You'll Never Look At The "Wealthiest 1%" The Same Way

On March 29, 2014, Joe Wisenthal writes on Business Insider:

In recent years, as income and wealth inequality have grown as matters of concern, the term “1%” has become a popular way to connote the rise of a super-elite that has separated itself economically from the rest of society.

We’ve all seen the charts showing, in various ways, how much the 1% have seen their wealth grow, while everyone else’s has stagnated.

But talking about the 1% actually misses the real story.

New research from economists Emmanuel Saez and Gabriel Zucman (.pdf), via HouseOfDebt, shows that really it’s only the 0.1% who’ve seen their share of the wealth surge.

Here’s what happens if you decompose the % of total wealth held by the top 1% in the United States.

So basically, if you’re a poor schmo whose wealth is in the top 1% but not above the top 0.5%, you haven’t seen gains at all. And it’s mostly the same for people between 0.5% and 0.1%. It’s really only above that where the outsize gains have accrued. And really, it’s only the top 0.01% of the wealthiest individuals who have seen the ridiculous gains everyone talks about.

Check out the full presentation from Saez and Zucman at http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf

What always strikes me about the numerous articles on economic inequality and the “1%” is these articles consistently fail to diagnoise the inequality as a result concentrated ownership of wealth-creating, income-generating productive capital assets.  As far as the 0.1% are concerned they are the richest because they own the vast bulk of the productive capital wealth of the nation.

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

There are solutions that will empower the working man and woman to secure a second income, which will grow over time, without having “past savings” or equity or having to reduce their income from wages and salaries. The solutions are embodied in the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/;  Monetary Justice at http://capitalhomestead.org/page/monetary-justice; and the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

http://www.businessinsider.com/the-wealth-of-the-top-1-percent-decomposed-2014-3#ixzz2xWhHLHbM

Human Rights Amendment

Section 1

In all instances wherein the words “person,” persons,” and “people” appear in this constitution, such words shall be construed to define living human beings only.

Section 2

“Money” is defined only as legal tender for the purpose of settling all debts, public and private. Congress shall make no law recognizing the free flow of money as an expression of speech of any kind, or as an expression of any of the rights enumerated in this constitution.

Section 3

Congress shall have power to enforce this article and to regulate federal elections by appropriate legislation.

Notes:

Section 1 ends corporate and union personhood by removing the foundation for the Supreme Court ruling in Citizen’s United v FEC, namely that use of the word “person” in the 14th amendment applies to legal fictions (like corporations, unions, NGOs, etc), automatically triggering 1st amendment rights. (see First Nat. Bank of Boston v. Bellotti)

Section 2 places money back in its proper place — a form of currency, not a form of speech. (see Buckley v. Valeo)

Section 3 uses standard constitutional language to empower Congress to make law based on the new amendment with an added reaffirmation of Congress’ supremacy over the judiciary in the matter of electoral law, putting some rein on activist courts.

This is non-partisan, process-oriented language. The only clear losers are the wealthiest corporations, oversized special interest groups and bloated unions and we can all compromise on that. No matter your political stripe, nobody should have the power to drown out your voice. And you shouldn’t have to give money to every group that has a message you agree with to have any say in the process. Even if you agree with the wealthy and powerful today, there’s no guarantee that you’ll agree with them tomorrow. Karl Rove thought he had created permanent Republican majorities. That wasn’t long after Tip O’Neill thought the same thing on the Democratic side. Nothing is permanent.

I strongly believe this is the most effective and least constitutionally invasive approach as well as the most obviously non-partisan and marketable language to use in the debate. I signed the Move To Amend petition long before I wrote this version but after extensive research I came to the conclusion that all the proposals in Congress were deeply flawed and that even good proposals, like David Cobb’s, were being smeared as partisan because the language wasn’t as accessible as it could be. I like Move To Amend — I’m a co-founder of the NYC Affiliate — and I like David Cobb’s language. I’ve merely had the benefit of seeing the proposals that came before and corrected for their tactical miscues.

This isn’t a contest and I’m not trying to dumb down the Constitution. But the most important point specifically relates to the current crop of Congressional proposals and it’s this: the Constitution isn’t written for lawyers, it’s written for the people. The people have to be able to read the Constitution and understand, in simple terms, what their rights are, what the government’s powers are, and what privileges fall in between, for individuals, associations and the several States. Writing complicated law into an amendment is a bad idea for a myriad of reasons, not least of which is marketability. But to distance the people from their own document by filling it with convoluted language is not just structurally and politically wrong, it’s fundamentally undemocratic.

The Move To Amend language is a huge improvement on the proposals in Congress. The HRA is modeled on the Bill of Rights and written in plain English. It does nothing but unwind the case law that got us here. The call throughout the country is to “overturn Citizens United!” Well, here it is. This does exactly that, unwinding legal personhood to pre-Santa Clara and unwinding money-as-speech to pre-Buckley. But it leavesDartmouth intact, preserving all the contract and property rights reserved for “artificial” persons inherited from English Common Law. We don’t want to throw the proverbial baby out with the bathwater and neither the Move To Amend nor this version do that. That’s why each gets their own tab and the endorsement of The Amendment Gazette.

Please sign the Move To Amend petition.

And then please sign the HRA petition.

And if you know of or have a version that can improve upon either or both of these versions, please let us know in these tabs.

Thank you,

Paul Westlake, Proprietor

Co-Founder, NYC Affiliate, Move To Amend

Are Corporations People?

Are Corporations People?

“Corporate personhood” is an incomplete shorthand in the same way that “overturn Citizens United” doesn’t encompass the entirety of the problem of money dominating politics in America. When people from organizations like Move To Amend say corporate personhood, what they usually mean by “corporate” is all legal fictions, including corporations, non-profits, unions, NGOs, PACs, political parties, incorporated towns and cities, and all other forms of organization that are created in charters granted by government agencies. And what they usually mean by “personhood” are the Constitutional protections afforded to those legal fictions that the Founding Fathers had originally reserved exclusively for individual citizens (We the People). The distinction between “natural” and “artificial” personhood is what is often lost in the translation to English from the legal pig latin of jurisprudence.

After the American Revolution, our legal system was largely founded on British Common Law, which dates back to the creation of the Magna Carta and included an understanding that legal fictions, like the British East India Company, were “artificial persons” for purposes of the law. Artificial personhood allowed those entities to enter into and break contracts, to negotiate, to sue and be sued, collect fees, distribute wages and pay taxes to the crown. This did not grant those entities any rights. All the things an artificial person could do were considered “privileges” that could be revoked by the monarch (or Parliament) if the artificial person wasn’t living up to the requirements of the charter that brought it into being.

