto Predators

On October 5, 2017, William Laconic writes on Institute for New Economic Thinking:

The Idea That Businesses Exist Solely to Enrich Shareholders Is Harmful Nonsense

In a new INET paperfeatured in the Financial Times, economist William Lazonick lays out a theory about how corporations can work for everyone – not just a few executives and Wall Streeters. He challenges a set of controversial ideas that became gospel in business schools and the mainstream media starting in the 1980s. He sat down with INET’s Lynn Parramore to discuss.Lynn Parramore: Since the 1980s, business schools have touted “agency theory,” a controversial set of ideas meant to explain how corporations best operate. Proponents say that you run a business with the goal of channeling money to shareholders instead of, say, creating great products or making any efforts at socially responsible actions such as taking account of climate change. Many now take this view as gospel, even though no less a business titan than Jack Welch, former CEO of GE, called the notion that a company should be run to maximize shareholder value “the dumbest idea in the world.” Why did Welch say that?

William Lazonick: Welch made that statement in a 2009 interview, just ahead of the news that GE had lost its S&P Triple-A rating in the midst of the financial crisis. He explained that, “shareholder value is a result, not a strategy” and that a company’s “main constituencies are your employees, your customers and your products.” During his tenure as GE CEO from 1981 to 2001, Welch had an obsession with increasing the company’s stock price and hitting quarterly earnings-per-share targets, but he also understood that revenues come when your company generates innovative products. He knew that the employees’ skills and efforts enable the company to develop those products and sell them.

If a publicly-listed corporation succeeds in creating innovative goods or services, then shareholders stand to gain from dividend payments if they hold shares or if they sell at a higher price. But where does the company’s value actually come from? It comes from employees who use their collective and cumulative learning to satisfy customers with great products. It follows that these employees are the ones who should be rewarded when the business is a success. We’ve become blinded to this simple, obvious logic.

LP: What have these academic theorists missed about how companies really operate and perform? How have their views impacted our economy and society?

WL: As I show in my new INET paper “Innovative Enterprise Solves the Agency Problem,” agency theorists don’t have a theory of innovative enterprise. That’s strange, since they are talking about how companies succeed.

They believe that to be efficient, business corporations should be run to “maximize shareholder value.” But as I have argued in another recent INET paper, public shareholders at a company like GE are not investors in the company’s productive capabilities.

LP: Wait, as a stockholder I’m not an investor in the company’s capabilities?

WL: When you buy shares of a stock, you are not creating value for the company — you’re just a saver who buys shares outstanding on the stock market for the sake of a yield on your financial portfolio. Public shareholders are value extractors, not value creators.

By touting public shareholders as a corporation’s value creators, agency theorists lay the groundwork for some very harmful activities. They legitimize “hedge fund activists,” for example. These are aggressive corporate predators who buy shares of a company on the stock market and then use the power bestowed upon them by the ill-conceived U.S. proxy voting system, endorsed by the Securities and Exchange Commission (SEC), to demand that the corporation inflate profits by cutting costs. That often means mass layoffs and depressed incomes for anybody who remains. In an industry like pharmaceuticals, the activists also press for extortionate product price increases. The higher profits tend to boost stock prices for the activists and other shareholders if they sell their shares on the market.

LP: So the hedge fund activists are extracting value from a corporation instead of creating it, and yet they are the ones who get enriched.

WL: Right. Agency theory aids and abets this value extraction by advocating, in the name of “maximizing shareholder value,” massive distributions to shareholders in the form of dividends for holding shares as well as stock buybacks that you hear about, which give manipulative boosts to stock prices. Activists get rich when they sell the shares. The people who created the value — the employees — often get poorer.

###p“downsize-and-distribute” —something that corporations have been doing since the 1980s, which has resulted in extreme concentration of income among the richest households and the erosion of middle-class employment opportunities.

LP: You’ve called stock buybacks — what happens when a company buys back its own shares from the marketplace, often to manipulate the stock price upwards— the “legalized looting of the U.S. business corporation.” What’s the problem with this practice?

WL: If you buy shares in Apple, for example, you can get a dividend for holding shares and, possibly, a capital gain when you sell the shares. Since 2012, when Apple made its first dividend payment since 1996, the company has shelled out $57.4 billion as dividends, equivalent to over 22 percent of net income. That’s fine. But the company has also spent $157.9 billion on stock buybacks, equal to 62 percent of net income.

###pCapital Return Program.” Yet the only time in its history that Apple ever raised funds on the public stock market was in 1980, when it collected $97 million in its initial public offering.  How can a corporation return capital to parties that never supplied it with capital? It’s a very misleading concept.

The vast majority of people who hold Apple’s publicly-listed shares have simply bought outstanding shares on the stock market. They have contributed nothing to Apple’s value-creating capabilities. That includes veteran corporate raider Carl Icahn, who raked in $2 billion by holding $3.6 billion in Apple shares for about 32 months, while using his influence to encourage Apple to do $80.3 billion in buybacks in 2014-2015, the largest repurchases ever. Over this period, Apple, the most cash-rich company in history, increased its debt by $47.6 billion to do buybacks so that it would not have to repatriate its offshore profits, sheltered from U.S. corporate taxes.

###popen letter to Apple CEO Tim Cook, there are many ways in which the company could have returned its profits to employees and taxpayers — the realvalue creators — that are consistent with an innovative business model. Instead, in doing massive buybacks, Apple’s board (which includes former Vice President Al Gore) has endorsed legalized looting. The SEC bears a lot of blame. It’s supposed to protect investors and make sure financial markets are free of manipulation. But back in 1982, the SEC bought into agency theory under Reagan and came up with a rule that gives corporate executives a “safe harbor” against charges of stock-price manipulation when they do billions of dollars of buybacks for the sole purpose of manipulating their company’s stock price.