This basic structure of artificial personhood, as separate and distinct from the “natural” personhood that describes living human beings, was carried forward into American law and confirmed in the first Supreme Court ruling to acknowledge it, Dartmouth College v. Woodward, in 1819. It should be remembered that not all living human beings in America were considered “persons” at all, or at least in full, in the Constitution at that time. Some of the Founders wanted to exclude African-American slaves from personhood entirely, but others wanted the political power their numbers could afford in a representative democracy, so the three-fifths rule was incorporated in the U.S. Constitution as a compromise. And even free white women, while not enduring the indignity of slavery, were nonetheless considered “property” for all intents and purposes in the law. With barely 5% of the nation eligible to vote under state law, in accordance with the federalist construction of the original Constitution, and not many more eligible to even own property, the notion of “natural” personhood for artificial creations of the state would have been anathema to the Founding Fathers.

An important piece of the following statement by Thomas Jefferson, in a letter to George Logan on November 12, 1816, has been circulating on the web for a long time. There’s nothing wrong with clipping out the quote but the full letter is fascinating and worth a look in its original form. But you can get the full context with this much [emphasis added]:

“I do not believe that in the four administrations which have taken place, there has been a single instance of departure from good faith towards other nations. We may sometimes have mistaken our rights, or made an erroneous estimate of the actions of others, but no voluntary wrong can be imputed to us. In this respect England exhibits the most remarkable phenomenon in the universe in the contrast between the profligacy of its government and the probity of its citizens. And accordingly it is now exhibiting an example of the truth of the maxim that virtue and interest are inseparable. It ends, as might have been expected, in the ruin of its people, but this ruin will fall heaviest, as it ought to fall, on that hereditary aristocracy which has for generations been preparing the catastrophe. I hope we shall take warning from the example and crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.” ~Thomas Jefferson

Despite the best efforts of corporate owners and executives, including the earliest railroad magnates, this separation of natural and artificial personhood remained intact for the first hundred years of the U.S. Constitution’s existence. But so did slavery for most of that time and it was a difficult argument to make that artificial persons should have rights when entire classes of natural persons (blacks and women) were still considered property. It was only after slavery was abolished that the foundation was set for the rise of the corporation as “natural” person.

This came about as a result of poor wording in one of the post-Civil War (13th, 14th and 15th) amendments, which together were designed to abolish slavery and grant citizenship, and the right to vote, to African-Americans, including former slaves. The 14th Amendment, the linchpin to corporate personhood, should have been worded to specifically exclude artificial persons but neither the word “artificial” nor “natural” was used in the amendment at all. The critical first section reads:

“All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

One would think using the terms “born” and “naturalized” would be sufficient to convey that this section defines “natural” persons, but there’s just enough wiggle room between “citizen” and “person” to get away with defining corporations as persons. That failure to include the word “natural” in this first section of the Fourteenth Amendment provided a loophole that was exploited to grant increasing levels of “natural” personhood to corporations in a series of Supreme Court rulings over many decades. Whether that wasdone intentionally or not is inconsequential at this point. What is very consequential is its impact on history — the law, the economy and political power in the United States and around the world.

Corporations can now claim constitutional civil rights and do so on a regular basis. The Fourth Amendment is used to prevent OSHA from making surprise inspections of work sites to make sure workers don’t get injured or worse. The Fifth Amendment is used toprevent the government from enforcing product labeling standards. And those aren’t examples of legislation. That’s what happens in the courts. That’s how we got Citizens United, a case the Supreme Court turned into a sweeping First Amendment ruling even without any urging from the plaintiff. Corporate personhood lies at the heart of all of these cases and more. We the people don’t mind granting privileges and immunities to allow corporations to become financially powerful. We do mind them using those same privileges and immunities to accumulate political power and use it to write laws intended to enshrine their supremacy forever.

Abolishing corporate personhood is not about demolishing corporations or capitalism or anything as radical as a complete overhaul of our economic system. It’s simply putting the reins back on the artificial entities that the Supreme Court has allowed to run amok in our economy, politics and legal system for decades. Governments are our creations. Corporations are the governments’ creations. We cannot continue to allow the creations of our creations to have control over the destinies of the original creators — we the people. Enough is enough.

 

http://www.amendmentgazette.com/are-corporations-people/

$1 Trillion Student Loan Debt Widens US Wealth Gap

On March 27, 2014, Carolyn Thompson of the Associated Press writes:

Every month that Gregory Zbylut pays $1,300 toward his law school loans is another month of not qualifying for a decent mortgage.

Every payment toward their student loans is $900 Dr. Nida Degesys and her husband aren’t putting in their retirement savings account.

They believe they’ll eventually climb from debt and begin using their earnings to build assets rather than fill holes. But, like the roughly 37 million others in the U.S. saddled with $1 trillion in student debt, they may never catch up with wealthy peers who began life after college free from the burden.

The disparity, experts say, is contributing to the widening of the gap between rich and everyone else in the country.

“If you graduate with a B.A. or doctorate and you get the same job at the same place, you make the same amount of money,” said William Elliott III, director of the Assets and Education Initiative at the University of Kansas. “But that money will actually mean less to you in the sense of accumulating assets in the long term.”

Graduates who can immediately begin building equity in housing or stocks and bonds get more time to see their investments grow, while indebted graduates spend years paying principal and interest on loans. The standard student loan repayment schedule is 10 years but can be much longer.

The median 2009 net worth for a household without outstanding student debt was $117,700, nearly three times the $42,800 worth in a household with outstanding student debt, according to a report co-written by Elliott last November.

About 40 percent of households led by someone 35 or younger have student loan debt, a 2012 Pew Research Center analysis of government data found.

Allen Aston is one of the lucky ones, having landed a full academic and financial-need scholarship at Ohio State University. The 22-year-old software engineer from Columbus estimates it let him avoid about $100,000 in debt.

Without loans to repay, Aston is already contributing 6 percent of his salary to a retirement fund that is matched in part by his employer and doesn’t have the same financial concerns his friends do.

“I’m making the same money as them, but they have student loans they’re paying back that I don’t. So, it definitely seems noticeable,” he said.

At the other end of the spectrum is Zbylut, an accountant-turned-attorney in Glendale, Calif. He’s been chipping away at nearly $160,000 in student debt since graduating in 2005 from law school at Loyola University in Chicago. Now 48, the tax attorney estimates he could have $150,000 to $200,000 in a 401(k) had the money he’s paid toward loans gone there.

“I’m sitting here in traffic. I’ve got a Mercedes behind me and an Audi in front of me and I’m thinking, ‘What did they do that I didn’t do?'” Zbylut said by cellphone from his Chevrolet. He’s been turned down twice for the type of mortgage he needs to buy a home big enough for himself, the fiancee he would have married already if not for his debts and her 10-year-old son.

“I have more education and more degrees than my father, as does she than her parents, and yet our parents are better off than we are. What’s wrong with this picture?” he said.

Student debt is the only kind of household debt that rose through the Great Recession and now totals more than either credit card or auto loan debt, according to the Federal Reserve Bank of New York. Both the number of borrowers and amount borrowed ballooned by 70 percent from 2004 to 2012.

Of the nearly 20 million Americans who attend college each year, about 12 million borrow, according to the Almanac of Higher Education. Estimates show that the average four-year graduate accumulates $26,000 to $29,000 in loans, and some leave college with six figures worth of debt.

The increases have been driven in part by rising tuition, resulting from reduced state funding and costlier campus facilities and amenities. Compounding the problem has been a trend toward merit-based, rather than need-based, grants as institutions seek to attract the higher-achieving students who will boost their standings.

“Because there’s a strong correlation in this country between things like SAT scores or ACT scores and wealth or income, the (grant) money ends up going disproportionately to students from wealthier families” who tend to perform better on those tests, said Donald Heller, dean of the Michigan State University College of Education.

Those factors, along with stagnating family incomes and declining savings, have made student loans a much bigger part of funding higher education, Elliott said.

Harvard Business School’s Michael Norton wonders whether greater public awareness of the widening wealth gap in the United States would hasten policy change. Norton conducted a 2011 survey that found that people tend to think wealth is more equally distributed than it is.

But with elected officials from President Barack Obama on down now talking about the wealth gap as an urgent public problem, a more complete picture seems to be emerging, he said.

“Both parties are now saying, perhaps inequality has gotten to the point where it’s not fair when people don’t have a chance to rise, and we need to do something about it,” Norton said.

Targeting the soaring cost of higher education, Obama in August proposed the most sweeping changes to the federal student aid program in decades. His plan would link federal money to new college ratings and reward schools if they help low-income students, keep costs low and have large numbers of students earn degrees.

Lawmakers in Congress also are debating how to address the issue, including proposals to allow graduates with high-interest loans to refinance at lower rates.

The American Medical Student Association supports expanding the National Health Services Corps, which provides loan forgiveness in exchange for service in underserved areas.

Nida Degesys, AMSA’s president, graduated in May 2013 from Northeast Ohio Medical University with about $180,000 in loans. The amount has already swelled with interest to about $220,000.

“There were times where this would make me stay up at night,” Degesys said. “The principal alone is a problem, but the interest is staggering.”

Yet, as costly as medical school was, Degesys sees it as an investment in herself and her career, one she thinks will pay off with a higher earning potential.

College degrees can pay off. College graduates ages 25 to 32 working full time earn $45,500, about $17,500 more than their peers with just a high school diploma, according to a Pew Research Center analysis of census data.

Elliott says the country needs to re-think college financing options to bring debt down and graduation rates up.

“We can’t,” he said, “let debt hinder a whole generation of people from beginning to accumulate wealth soon after graduating college.”

We at the Center for Economic and Social Justice maintain that attending a university is an expense, not an “investment.”

We need to emphasize that financing education within a world in which the money system and economy is restructured according to the logic of binary economics and Capital Homesteading reforms, is fundamentally different from financing education in today’s unjust system of monopoly capitalism or socialism.

Underneath the analysis in this op-ed is the unaddressed question of whether interest-free money and credit should be created by the monetary system to provide for the otherwise worthy education and consumption needs of students.

The focus of binary economics is on increasing the productiveness of the non-human factors of production. In this way students and all members of society –– including educators and school administrators — can become owners of machines and other non-human inputs to the productive processes of society. This will enable students and the rest of society to earn capital incomes to supplement their incomes from other sources. Direct personal ownership of productive capital would help pay for the consumption needs of all members of society…from the bottom-up. Interest-free credit should not be used for consumption rather than liberating non-owning people through capital ownership from their continued dependency on their employer, the government and the private sector power elite who now control money and credit.

Education is a marketable good or service, a consumption item that students purchase. Consuming an education does not directly produce marketable services and direct incomes, except for educators and others supplying educational goods and services. Education is an expense for students, however profitable it may (or may not) be for teachers and administrators. Going to school costs money, it does not generate a profit; getting an education is not financially feasible capital by any stretch of the imagination.

The last few years have revealed as an outrageous lie the “conventional wisdom” that getting an education is an “investment.” Young people have been told that if they get a “good education,” they are virtually guaranteed a “good job.” What passes for “education” these days has become “job training for jobs that won’t be there,” as students discover upon entering today’s workforce.

Fiddling with interest rates on student loans is the equivalent of rearranging deck chairs on the Titanic. If the price of higher education and the resulting debt burden were not so great in the first place, there would be no problem with interest rates on them.

The easy availability of loans for students is itself a major part of the problem. Pumping money into education by providing financing to the “consumer” –– the student –– has increased the cost of education dramatically.

Assuming that a “good education” automatically means a “good job” creates a vicious circle. As a result, the cost of education has been spiraling out of control. Ironically, the myth that a “good education” will result in a “good job” has meant that the cost of education increases even faster during an economic downturn when demand increases, and even more money is made available, driving up the cost even more.

This could not possibly happen if being a student or getting an education were a genuine investment. The cost of forming capital is irrelevant as long as the capital generates sufficient income to cover its own cost and provide an adequate return to the owner.

The obvious conclusion is that because getting an education does not, in and of itself, generate wealth, it is therefore not a capital good by any standard. The use of pure interest-free credit to finance an education is therefore directly contrary to the most fundamental principles of binary economics.

This does not mean that anyone should be indifferent to the problem. If, as moral authorities through the ages have agreed, paying for someone’s education is a virtuous act, then private individuals or foundations can make interest-free loans, or even non-repayable grants to students –– as long as these are financed out of existing accumulations of savings. Most people agree that a well-educated citizenry is a benefit, albeit indirect, to the State. Given that, interest-free loans or non-repayable grants financed by a tax levy, can also be justified, but not money creation.

With full implementation of the proposed Capital Homestead Act, government vouchers could address the student loan problem but be gradually phased out. Under Capital Homesteading, the private sector would become more productive. This economic growth would be financed through interest-free credit used to purchase new, directly owned capital. Rising dividend incomes would enable students to pay for their own education. It would also provide supplementary capital incomes to substitute for the inflationary costs of salaries and benefits of teachers and school administrators at all levels of education under today’s economic system of monopoly capitalism. That’s why we try to concentrate our time and attention to advancing support for passage of the Capital Homestead Act, rather than expedients required under the current system.