LP: But don’t shareholders deserve some of the profits as part owners of the corporation? 

WL: Let’s say you buy stock in General Motors. You are just buying a share that is outstanding on the market. You are contributing nothing to the company. And you will only buy the shares because the stock market is highly liquid, enabling you to easily sell some or all of the shares at any moment that you so choose.

In contrast, people who work for General Motors supply skill and effort to generate the company’s innovative products. They are making productive contributions with expectations that, if the innovative strategy is successful, they will share in the gains — a bigger paycheck, employment security, a promotion. In providing their labor services, these employees are the real value creators whose economic futures are at risk.

LP: This is really different from what a lot of us have been taught to believe. An employee gets a paycheck for showing up at work — there’s your reward. When we take a job, we probably don’t expect management to see us as risk-takers entitled to share in the profits unless we’re pretty high up.

WL: If you work for a company, even if its innovative strategy is a big success, you run a big risk because under the current regime of “maximizing shareholder value” a group of hedge fund activists can suck the value that you’ve created right out, driving your company down and making you worse off and the company financially fragile. And they are not the only predators you have to deal with. Incentivized with huge amounts of stock-based pay, senior corporate executives will, and often do, extract value from the company for their own personal gain — at your expense. As Professor Jang-Sup Shin and I argue in a forthcoming book, senior executives often become value-extracting insiders. And they open the corporate coffers to hedge fund activists, the value-extracting outsiders. Large institutional investors can use their proxy votes to support corporate raids, acting as value-extracting enablers.

You put in your ideas, knowledge, time, and effort to make the company a huge success, and still you may get laid off or find your paycheck shrinking. The losers are not only the mass of corporate employees — if you’re a taxpayer, your money provides the business corporation with physical infrastructure, like roads and bridges, and human knowledge, like scientific discoveries, that it needs to innovate and profit. Senior corporate executives are constantly complaining that they need lower corporate taxes in order to compete, when what they really want is more cash to distribute to shareholders and boost stock prices. In that system, they win but the rest of us lose.

LP: Some academics say that hedge fund activism is great because it makes a company run better and produce higher profits. Others say, “No, Wall Streeters shouldn’t have more say than executives who know better how to run the company.” You say that both of these camps have got it wrong. How so?

WL: A company has to be run by executive insiders, and in order to produce innovation these executives have got to do three things:

First you need a resource-allocation strategy that, in the face of uncertainty, seeks to generate high-quality, low-cost products. Second, you need to implement that strategy through training, retaining, motivating, and rewarding employees, upon whom the development and utilization of the organization’s productive capabilities depend. Third, you have to mobilize and leverage the company’s cash flow to support the innovative strategy. But under the sway of the “maximizing shareholder value” idea, many senior corporate executives have been unwilling, and often unable, to perform these value-creating functions. Agency theorists have got it so backwards that they actually celebrate the virtues of “the value extracting CEO.” How strange is that?

Massive stock buybacks is where the incentives of corporate executives who extract value align with the interests of hedge fund activists who also want to suck value from a corporation. When they promote this kind of alliance, agency theorists have in effect served as academic agents of activist aggression. Lacking a theory of the value-creating firm, or what I call a “theory of innovative enterprise,” agency theorists cannot imagine what an executive who creates value actually does. They don’t see that it’s crucial to align executives’ interests with the value-creating investment requirements of the organizations over which they exercise strategic control. This intellectual deficit is not unique to agency theorists; it is inherent in their training in neoclassical economics.

LP: So if shareholders and executives are too often just looting companies to enrich themselves – “value extraction,” as you put it – and not caring about long-term success, who is in a better position to decide how to run them, where to allocate resources and so on?

WL: We need to redesign corporate-governance institutions to promote the interests of American households as workers and taxpayers. Because of technological, market, or competitive uncertainties, workers take the risk that the application of their skills and the expenditure of their efforts will be in vain. In financing investments in infrastructure and knowledge, taxpayers make productive capabilities available to business enterprises, but with no guaranteed return on those investments.

These stakeholders need to have representation on corporate boards of directors. Predators, including self-serving corporate executives and greed-driven shareholder activists, should certainly not have representation on corporate boards.

LP: Sounds like we’ve lost sight of what a business needs to do to be successful in the long run, and it’s costing everybody except a handful of senior executives, hedge fund managers, and Wall Street bankers. How would your “innovation theory” help companies run better and make for a healthier economy and society?

WL: Major corporations are key to the operation and performance of the economy. So we need a revolution in corporate governance to get us back on track to stable and equitable economic growth.  Besides changing board representation, I would change the incentives for top executives so that they are rewarded for allocating corporate resources to value creation. Senior executives should gain along with the rest of the organization when the corporation is successful in generating competitive products while sharing the gains with workers and taxpayers.

Innovation theory calls for changing the mindsets and skill sets of senior executives. That means transforming business education, including the replacement of agency theory with innovation theory. That also means changing the career paths through which corporate personnel can rise to positions of strategic control, so that leaders who create value get rewarded and those who extract it are disfavored. At the institutional level, it would be great to see the SEC, as the regulator of financial markets, take a giant step in supporting value creation by banning stock buybacks whose purpose it is to manipulate stock prices.

To get from here to there, we have to replace nonsense with common sense in our understanding of how business enterprises operate and perform.


Tax Cuts, Sold As Fuel For Growth, Widen Gap Between Rich And Poor

Arthur B. Laffer made the case in the 1970s that raising tax rates would reduce tax revenue by hampering growth. CreditGetty Images

On October 3, 2017, Eduardo Porter writes in The New York Times:

It is a little unsettling that the intellectual underpinning of tax policy in the United States today was jotted down on a napkin at the Two Continents Restaurant in Washington in December 1974.