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

NASA Models Predict Total Societal Collapse: “Irreversible”

On March 26, 2014, Mac Slavo writes on Freedom Outpost:

The end of the world as we know it is coming.

You’ve likely heard this before, especially from the growing number of voices in the alternative news and preparedness communities. Often dismissed as conspiracy theory or outright lunacy, there is a growing body of evidence that suggests these fringe thinkers may well be on to something.

Despite assurances from most political leaders, experts and researchers who argue that we live in a stable and sustainable world, a new study utilizing mathematical models developed by NASA’s Goddard Space Flight Center may confirm our worst fears.

According to the Socio Economic Synthesis Center, which led the study’s research team and was made up of well respected natural and social scientists from various U.S.-based universities, society as it exists today is decades, perhaps just years, from a complete collapse of our way of life.

Given economic strati cation, collapse is very difficult to avoid and requires major policy changes, including major reductions in inequality and population growth rates. Even in the absence of economic strati cation, collapse can still occur if depletion per capita is too high. However, collapse can be avoided and population can reach equilibrium if the per capita rate of depletion of nature is reduced to a sustainable level, and if resources are distributed in a reasonably equitable fashion. (SESC via Steve Quayle)

The study cites scores of historical examples of civilization collapse dating back thousands of years. Given the facts it is clear that humanity’s long sought after Utopian society is a goal that is simply unachievable. Every five hundred years or so, the whole system simply falls apart.

There are widespread concerns that current trends in population and resource-use are unsustainable, but the possibilities of an overshoot and collapse remain unclear and controversial.

How real is the possibility of a societal collapse?

Can complex, advanced civilizations really collapse?

It is common to portray human history as a relentless and inevitable trend toward greater levels of social complexity, political organization, and economic specialization, with the development of more complex and capable technologies supporting ever-growing population, all sustained by the mobilization of ever-increasing quantities of material, energy, and information. Yet this is not inevitable.

In fact, cases where this seemingly near-universal, long-term trend has been severely disrupted by a precipitous collapse often lasting centuries have been quite common.

This brings up the question of whether modern civilization is similarly susceptible. It may seem reasonable to believe that modern civilization, armed with its greater technological capacity, scientific knowledge, and energy resources, will be able to survive and endure whatever crises historical societies succumbed to.

But the brief overview of collapses demonstrates not only the ubiquity of the phenomenon, but also the extent to which advanced, complex, and powerful societies are susceptible to collapse.

In short, the mathematical models utilized to determine the results of the study indicate that there are two key causes for what the authors call an “irreversible” collapse.

First, with the earth’s population now over 7 billion people our civilization is burning through resources faster than they can be replenished, and the burden of paid “non-workers” (i.e. those who are given resources for performing no actual function in society) leads to a complete break down in the system.

We can see how an irreversible Type-N (full) collapse of Population, Nature, and Wealth can occur due to over-depletion of natural resources as a result of high depletion per capita.

Workers and Non-Workers with the same level of consumption, i.e., with no economic strati cation. The Non-Workers in these scenarios could represent a range of societal roles from students, retirees, and disabled people, to intellectuals, managers, and other non-productive sectors. In this case, the Workers have to deplete enough of Nature to support both the Non-Workers and themselves.

Second, and this may come as no surprise, “elite” members of society are accumulating whatever available resources there are in an effort to maintain control over the “commoners.”

The Elite population starts growing significantly… hence depleting the Wealth and causing the system to collapse.

Under this scenario, the system collapses due to worker scarcity even though natural resources are still abundant, but because the depletion rate is optimal, it takes more than 400 years after the Wealth reaches a maximum for the society to collapse.

In this example, Commoners die out first and Elites disappear later. This scenario shows that in a society that is otherwise sustainable, the highly unequal consumption of elites will still cause a collapse. This scenario is an example of a Type-L collapse in which both Population and Wealth collapse but Nature recovers.

The Elites eventually consume too much, resulting in a famine among Commoners that eventually causes the collapse of society. It is important to note that this Type-L collapse is due to an inequality-induced famine that causes a loss of workers, rather than a collapse of Nature. Despite appearing initially to be the same as the sustainable optimal solution obtained in the absence of Elites, economic strati cation changes the fi nal result: Elites’ consumption keeps growing until the society collapses. The Mayan collapse in which population never recovered even though nature did recover is an example of a Type-L collapse

There are several other scenarios outlined in the study, but the above two are seemingly the ones that may be responsible for the coming collapse of our own civilization.

In America, nearly 50% of the population produces nothing, yet receives payment in the form of money, goods and services. This takes resources out of the hands of those who actually produce these resources.

Furthermore, it should be obvious that elite members of society simply take what they want through force, whether by taxation or criminal activity (as defined by natural law), putting even more strain on the system.

Over time, the debt builds and pulls forward wealth from generations ahead, resources are depleted, and costs begin to reach levels that are simply unsustainable for everyone, including the elites who attempt to amass as much as they can.

In the end, we all suffer the same fate.

According to this and other studies, like one recently published by the UK Government Office of Science and entitled A Perfect Storm of Global Events, we are very quickly approaching the breaking point. Over the next fifteen years, it is predicted that the strain could become so burdensome on society that the system will crack and eventually break down.

The result will be famine, war, and what some refer to as a “die off.” This will affect all segments of society.

Naturally, there will be those who survive, and it will likely be the people who are able to develop their own sustainable environments on a personal, familial or communal level. These people may have taken steps to not only prepare for long-term crises, but to develop sustainable practices that will allow them to produce their own food and energy.

The mathematics being cited here have been seen time and again in other studies, and they don’t bode well for human civilization as we know it today.

With seven billion people on the planet, a massively unproductive non-workforce, and the greed of the elite, it is only a matter of time before something breaks and there is a real possibility that our civilization will not be able to survive it.

The scary version? According to these studies, the consequences will be felt within most of our lifetimes.

This article is based on the presumption that continuing the suicidal mechanisms of “prosperity in the “consumer economy,” concentrated ownership of capital assets and resources, and out-of-control population growth will result in the planet being thoroughly destroyed along with the collapse of civilization.

This scarino is one that I have worked to achieve solutions my entire adult life.  My colleagues and I at the Center for Economic and Social Justice (CESJ.org) have been addressing this prediction the late 1950’s.  Over the course of several decades we have developed solutions to this scary proposition. Indeed it will become increasingly scary if we fail to reform the system. The reforms we have developed on what the Agenda of The JUST Third Way Movement is rooted in. See http://foreconomicjustice.org/?p=5797, Monetary Justice at http://capitalhomestead.org/page/monetary-justice, and the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm for solutions.

We can reserve this destructive trend and put our nation on a path to prosperity, opportunity and economic justice, while preserving, sustaining and enhancing the physical environment and world in which we live.

http://freedomoutpost.com/2014/03/nasa-models-predict-total-societal-collapse-irreversible/

 

The New Billionaire Political Bosses

NewBillionairePoliticalForce032614

On March 26, 2014, Robert Reich writes on Nation Of Change:

Charles and David Koch should not be blamed for having more wealth than the bottom 40 percent of Americans put together. Nor should they be condemned for their petrochemical empire. As far as I know, they’ve played by the rules and obeyed the laws.

They’re also entitled to their own right-wing political views. It’s a free country.

But in using their vast wealth to change those rules and laws in order to fit their political views, the Koch brothers are undermining our democracy. That’s a betrayal of the most precious thing Americans share.

The Kochs exemplify a new reality that strikes at the heart of America. The vast wealth that has accumulated at the top of the American economy is not itself the problem. The problem is that political power tends to rise to where the money is. And this combination of great wealth with political power leads to greater and greater accumulations and concentrations of both — tilting the playing field in favor of the Kochs and their ilk, and against the rest of us.

America is not yet an oligarchy, but that’s where the Koch’s and a few other billionaires are taking us.

American democracy used to depend on political parties that more or less represented most of us. Political scientists of the 1950s and 1960s marveled at American “pluralism,” by which they meant the capacities of parties and other membership groups to reflect the preferences of the vast majority of citizens.

Then around a quarter century ago, as income and wealth began concentrating at the top, the Republican and Democratic Parties started to morph into mechanisms for extracting money, mostly from wealthy people.

Finally, after the Supreme Court’s “Citizen’s United” decision in 2010, billionaires began creating their own political mechanisms, separate from the political parties. They started providing big money directly to political candidates of their choice, and creating their own media campaigns to sway public opinion toward their own views.

So far in the 2014 election cycle, “Americans for Prosperity,” the Koch brother’s political front group, has aired more than 17,000 broadcast TV commercials, compared with only 2,100 aired by Republican Party groups.

“Americans for Prosperity” has also been outspending top Democratic super PACs in nearly all of the Senate races Republicans are targeting this year. In seven of the nine races the difference in total spending is at least two-to-one and Democratic super PACs have had virtually no air presence in five of the nine states.

The Kochs have spawned several imitators. Through the end of February, four of the top five contributors to 2014 super-PACs are now giving money to political operations they themselves created, according to the Center for Responsive Politics.

For example, billionaire TD Ameritrade founder Joe Ricketts and his son, Todd, co-owner of the Chicago Cubs, have their own $25 million political operation called “Ending Spending.” The group is now investing heavily in TV ads against Republican Representative Walter Jones in a North Carolina primary (they blame Jones for too often voting with Obama).

Their ad attacking Democratic New Hampshire Senator Jeanne Shaheen for supporting Obama’s health-care law has become a template for similar ads funded by the Koch’s “Americans for Prosperity” in Senate races across the country.

When billionaires supplant political parties, candidates are beholden directly to the billionaires. And if and when those candidates win election, the billionaires will be completely in charge.

At this very moment, Casino magnate Sheldon Adelson (worth an estimated $37.9 billion) is busy interviewing potential Republican candidates whom he might fund, in what’s being called the “Sheldon Primary.”

“Certainly the ‘Sheldon Primary’ is an important primary for any Republican running for president,” says Ari Fleischer, former White House press secretary under President George W. Bush. “It goes without saying that anybody running for the Republican nomination would want to have Sheldon at his side.”

The new billionaire political bosses aren’t limited to Republicans. Democratic-leaning billionaires Tom Steyer, a former hedge-fund manager, and former New York Mayor Michael Bloomberg, have also created their own political groups. But even if the two sides were equal, billionaires squaring off against each other isn’t remotely a democracy.

In his much-talked-about new book, “Capital in the Twenty-First Century,” economist Thomas Piketty explains why the rich have become steadily richer while the share of national income going to wages continues to drop. He shows that when wealth is concentrated in relatively few hands, and the income generated by that wealth grows more rapidly than the overall economy – as has been the case in the United States and many other advanced economies for years – the richest receive almost all the income growth.

Logically, this leads to greater and greater concentrations of income and wealth in the future – dynastic fortunes that are handed down from generation to generation, as they were prior to the twentieth century in much of the world.

The trend was reversed temporarily in the twentieth century by the Great Depression, two terrible wars, the development of the modern welfare state, and strong labor unions. But Piketty is justifiably concerned about the future.

A new gilded age is starting to look a lot like the old one. The only way to stop this is through concerted political action. Yet the only large-scale political action we’re witnessing is that of Charles and David Koch, and their billionaire imitators.

Power always follows property ownership! If we want a true just democracy and economy then we MUST institute economic policies that broaden individual private sector ownership of productive capital assets and NEVER allow for its ownership to be concentrated among a tiny minority who seek to influence and control politicians to serve their economic interests.

Democratic capital ownership, or what could be termed economic personalism, must be founded on the principal that economic power has to be universally distributed amongst individual citizens and never allowed to concentrate.

Democratizing economic power by broadening productive capital ownership will return us to the pristine innocence and economic power diffusion we had in a pre-industrial society where labor was the principal factor in the creation of wealth.

Real physical productive capital ia producing power and earning power through ownership of the non-human factor of production.

http://www.nationofchange.org/new-billionaire-political-bosses-1395842848

5 Reasons To Consider A Basic Income For All Americans

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On March 23, 2014, Lynn Parramore writes on Nation Of Change:

All over the world, people are talking guaranteeing basic incomes for citizens as a viable policy.

Half of all Canadians want it. The Swiss have had a referendum on it. The American media is all over it: The New York Times’ Annie Lowrey considered basic income as an answer to an economy that leaves too many people behind, while Matt Bruenig and Elizabeth Stoker of the Atlantic wrote about it as a way to reduce poverty.

The idea is not new: In his final book, Martin Luther King Jr. suggested that guaranteeing people money without requiring them to do anything in exchange was a good way for Americans to share in prosperity. In the 1960s and early 1970s, many in the U.S. gave the idea serious consideration. Even Richard Nixon supported a version of it. But by 1980, the political tide shifted to the right and politicians moved their talking points to unfettered markets and individual gain from sharing the wealth and evening the playing field.

Advocates say it’s an idea whose time has finally come. In a world of chronic job insecurity, stagnant wages, boom-and-bust cycles that wipe out ordinary people through no fault of their own, and shredded social safety nets, proponents warn that we have to come up with a way to make sure people can survive regardless of work status or economic conditions. Here are five reasons they give as to why a guaranteed basic income might just be the answer.