That was when, legend has it, Arthur Laffer, a young economist at the University of Chicago, deployed the sketch over dinner to convince Dick Cheney and Donald H. Rumsfeld, aides to President Gerald R. Ford, that raising tax rates would reduce tax revenue by hampering growth.

It was another economy. The top marginal income tax rate was 70 percent then. For three decades, just over 10 percent of the nation’s income had gone to the 1 percent earning the most. Economists believed Simon Kuznets’ proposition that though market forces would widen inequality at early stages of growth, further economic development would ultimately lead it to narrow. The paramount policy challenge of the day was how to raise productivity.

To many economists, Mr. Laffer’s basic argument that high taxes would at some point discourage effort and reduce growth made sense: Why work or invest more if the government will keep almost all the fruits of your troubles? Even Arthur M. Okun, who had been President Lyndon B. Johnson’s chief economic adviser, was writing about leaky buckets to illustrate a trade-off between efficiency and equity: Taxing the rich to pay for programs for the poor could slow growth down, in part by reducing the incentive of the rich to earn more.

It is unclear whether reality ever followed Mr. Laffer’s prescription. “In 1986 we dropped the top income tax rate from 50 to 28 percent and the corporate tax rate from 46 to 34 percent,” said Bruce Bartlett, a policy adviser in the administration of President Ronald Reagan. “It’s hard to imagine a bigger increase in incentives than that, and I can’t remember any big boost to growth.”

Nonetheless, tax policy today is still being driven by his decades-old argument, devised in an economy that looks nothing like today’s.

Today, 1 percent of the population is taking in more than 20 percent of the nation’s income, twice as much as when the fateful dinner took place. Today’s top marginal tax rate, 39.6 percent, is a little over half what it was then.

Critically, how the pie is sliced has become as important as how to raise productivity further. Indeed, the questions are intertwined. Compelling new economic research suggests that in the economy in which we live, cutting taxes on the rich further won’t just fail to foster growth, it could even make the economic pie smaller.

The direct case against lower taxes on the rich was made most clearly a few years ago by the French economist Thomas Piketty — noted for his analysis of inequality trends over the centuries — and colleagues from the University of California, Berkeley, and Harvard University.

Looking at a set of industrialized countries from the 1970s until the years preceding the financial crisis, the economists found no meaningful correlation between cuts in top tax rates and economic growth. Big tax cutters like the United States did not grow faster than countries like Denmark, which kept taxes high. What did respond to lower taxes was inequality: The income share of the top 1 percent grew much more sharply among big tax cutters like the United States than in countries like France or Germany, where top tax rates changed little.

Cutting Taxes

The top marginal income tax rate has been cut sharply since the 1960s.

The findings contradicted the basic proposition on Mr. Laffer’s napkin. Indeed, they suggested an entirely different dynamic: Lower taxes did encourage executives and other top earners to raise their incomes, but not in ways that benefited the entire economy, like working and investing more. Instead, they were encouraged to manipulate the system in ways that, in fact, reduced the pie for everybody else, putting every decision at the service of increasing their pay.

Think about tax avoidance or outright evasion — which simply hides money from the Treasury, reducing the government’s ability to fund often critical programs, at no gain to the economy. But executives have been known to use other tricks — say, options backdating or earnings manipulation, or simply lobbying the compensation committee of their company’s board, or putting corporate strategy at the service of the current quarter’s earnings to give the share price a bump.

Taking into account all the ways top earners respond to taxation, Mr. Piketty and colleagues suggested that the optimal top tax rate on the Americans with the highest incomes — the rate raising the most money for the government — could exceed 80 percent with no harm to growth. Loopholes would have to be closed to prevent avoidance, but only the mega-rich would lose out. From an economic perspective, soaking the rich would, in fact, do good.

The argument that inequality matters little and redistribution mars economic success has always been suspect. In more unequal societies, the disadvantaged will have less access to many of the things that improve productivity, like education, health and the internet. Rising inequality can hamper consumption by weighing on the income of the middle class.

Douglas W. Elmendorf, former head of the Congressional Budget Office and now dean of the Kennedy School of Government at Harvard, once said that to assess the macroeconomic impact of cutting taxes and spending, it is indispensable to assess which taxes are cut and what spending is affected. “Major changes to benefits for lower-income people could have notable effects on the economy by altering labor supply, and those effects could be an important criterion in evaluating such changes,” he argued.

In more unequal societies, the rich have more power to distort policy making to channel more of the fruits of growth in their direction by, say, cutting taxes and government spending that might improve productivity and growth. Politics becomes more polarized. And it becomes more difficult to recover from economic shocks: Citizens in unequal societies are less likely to buy government promises that sacrifice today will lead to gains tomorrow.

“We have not paid enough attention to macro distributional linkages,” said Jonathan D. Ostry, deputy head of research at the International Monetary Fund, who has published groundbreaking research linking inequality and growth. “Even if you are only interested in the aggregate gains, you are forced to think about equity, because equity matters for the aggregate. The distribution might come back to bite you.”

Mr. Laffer may still be calling to cut tax rates, to provide an incentive for executives to earn even more. But tax policy today calls for a new napkin, one with a place for equity.

Lowering taxes on the wealthy does not lead to higher economic growth. It only makes the rich richer, and widens inequality. End of story. Period.