1. It would help fight poverty: America is the richest country in the world, yet widespread poverty continues to afflict us. Social Security has arguably been the most successful program for reducing poverty in American history, dramatically cutting poverty among the elderly and keeping tens of millions above the poverty threshold. Why not expand it to all?

Matt Bruenig calculated that by giving everybody a mere $3,000 a year, including children (who would receive the money through their parents), we could potentially cut poverty in half. The program would be simple: you get it no matter how much money you make, which would prevent poor people from having to worry about losing the benefit. With everybody in it together, you get a much larger base of political support (one of the reasons means-testing has always been a back-door way of killing Social Security— it reduces support).

 

In the 1970s, the small Canadian town of Dauphin ran an experiment through a social policy called “Mincome.” Everybody in the town was allowed to get a minimum cash benefit during the duration of the program. Poverty was eliminated, because people living below the poverty line saw their income boosted through monthly checks. But the results were about more than an official line marking the poverty threshold. Mincome positively impacted the horrible conditions associated with the cycle of poverty. When people had a basic income, they were able to better care for their families, stay healthy and improve their education — all the things that help people stay out of poverty in the future.

2. It could be good for the economy: A basic guaranteed income has the potential to positively impact the economy in several ways, which is why economists from John Kenneth Galbraith to Milton Friedman have advocated it.

For one thing, it could help solve the problem of demand. The great driver of the economy in a capitalist system is something economists call “aggregate demand.” The Econ 101 lesson is simple: when ordinary people have money in their pockets, they spend it on goods and services, which in turn allows businesses to thrive because they are able to invest and to hire more people. Proponents argue that a basic guaranteed income would increase demand, which would help the economy to prosper.

But wait, wouldn’t people get lazy if they had a basic income? One of the things the Mincome researchers wanted to know was whether a guaranteed basic income would cause people to stop working. Despite all the dire predictions that had circulated in academic literature before the experiment, the Mincome effect on number of hours worked was actually quite small — hours dropped 1 percent for men, 3 percent for married women and 5 percent for unmarried women.

The decrease in hours was mostly the result of people taking the time to raise newborns, care for family members, and pursue their education — people did not cut back on work just to loaf around. In addition to activities which would serve as economic investments for the future, the experiment also resulted in things like fewer hospital visits and illnesses, all of which reduce public health costs.

Many argue that a guaranteed basic income is also potentially good for entrepreneurship, making it easier for people to start a small business or switch careers.

3. It could have many benefits to society: Clearly, we want policies that help us create a more stable society where more people can reach their potential and fewer people resort to crime and violence. Advocates say a guaranteed basic income does just that.

Researchers found that during the Mincome years, more people in Dauphin finished high school, more adults pursued education, and students achieved higher test scores. As noted, people got healthier, too: Fewer people visited the hospital, mental illness decreased, and the number of work-related injuries went down. Plus, social ills like domestic abuse dropped.

As a recession hit and the center-left politics of the 1970s shifted rightward in Canada, interest in the Mincome experiment waned. However, Canadian economic researcher Evylen Forget notes that most people who participated in Mincome wish the program had continued, citing benefits like increased opportunity to pursue an education.

Candadians are now reviving the idea, many arguing that such programs would actually encourage people to work because they would eliminate welfare provisions that penalize the poor who take very low-paying or part-time jobs. In Brazil, advocates have pointed outthat a basic guaranteed income could help guard against such scourges as child labor, while Swiss activists make the case that it would help people do more meaningful work, making for happier and better workers.

Philippe Van Parijs, a Belgian philosopher, argues that a basic income is a powerful tool for social justice, allowing everyone, no matter what their circumstances, the possibility to pursue their conception of a good life. He notes that a guaranteed basic income could address some of the issues associated with sexist divisions of labor in which women are expected to do more of unpaid, care-giving work in our society.

4. It might be more efficient than present systems: In the current patchwork of systems confronting poverty, like welfare, food stamps and vouchers, people can fall through the cracks. A guaranteed income could help solve problems caused by rules and restrictions that leave some without subsistence income when they need it.

It’s not just liberals and progressives who like the sound of a simple basic guaranteed income. Something streamlined appeals to conservatives who like versions that could replace existing tax credits and social assistance programs — though it’s important to note that most advocates don’t propose it as a full substitute for existing programs. The American Enterprise Institute’s Charles Murray points out that a streamlined system would obviate the need for people to fill out multiple forms and visit myriad offices to receive benefits. (In his book In Our Hands: A Plan to Replace the Welfare State, Murray suggested an income of $10,000 a year to anyone who was American, over 21 and out of jail.)

5. Let’s not forget simple human dignity: Why is living in dignity not a right? These days, even Americans who get up in the morning every day and report to full-time jobs may not earn enough for a decent standard of living. People like fast-food workers, big-box store employees, caregivers, beauty salon workers, and farm hands often can’t earn enough to feed their families and keep a roof over their heads. Millions have seen no real increase in earnings in decades. Material security, as well as the intangible things that come along with it, like self-esteem and peace of mind, are often out of reach.

A guaranteed basic income is one way to help people to survive with dignity and free them from the humiliation of having to participate in criminal activity and accept abusive work conditions. Because everyone gets it, such a program might serve to eliminate the stigma of a hand-out. Of course, the payment has to be large enough that it helps people actually live in dignity, and some, like economist L. Randall Wray, prefer it as a supplement to something like a jobs guarantee program for this reason.

What’s clear is that our current capitalist system and social safety net have failed too many of us. It may be that in order to confront that epic fail, policy makers will need to get bolder in considering universal guarantees to all citizens. 

Such “guaranteed income” schemes are redistributive and must be financed by a tax (open or disguised). While it is true that everyone today suffers from past injustices in terms of property rights, further extracting taxes to pay an annual Citizens Dividend or Social Credit will further destroy private property principles and bolster the State as the effective, if not legal title owner of property. In essence such schemes made ownership meaningless by taking away control (usufruct) through State confiscatory taxation for social purposes. Such schemes accede to the socialist principle that taxes are an exercise of the State’s ultimate property right.

Such schemes would shift property ownership (control) from individuals to the State and usufruct and control the fruits of ownership, and all income and increases in value attributable to property would belong to the State. The State would assume the right to exercise property in landed and other productive capital (effective title; dominion or proprietas) by controlling the fruits of ownership (exercise or use; usufruct), draining and exhausting a man’s means by excessive taxation for social purposes.

What is never addressed is that our country’s founders regarded taxes as a grant from the citizens, and unjust without their consent. Such schemes counter our country’s founding principles of consent of the governed.

The backers of such schemes consider ownership title an irrelevant legal technicality as long as effective title is vested in the State through the State’s control of all land and productive capital by taxing profits. That being the case, taxes would not be a grant from the people to the State to defray legitimate expenses of government, but instead, an exercise of an ultimate property right by the State, to be used for any social purpose, i.e., to provide for individual welfare directly, instead of indirectly by maintaining the common good. In other words, advocates for a basic income for all would use the taxing power for a social purpose. Such a State tax appropriation would utterly destroy private property and is unjust per se. Taxation for social purposes (such as redistribution) in any amount lessens private means to achieve a presumably more equitable distribution of wealth. Such tax extraction measures should only be justified as an expedient in an emergency, with the purpose of keeping people alive and in reasonable health when no other recourse is available––not as the usual way of running society.

The fact is that taxation for “social purposes” accomplishes its ends solely by taking from those with “too much” for redistribution to those who are judged by the authorities as not having enough. This is prohibited under the natural law. The principle of taxing for social purposes as a usual thing instead of as an expedient in an emergency is itself the problem, not how much is taxed or how the tax is administered.

Furthermore, such proposals do not address the issue of concentrated ownership of wealth-creating, income-producing productive capital assets, or its impact on private property principles, but instead takes from those who are productive and redistribute earnings to those who are not or less productive. What should be the solution is to make EVERY citizen productive, so that they do not become dependent on an annual tax-extracted Citizens Dividend or Social Credit nor on wages from toil jobs or State welfare supports, but through owning wealth-creating, income-producing productive capital assets.

As an alternative that does protect private property principles and is market-based, implement the Capital Homestead Act. Here is an explanation of the main part of the proposal:

Right now in the United States, the Federal Reserve creates money by loaning it to banks, who re-loan it multiple times because of fractional banking rules. With Capital Homesteading, money would be created by loaning it directly to citizens at near-zero interest to invest in asset-based economic growth. To build real wealth and also phase out our near-defunct social security scheme, the new full-reserve money would go into a long-term retirement account to be invested in full-dividend-paying shares of qualified successful corporations. That way, money power would be spread to all citizens. The middle class would be invigorated using the principle of compounding interest, instead of being decimated by mushrooming public and personal debt.

For solutions see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org.

In the United States, the reform of the financial system that resulted in the National Banking Act of 1863 restricted the non-rich to the existing (and diminishing) pool of past savings to finance new capital formation and economic development, while the rich could create their own money for the same purpose by issuing bills of exchange. The National Banks and state banks functioned as banks of deposit for the non-rich, severely restricting participation in the economic common good, while they served as banks of issue for the rich, giving them a virtual monopoly over the ownership of new productive capital assets other than homestead land and small ancillary businesses.

 

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Unfortunately, both capitalism and socialism rely on the demonstrably false premise that the only way to finance new productive capital formation is to cut consumption and accumulate money savings; financing for all new productive capital is presumed to come out of the present value of production that was withheld from consumption.

As Harold Moulton demonstrated in The Formation Of Capital (1935), reducing consumption (withholding production from consumption) in order to finance new capital formation harms the financial feasibility of the new productive capital the investor intends to finance. It can even, when the investor realizes that there is insufficient consumer demand to justify the new productive capital formation, prevent the new productive capital from being formed in the first place.

Given that, as Adam Smith said, the sole purpose of production is consumption, one can reasonably conclude that it is contrary to the purpose of production to withhold production from consumption in order to finance new productive capital to increase production. More simply put, if we are not consuming all that is being produced now, of what conceivable use is it to increase production?

That is the “economic dilemma” (as Moulton put it) facing the “capitalist,” or (in socialism) the State if it takes over control of the economy. It should be obvious that new productive capital investment must take place if economic activity is to be sustained. At the same time, the individual investor cannot justify financing the formation of additional new productive capital when there is clearly insufficient demand for what existing productive capital is already producing.

It is, to all appearances, a perfect “Catch 22” situation. If the capitalist invests in new productive capital when there is no demand for what the productive capital will produce, he or she will go bankrupt. If, on the other hand, there is a demand for all that is being produced and more besides, there is little or no possibility of withholding anything from consumption to use in financing new productive capital formation.

Past savings — the present value of past cuts in consumption — are not, however, the only or even the best source of financing for new capital formation. There is also “future savings,” that is, the present value of future increases in production. Just as derivatives (“money”) called mortgages can be created using the present value of existing marketable goods and services as the “underlying” asset backing the derivative, derivatives called bills of exchange can be created using the present value of future marketable products and services as the underlying asset.

Believing — erroneously — that past savings are the only source for financing of new productive capital formation has one of two results. If we believe that the market will take care of things without the State doing more than policing abuses, enforcing contracts, and in general providing a level playing field, we end up with capitalism. Ownership of productive capital must be concentrated in the hands of a private sector elite, for only people whose productive capital assets produce far more than they can consume can afford to finance the formation of new productive capital, thereby providing jobs for the rest of us, to the extent that they are not necessary due to ever-increasing shifts in the technologies of production.

If, however, we believe that the market and private initiative cannot be trusted to take care of things, and that government action is required to both regulate and control the private sector so that everyone will be taken care of adequately and there will be sufficient investment to create enough jobs (whether or not we believe State control will continue to be necessary, or it will wither away), the State must take an ever-increasing role in the economy. That is socialism.

The way to avoid the fallacies of both capitalism and socialism is to realize that new productive capital formation can be financed better using the present value of future increases in production – future savings – than by using the present value of past cuts in consumption – past savings. Reliance on past savings, however (despite its obvious falsity) is accepted as an absolute dogma by all mainstream schools of economics, and virtually all of their offshoots. That is the challenge – to re-educate.