The End Of Capitalism Is Already Starting–If You Know Where To Look

On September 18, 2017, Eillie Anzilotti writes on  Fast Company:

These days, Richard Wolff is feeling pretty glad he stuck around teaching this long. Now in his 70s and lecturing at the New School University and having become, over the course of his nearly 50-year-long professorial career, one of America’s most prominent Marxist economists, Wolff is used to being fringe. That’s no longer a word that can apply to him, or to his ideas. Over the summer, inequality experts Jason Hickel and Martin Kirk launched a conversation on this site when they posed the theory that capitalism is at the core of the many crises gripping our world today. To Wolff, that’s not news. But it is new to him to see the same ideas he has taught for decades being met not with scorn or skepticism, but with genuine interest.

In 2011, the same year that Occupy Wall Street injected dissatisfaction with the financial system into the American mainstream, Wolff founded Democracy at Work, a nonprofit that advocates for worker cooperatives–a business structure in which the employees own the company, and share decision-making power over salaries, schedules, and where profits are directed. “If I had to pinpoint right now where the transition away from capitalism is happening in the United States, it’s in worker co-ops,” Wolff says. Though he’s been championing the cause of cooperatives–a radically democratic departure from the top-down capitalist business structure–for years, certain recent events, like the 2008 recession and the presidency of Donald Trump, poster boy for corrupt capitalism, have galvanized a distinctly anti-capitalist movement in the U.S.

“This is the beginning of the end of capitalism.” [Source Image: StudioM1/iStock]

“Americans are getting closer and closer to understanding that they live in an economic system that is not working for them, and will not work for their kids,” Wolff says. Growing awareness that wages have been unable to keep up with inflated costs of living have left younger generations particularly disillusioned with capitalism’s ability to support their livelihoods, Wolff says, and with CEOs out-earning employees by sometimes as much as 800 to 1, it makes sense that public interest should be swinging toward a workplace model that encapsulates shared ownership, consensus-based decision making, and democratized wages.Admittedly, Wolff acknowledges, a small boom in the number of worker-owned cooperatives in the U.S.–consecutive years of double-digit growth in co-ops since 2010 have brought the total up to around 350, employing around 5,000 people–does not exactly scream revolution. But perhaps that’s because historical precedents for alternatives to capitalism have conditioned us to expect its end to dramatic and cataclysmic.

But that might be mean we’re looking in the wrong places. “I don’t want people to think in terms of Russia and China,” Wolff says. In their pursuit of an alternative, Wolff says, those countries neglected to do the work of transition at the micro scale, instead initiating wide-sweeping reforms at the state level and leaving their populations in the lurch.

Instead, Wolff says, it’s instructive to look to the transition to capitalism, and understand that it’s the smaller waves and shifts in the way things are done that signal true change.

Before capitalism emerged in Europe, there was feudalism, a radically different system in which nothing–neither land nor labor–was for sale, and serfs orbited their feudal lord like ribbons tethered to a maypole. Feudalism’s inhumanity was different from capitalism’s: Instead of being unable to work and earn money to pay for rent and necessities, serfs were dependent on the lords for their livelihoods and their schedules and for a piece on land upon which to labor. Their stability was contingent on the lord’s generosity or lack thereof.

“The sheer beauty of this is that nothing fuels this movement more than capitalism’s own troubles, and the displeasure, disaffection, and anxiety it produces.” [Source Image: StudioM1/iStock]

Sometimes, serfs would get squeezed, Wolff says–maybe a serf who was permitted to work his own land three days a week was cut down to two, and had to work on the lord’s the rest of the time, struggling to feed his family. Those serfs would run away. They’d jet off into the forests around the manors, where they’d encounter other runaway serfs (this is the origin of Robin Hood). That group of runaways, who’d cut ties with the feudal system, would establish their own villages, called communes. Without the lord controlling how the former serfs used their land and their resources, those free workers set up a system of production and trade in the communes that would eventually evolve into modern capitalism.“The image of the transition from feudalism to capitalism was the French Revolution, and that was part of it,” Wolff says, “but it wasn’t the whole story. The actual transition was much slower, and not cataclysmic, and found in these serfs that ran away and set up something new.”

In the U.S., businesses converting to cooperative workplace models are the functional equivalent of those runaway serfs. Around 10 cities across the U.S. have, in recent years, launched initiatives specifically to support the development of worker co-ops, which have been especially beneficial in creating job and wage stability in low-income neighborhoods. Because workers are beholden to themselves and each other, rather than a CEO and a board of directors, the model parts ways with the capitalist structure and advances something that more closely resembles a true democratic system.

“This is the beginning of the end of capitalism,” Wolff says. “Whether these experiments–which is what we have to call them at this point–will congeal into a massive social transformation, I don’t know. But I do know that massive social transformations have never happened without this stage. This stage may not do it, but change won’t happen without it,” he adds. These subtle shifts away from capitalism are not just apparent in the development of more co-ops, Wolff says. Over the past year, he’s been called in to meet with CEOs at large financial firms, who seemed to Wolff to be steeling themselves for a dethroning. As CEOs continue to disproportionately outearn their employees, the call for a dismantling of the system has become loud enough that they seem to have no choice but to pay attention. While it’s a flimsy gesture, some have distributed their bonuses to their employees.

“The move toward co-ops and the change in consciousness I’ve witnessed in workplaces and among my students are the two mechanisms of transformation that are now underway globally, and I’d like to say–it’s more a wish than anything else–that it’s too late to stop them,” Wolff says. “And the sheer beauty of this is that nothing fuels this movement more than capitalism’s own troubles, and the displeasure, disaffection, and anxiety it produces.”

Of course, the thought currents and little blooms of democratic workplaces are not enough to engineer a new economic system. These developments are all happening outside of the political system; in the White House and in Congress, the presence of big capitalist businesses continues as strong asever. But the fact that local governments like New York City and Austin have launched incubator programs for worker-owned cooperatives indicates that they’re not incompatible with the current political system.

“The move toward co-ops and the change in consciousness I’ve witnessed in workplaces and among my students are the two mechanisms of transformation that are now underway globally.” [Source Image: StudioM1/iStock]

The thing that could transition them to a movement is solid, unified political thought underpinning each new development, each step away from capitalism. It’s not enough for all of these workplaces to democratize in isolation, or for conversations about the failures of capitalism to happen in a vacuum. If an alternative to capitalism is ever going to scale up, it will need to do so nationally, and with political support at the federal level. In the meantime, the democratic ethos of worker co-ops–which is, especially now, what’s driving their appeal–can be translated into many other parts of the prevailing economic system.Could it look something like inviting Medicare and Medicaid recipients into the legislating body that decides the future of healthcare in this country? Could it look something like involving women in the legal processes that determines what resources they can access to care for their own bodies? Something like a cooperativized Housing and Urban Development department that brings those people it aims to serve into the process of determining how best to do so?

Or what about developing a justice system that relies not on removing people from the formal economy via mass incarceration, but that emphasizes cooperative employment and job training at both points of re-entry and pre-incarceration? Kimberly Westcott, associate counsel in the New York-based Community Service Society, a 172-year-old anti-poverty organization, has begun a program through Democracy at Work to teach cooperative work within prisons. If the cooperatives that could form inside prisons could function just like those on the other side, are the walls necessary?

Neither capitalism (hoggism of productive capital by a tiny few) or socialism (a State’s elite owning the productive capital and control of the masses)  should be embraced. Instead a system that empower EVERY child woman and man to become a productive capital owner simultaneously with the formation of wealth-creating, income-producing capital project and their assets, using insured, interest-free pure capital credit, repayable out of the future earnings of the investments to grow our economy.


Joanne Molnar, 64, and husband Mark, 62, pictured on June 22 in the RV that has been their home for several years, managed a camping park in Trenton, Maine, for the summer season. (Linda Davidson/The Washington Post)

On September 30, 2017, Mary Jordan and Kevin Sullivan write in The Washington Post:

Richard Dever had swabbed the campground shower stalls and emptied 20 garbage cans, and now he climbed slowly onto a John Deere mower to cut a couple acres of grass.

Dever shifted gently in the tractor seat, a rubber cushion carefully positioned to ease the bursitis in his hip — a snapshot of the new reality of old age in America.

People are living longer, more expensive lives, often without much of a safety net. As a result, record numbers of Americans older than 65 are working — now nearly 1 in 5. That proportion has risen steadily over the past decade, and at a far faster rate than any other age group. Today, 9 million senior citizens work, compared with 4 million in 2000.

While some work by choice rather than need, millions of others are entering their golden years with alarmingly fragile finances. Fundamental changes in the U.S. retirement system have shifted responsibility for saving from the employer to the worker, exacerbating the nation’s rich-poor divide. Two recent recessions devastated personal savings. And at a time when 10,000 baby boomers are turning 65 every day, Social Security benefits have lost about a third of their purchasing power since 2000.

Joanne Molnar, 64, and husband Mark, 62, are part of a growing number of older Americans traveling the country in their RVs for seasonal jobs. (Linda Davidson/The Washington Post) Jeannie Dever, 72, and husband Richard, 74, are among a record number of Americans older than 65 who are still in the workforce — out of necessity. (Linda Davidson/The Washington Post)

Polls show that most older people are more worried about running out of money than dying.

“There is no part of the country where the majority of middle-class older workers have adequate retirement savings to maintain their standard of living in their retirement,” said Teresa Ghilarducci, a labor economist who specializes in retirement security. “People are coming into retirement with a lot more anxiety and a lot less buying power.”

As a result, many older workers are hitting the road as work campers — also called “workampers” — those who shed costly lifestyles, purchase RVs and travel the nation picking up seasonal jobs that typically offer hourly wages and few or no benefits.

Amazon’s “CamperForce” program hires thousands of these silver-haired migrant workers to box online orders during the Christmas rush. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.) Walmart, whose giant parking lots are famous for welcoming RV travelers, has hired elderly people as store greeters and cashiers. Websites such as the Workamper News list jobs as varied as ushering at NASCAR tracks in Florida, picking sugar beets in Minnesota and working as security guards in the Texas oil fields.

In Maine, which calls itself “Vacationland,” thousands of seniors are drawn each summer to the state’s rocky coastline and picturesque small towns, both as vacationers and seasonal workers. In Bar Harbor, one of the state’s most popular tourist destinations, well-to-do retirees come ashore from luxury cruise ships to dine on $30 lobsters and $13 glasses of sauvignon blanc — leaving tips for other senior citizens waiting on oceanfront tables, driving Oli’s Trolley buses or taking tickets for whale-watching tours.

The Devers have noticed this economic divide. They found their campground jobs online and drove here in May, with plans to stay until the season ends in October. On a recent day off, they took a bus tour near Bar Harbor and Acadia National Park, where the tour guide pointed out the oceanfront Rockefeller estate and Martha Stewart’s 12-bedroom mansion.

“The ones who go on these ritzy, ritzy cruises to all these islands in Maine, I don’t know how they got all that money. Maybe they were born into it,” said Jeannie, 72. “And then you see this poor little old retired person next door, who can hardly keep going. And he’s got his little trailer.”

On Election Day last November, the Devers expressed their frustration. For more than 50 years, they had supported mainstream candidates in both parties, casting their ballots for John F. Kennedy, Ronald Reagan, Bill Clinton and George W. Bush. This time, they concluded that the Democrat, Hillary Clinton, would be no help to them. And they found the Republican standard-bearer, Donald Trump, too “mouthy.”

So, for the first time in their lives, they cast protest votes, joining legions of disaffected voters whose aversion to Clinton helped propel Trump into the White House. Richard voted for Libertarian Gary Johnson. Jeannie left her presidential ballot blank.

“We are all talking about this, but not politicians. Helping people build a nest egg is not on their agenda,” Jeannie said. “We are the forgotten people.”

On their day off, Richard and Jeannie Dever wash their clothes at a laundry. They are living a new reality of old age in America: Millions have so little savings that they keep working to pay the bills. (Linda Davidson/The Washington Post)

‘This job is a blessing’

The Devers first hit the road in their 33-foot American Star RV when Jeannie turned 65. Since then, they have worked jobs in Wyoming, Pennsylvania and now Maine. In addition to their $10-an-hour paychecks, the couple receives $22,000 a year from Social Security, an amount that has barely budged while health-care and other costs have soared.

“If we didn’t work, our money would run out real quick,” Richard said.

On a recent Friday, the Devers met for lunch back at their RV, Richard’s plaid shirt and suspenders dusty from mowing the drought-dried grass. Jeannie had spent the morning working the front desk in the campground office, where she checks people in and sells bug spray, marshmallows and other camping essentials.

As usual, she had arrived a half-hour early for her 9 a.m. shift to make sure everything was tidy for the first customer. Full of cheer and wearing white sneakers, she shies from talking about her macular degeneration and arthritic knuckles. “This job is a blessing,” she said.

President Trump is one year younger than Jeannie and, she said, “has more money than we can even imagine.” She muses that he probably “will hand a lot down to his kids” — another generation of rich people who, Richard and Jeannie believe, tend to be born that way.

The Devers know how hard it is to make it on your own.

In 1960, when John F. Kennedy and Richard Nixon were running for president, Richard started repairing homes and Jeannie made root beer floats in a drugstore back home in southern Indiana, near the Kentucky border. Later, they ran a business that put vinyl siding on homes and a little start-up called Southwest Stuff that sold Western-themed knickknacks.

They raised two children and lived well enough but never had much extra cash to put away. After a lifetime of working, they have a small mobile home in Indiana, a couple of modest life insurance policies and $5,000 in savings.

The Devers are better off than many Americans. One in 5 have no savings, and millions retire with nothing in the bank. Nearly 30 percent of households headed by someone 55 or older have neither a pension nor any retirement savings, according to a 2015 report from the U.S. Government Accountability Office.

From the camper’s compact refrigerator, Jeannie pulled a tub of meatloaf she had cooked in her crockpot a couple of days earlier.

“Are you good with just a sandwich?” she called to Richard.

“Just a sandwich, thanks,” he said, emerging from the bedroom in a fresh plaid shirt, bought for $2 at Goodwill. His blue-striped suspenders dangled below his waistband.

Without a word, Jeannie leaned over and slipped them over his shoulders — a daily task that keeps getting harder for the man she married 55 years ago.

Mark Molnar cleans the restrooms at the campground he and his wife manage. After the Great Recession, they liquidated their assets, bought an RV and hit the road looking for work. (Linda Davidson/The Washington Post)

A Wall Street gold mine

While most Americans are unprepared for retirement, rich older people are doing better than ever. Among people older than 65, the wealthiest 20 percent own virtually all of the nation’s $25 trillion in retirement accounts, according to the Economic Policy Institute.

Employers have gradually shifted from traditional pensions, with guaranteed benefits for life, to 401(k) accounts that run out when the money has been spent. Those accounts work best for the wealthy, who not only have the extra cash to invest but also use 401(k)s to shelter their income from taxes while they are working.

People with little financial know-how often find 401(k)s confusing. Millions of people opt not to participate, or contribute too little, or take money out at the wrong time and are charged huge fees.

Even people who manage to save for retirement often face a grim calculation: Among people between 55 and 64 who have retirement accounts, the median value of those accounts is just over $120,000, according to the Federal Reserve. So people are forced to guess how long they might live and budget their money accordingly, knowing that one big health problem, or a year in a nursing home, could wipe it all out.

The system has been a gold mine for Wall Street. Brokerages and insurance companies that manage retirement accounts earned roughly $33 billion in fees last year, according to the Center for Retirement Research at Boston College.

Ted Benna, a retirement consultant who is credited with creating the modern 401(k), called those fees “outrageous.” Many people — especially those who need the money the most — don’t even know they are paying them, he said.

Compared with the old system of company pensions, the new retirement system does not serve the average American well, said Ghilarducci, the labor economist, who teaches at the New School in New York.

“It’s as if we moved from a system where everybody went to the dentist to a system where everybody now pulls their own teeth,” she said.

Photos of Mark and Joanne Molnar’s children and grandchildren adorn a wall in the couple’s camper. After finishing work this fall at the campground they manage in Trenton, Maine, they expect to look for work in Texas or Wisconsin. (Linda Davidson/The Washington Post)

‘The rich help the rich’

A few miles up the road from the Devers, Joanne Molnar, 64, and her husband, Mark, 62, live in their RV and work at another campground.

For 21 years, Joanne worked as a manager for a day-care company in Fairfield, Conn. She said she paid regularly into a 401(k) account that, at one point, was worth more than $40,000.

By the time she left the company in 2008, however, its value had fallen to $2,000.

Molnar said the company’s owner thought he was doing his 100 employees a favor by managing their retirement accounts. “But he didn’t know what he was doing,” she said. Instead of being angry with him, she’s furious with the 401(k) system.

“It stinks,” she said.

As Joanne’s retirement account was further battered by the Great Recession in 2008, the Molnars sold Mark’s share of his piano-restoration business and their home in Connecticut, which had lost value but kept attracting higher and higher property tax bills.

They bought a 25-foot RV for $13,000 and started looking for work near their three sons, one of whom lives near Bar Harbor, and their six grandchildren. After finishing at the Maine campground this fall, they plan to look for work in Texas or Wisconsin, near their other children.

Like the Devers, the Molnars say they are frustrated that the problems of older Americans do not seem to register in Washington.

“The little people are drowning, and nobody wants to talk about it,” Joanne said. “Us middle-class, or lower-class, people are just not part of anything politicians decide.”

Last year, the Molnars grew more optimistic when they heard Trump promising in campaign speeches to help the “forgotten people.” Like a majority of older voters, Joanne voted for Trump. She said she thought maybe a businessman, an outsider, would finally address the economic issues that matter to her.

But the Molnars said that with each passing week of the Trump presidency, they are growing less hopeful.

“We’ll see. I’m just getting a little worried now,” Joanne said. “I just think he’s not going to be helping the lower class as much as he thought he would.”

The recent battle to repeal Obamacare was “kind of scary,” she said, noting that Trump supported legislation that would have slashed Medicaid and left more people without government-subsidized insurance. Although the effort failed, Joanne and Mark remain nervous.

“The rich help the rich, and I’m starting to think that not enough will fall down to us,” Mark said, as he methodically bolted together one of 170 new picnic tables.

Mark signed up to begin collecting Social Security this summer. Even with those monthly checks, he figures he’ll have to work at least 10 more years.

“Forget the government. It’s got to be ‘We the People,’ ” he said. “We’re on our own. You have to fend for yourself.”

After a lifetime’s work, the Devers have a small mobile home in Indiana, $5,000 in savings and a couple of modest insurance policies. Still, they are better off than many other Americans: Millions retire with nothing in the bank. (Linda Davidson/The Washington Post)

‘It’s not fun getting old’

At the end of a long day at work, Richard and Jeannie Dever met back at their RV. After mowing the grass in the hot sun, Richard, who is just shy of his 75th birthday, was sweating under his baseball cap. He was tired.

“It’s not fun getting old,” he said.

Asked whether he was more worried about dying or running out of money, Richard thought about it, then said with a shrug, “I guess it’s a toss-up.”

Jeannie took off her sneakers and rested her swollen ankles. Richard recently cut back to 33 hours a week, but she was still working 40 hours, sometimes a few more.

A few days earlier, she had spent four hours cleaning a trailer where the guests had used a fire extinguisher to put out a small stove fire. She got down on the linoleum floor and lay on her stomach to reach the dust under the stove.

In the years ahead, Jeannie said, she hopes to find a job where she can sit down.

The Growing Danger Of Dynastic Wealth

A boy takes a picture of a car at an auto show of rare and luxury vehicles on Sept. 18, 2011 in Westport, Connecticut. (Photo by Spencer Platt/Getty Images)

On September 18, 2017, Robert Reich writes on Moyers & Company:

This post originally appeared at Robert Reich’s blog.

White House National Economic Council director Gary Cohn, former president of Goldman Sachs, said recently that “only morons pay the estate tax.”

I’m reminded of Donald Trump’s comment that he didn’t pay federal income taxes because he was “smart.” And billionaire Leona Helmsley’s “only the little people pay taxes.”

What Cohn was getting at is how easy it is nowadays for the wealthy to pass their fortunes to their children, tax-free.

The estate tax applies only to estates over $11 million per couple. And wealthy families stash away dollars above this into “dynastic” trust funds that escape additional taxes.

No wonder revenues from the estate tax have been dropping for years even as wealth has become concentrated in fewer hands. The tax now generates about $20 billion a year, which is less than 1 percent of federal revenues. And it applies to only about two out of every 1,000 people who die.

Now, Trump and Republican leaders are planning to cut or eliminate it altogether.

There’s another part of the tax code that Cohn might also have been referring to — capital gains taxes paid on the soaring values of the wealthy people’s stocks, bonds, mansions and works of art when they sell them.

If the wealthy hold on to these assets until they die, the tax code allows their heirs to inherit them without paying any of these capital gains taxes. According to the Congressional Budget Office, this loophole saves heirs $50 billion a year.

The estate and capital gains taxes were originally designed to prevent the growth of large dynasties in the US and to reduce inequality.

They’ve been failing to do that. The richest 1 tenth of 1 percent of Americans now owns almost as much wealth as the bottom 90 percent.

Many of today’s super rich never did a day’s work in their lives. Six out of the ten wealthiest Americans alive today are heirs to prominent fortunes. The Walmart heirs alone have more wealth than the bottom 42 percent of Americans combined.

Rich millennials will soon acquire even more of the nation’s wealth.

America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers expire, an estimated $30 trillion will go to their children over the next three decades.

Those children will be able to live off of the income these assets generate, and then leave the bulk of them — which in the intervening years will have grown far more valuable — to their own heirs, tax-free.

After a few generations of this, almost all of the nation’s wealth will be in the hands of a few thousand families.

Dynastic wealth runs counter to the ideal of America as a meritocracy. It makes a mockery of the notions that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

It puts economic power into the hands of a relative small number of people who have never worked, but whose investment decisions will have a significant effect on the nation’s future.

And it creates a self-perpetuating aristocracy that is antithetical to democracy.

The last time America faced anything comparable to the concentration of wealth we face now, occurred at the turn of the last century.

Then, President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” could destroy American democracy.

Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916 and the capital gains tax in 1922.

But since then, both have been eroded. As the rich have accumulated greater wealth, they have also amassed more political power, and they’ve used that political power to reduce their taxes.

Teddy Roosevelt, a Republican, helped create a movement against dynastic wealth. Trump and today’s congressional Republicans will not follow in his footsteps. I doubt even today’s Democrats would do so if they had a chance. Big money has become too powerful on both sides of the aisle.

But taxing big wealth is necessary if we’re ever to get our democracy back, and make our economy work for everyone rather than a privileged few.

Maybe Gary Cohn is correct that only morons pay the estate tax. But if he and his boss were smart and they cared about America’s future, they’d raises taxes on great wealth. Roosevelt’s fear of an American dynasty is more applicable today than ever before.

The Growing Danger of Dynastic Wealth


President Donald J. Trump Puts Americans First In Tax Relief

On September 27, 2017, President Donald J. Trump issue the following statement in reference to “America’s First Tax Relief Plan”:

“If we want to renew our prosperity, restore our opportunity, and reestablish our economic dominance – which is what we should be doing – then we need tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and, yes, pro-American.” – President Donald J. Trump

An America First Tax RELIEF PLAN: President Donald J. Trump, the House of Representatives Ways and Means Committee, and the Senate Finance Committee are proposing vital tax relief to strengthen the middle class, grow the economy, and unleash America’s economic comeback.

  • We are calling for a dramatic tax cut, which includes:
    • A larger zero tax bracket;
    • Lower tax rates for individuals, providing relief to Middle Class American families;
    • Lower small business tax rates, giving a boost to millions of American businesses and farms; and
    • Lower corporate tax rates, making American business more competitive.
  • Tax cuts, like those in President Trump’s unified framework, boost economic growth.
    • Since Vice President Pence’s 2013 tax cuts, as Governor of Indiana, unemployment in Indiana has been cut in half and more than 200,000 jobs have been created.
    • President Reagan’s 1986 corporate income tax cut contributed 3.3 percent to economic growth over ten years, according to the Tax Foundation.

A TAX CUT For WORKING AMERICANS: We are laying out a tax-relief framework that will unburden America’s Middle Class.

  • Double the standard deduction so that more income is taxed at zero percent.
    • The first $12,000 of income for an individual and $24,000 for a married couple will be tax-free.
  • Consolidate the seven existing tax brackets for taxable income to only three brackets: 12 percent, 25 percent, and 35 percent.
  • Increase and expand the Child Tax Credit to benefit more middle-income families and eliminate the marriage penalty.
  • Create a new $500 tax credit for those caring for an adult dependent or elderly loved one.

Simplify the tax code: We will simplify tax filing so Americans can file their returns on a single sheet of paper.

  • The vast majority of Americans will be able to file their taxes on a single sheet of paper.
    • American individuals and businesses spend more than 6 billion hours complying with the tax code, according to the National Taxpayer Advocate.
  • The plan repeals the Alternative Minimum Tax, which requires many taxpayers to do their taxes twice.
  • The plan ends the job killing “Death Tax.”

Lower The Crushing Business Tax Rates: We will cut tax rates for American business and make American business competitive again.

  • The plan will reduce the corporate tax rate to 20 percent.
    • The United States corporate income tax rate is the highest in the Organisation for Economic Co-operation and Development (OECD), and has been above the OECD average for almost 20 years.
    • The United States corporate income tax rate is more than 10 points higher than China’s, according to the Congressional Budget Office (CBO).
  • The plan will also reduce the top tax rate paid by sole proprietors, S corporations, and partnerships to 25 percent.
  • For the next five years, American businesses will be able to immediately write off the cost of their equipment and other capital investments.
  • Economists agree that America’s corporate tax rate harms America’s workers by keeping their wages down.
    • More than 70 percent of the corporate tax burden falls on American workers, according the CBO.

Bring Wealth Back: We are proposing an “American Model” that will bring back trillions of dollars held overseas and restore America’s competitive edge.

Profits that have accumulated offshore will be subject to a one-time low tax rate, thereby ending the tax incentive to keep those profits offshore.

To avoid paying high U.S. corporate taxes on foreign profits, American companies have often reinvested their money abroad instead of repatriating it to U.S. shores.

Companies hold an estimated $2.8 trillion in earnings offshore, according to Audit Analytics.

This plan will stop the “Offshoring Model,” which penalizes companies for incorporating in the United States.

The Growing Danger of Dynastic Wealth

• The tax cut proposal will eliminate the estate tax, which affects ONLY those estates worth OVER $5.49million!
• Reduces the top tax rate from 39.6% to 35%. This affects only the top 5% of Americans! Example: Someone like Trump, might make $100 million per year. In 1 year, this cuts $4.6 million out of Trump’s tax bill and moves it to the rest of us to pay. Is $4.6 million a lot of money? Well, the “average American” makes $51,000 per year, so, if they make that for 40 years, they will earn $2,040,000 IN THEIR LIFETIME, or, said another way, IN THEIR LIFETIME, they will earn 44% of Trump’s “self imposed” tax cut FOR ONE YEAR! So, yeah, it’s a lot of money!
• The tax rate for business owners who report on individual returns will see their rate drop from 39.6% down to 25%. Again, do some math. It’s HUGE for the already wealthy!
• The GOP proposal TOTALLY ELIMINATES the alternative minimum tax, (AMT), which as a rule affects those who earn between $200,000/yr and $1million/year. NOTE: In the one tRump tax return, (2005), that we all saw, if his AMT is eliminated, Trump saves, $31million, or, in 1 year, Trump would save an amount equal the earnings of 15 American LIFETIMES!!!!
So, it’s pretty obvious, when tRump says “I think there’s very little benefit for people of wealth,” his lips are moving, so, he’s lying again! Do you see why? 9/28/17