Of course to succeed practically in creating broadened private, individual ownership of FUTURE productive capital formation, there must be a provision to secure investment. This is where collateral insurance comes in (i.e. the provision of sufficient security to support a loan for productive capital acquisition). Because beneficiaries would be enabled to undertake financing on the strength of non-recourse pure capital credit loans from banks and other lenders, the question of collateral or other satisfactory security to support the loans is critical. Banks cannot extend pure capital credit without security to cover the risk of the borrower’s inability to repay the loan. Nor can existing owners be saddled with the risk of business failure. Thus the risk of productive capital investment failure (a risk that is now borne primarily by existing owners, but with considerable governmental back-up mediation through economic intervention by way of taxing, borrowing, monetary, regulatory and other powers) can instead be commercially insured with government reinsurers in reserve if necessary. This would be included as an element in the cost of borrowing in the case of each pure capital credit loan to provide financial compensation to the lenders. Similar insurance mechanisms can be employed as used by the Federal Housing Administration (FHA) to overcome the formidable financial barrier that prevents most people form effective productive capital acquisition. Once we set put on this path to prosperity, opportunity, and economic justice it is an open question whether government involvement (and how much and in what form) is necessary to promote the market provision of pure capital credit insurance. In the writings of binary economist Louis Kelso, he consistently proposed the creation of an agency to operate on the broad principles as practiced by the FHA in providing loan insurance to home buyers. The FHA has experienced decades of profitable success in facilitating the financing of broader home ownership throughout the United States. Instead of financing with insured loans a consumer purchase (a home to live in) we would be financing productive capital asset formation that generates its own earnings out of which to pay back the loan. Capital credit insurance is not a government guarantee. To the contrary, capital credit insurance would be provided only if the premium is competitively attractive in view of the risk insured. Any investment risk that is not insurable on market principles should not be undertaken. The government’s reinsurance corporation would be expected to meet the profitable performance standards of programs like the FHA’s home loan insurance program.

The Agenda for the Just Third Way and the proposed Capital Homestead Act addresses the alternative to schemes for a basic income for all achieved through tax extraction and the coercive powers of the State.

Within the scope of the proposals, the Federal Reserve would stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and creating private sector jobs for local, national and global markets. The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy. Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.

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

Support for this article was provided by the Center for Economic and Social Justice (www.cesj.org).

http://www.nationofchange.org/5-reasons-consider-basic-income-all-americans-1395581072

Trickle-Up Economics

On March 23, 2014, David Cay Johnston writes on Aljazeera America:

Coming out of the Great Recession in 2009, inequality increased dramatically, the opposite of what happened when the Great Depression ended nearly eight decades earlier. Why?

The short answer: When investment returns exceed economic growth, the rich get richer, increasing inequality. So argues Thomas Piketty, a French economist renowned for analyzing incomes reported on tax returns over the last century, in his excellent new book “Capital in the Twenty-First Century.”

The future will be vastly more unequal, Piketty predicts, thanks to tax laws that allow virtually unlimited inheritances to pass from generation to generation. This sort of out-of-control inequality recalls similar class divides in 18th and 19th century France that were reversed only by sharp-edged popular responses.

The good news is that such increasing inequality is not inevitable. Piketty shows that the degree of inequality results not from natural forces or individual choices but from government policy. This is comforting to those of us who been making this argument for years, especially since even The Economist, that staid British magazine devoted to the interests of the investor class, has embraced Piketty’s theory.

Capital accumulation

Piketty’s fully developed argument is backed by careful analysis of official data and supplemented by his brilliant use of economic facts pulled from classics of 19th century literature. To his credit, he offers an easy-to-follow model to explain how, even when economic growth is weak, the rich can get richer while the rest of us find ourselves worse off.

When an economy grows at 1 percent annually but investment returns are 5 percent, the already wealthy need to reinvest only a fifth of their gains for their fortunes to grow at the same rate as the overall economy. The rest can be spent on a sumptuous lifestyle.

Since by definition the very rich do not need to consume 80 percent of their incomes — the portion by which investment returns exceed the growth of the economy in Piketty’s model — they can reinvest most of their annual gains in the market.  Over time this accumulating capital will snowball.

The official American income numbers, crunched by Piketty and his sometime colleague Emmanuel Saez, show that in the 21st century wealth and income increases are almost all taking place among the tiniest sliver of the wealthiest and highest-earning. This trend emerged in the mid-1970s, accelerated under Reaganism and took off like a rocket after the tax cuts and anti-regulatory policies of the George W. Bush administration.

The top 1 percent of Americans raked in 95 cents out of every dollar of increased income from 2009, when the Great Recession officially ended, through 2012. Almost a third of the entire national increase went to just 16,000 households, the top 1 percent of the top 1 percent, Piketty and Saez’s analysis of IRS data shows.

By contrast, in 1934, the year after the Great Depression officially ended, the 1 percent of the 1 percent saw their incomes slip by 3.4 percent.

The income changes for the vast majority are just as revealing. The bottom 90 percent saw their average incomes rise 8.8 percent in 1934 over the prior year, while in 2012 the same statistical group had to get by on 15.7 percent less than in 2009.

In showing the crucial role of government policy in the distribution of wealth and income, Piketty throws the proposals by many conservatives and billionaires to end all taxes on capital into proper perspective. The Steve Forbes flat tax, for example, would levy wages and business profits, but not capital gains, dividends or interest, meaning that the already rich could live tax-free while workers would bear the full burden of government.

Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy, it is all but inevitable that inheritance predominates over saving.

Thomas Piketty

Piketty shows that whether capital is taxed or not, inequality will grow under current policies because savings from current wages and salaries cannot grow as much as returns to existing riches.

The process of accumulating “becomes more rapid and inegalitarian as the return on capital rises and the [overall economic] growth rate falls,” Piketty writes.

“Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy,” he writes, “it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present).”

The new dynasties

And that economic principle leads to what he sees as a serious long-run problem, the very one that ended the French monarchy but not extreme concentrations of wealth.

Dynastic wealth benefits those with rich parents while limiting economic opportunity for everyone else, he shows. This is true, Piketty says, whether inheritance laws are based on primogeniture, in which the first-born male child inherits all or nearly all, or whether siblings share equally in fortunes left by their parents.

“The dynamics of the accumulation and transmission of wealth automatically lead to a very highly concentrated distribution and egalitarian sharing among siblings does not make much of a difference,” he writes.

“The cumulative dynamics of wealth accumulation will automatically give rise to an extremely high concentration of wealth,” with half of the capital owned by the top 1 percent, while the bottom half end up with no savings, he says.

Because in the modern world the already rich need business and investment managers, and the CEOs he calls “supermanagers,” we may see a slightly broader distribution of wealth than in 18th century France or, a century later, in the Belle Époque, France’s gilded age.

One can be both a modest-sized wealth holder or rentier and a manager, Piketty writes, as we see today. But achieving this slightly wider distribution of assets, he says, is “probably to the detriment of low- and median-wage workers, especially those who own only a tiny amount of property, if any.” That is because the moderate wealth holders have an incentive to push down wages so they can reap greater rewards for themselves.

Return of the Belle Époque

Piketty’s genius lies in expanding beyond the numbers about how thick wallets are to show from literary classics how economic rules shape morality, especially for those with ambitions that are thwarted when society’s focus is on preserving the fortunes of the already rich.

Piketty shows that this is not just about numbers or the thickness of wallets. In one of the many examples he draws from literature, Piketty examines the economic logic and moral dilemmas confronting Eugène de Rastignac, an impoverished young noble hoping to regain his comforts by becoming a lawyer, as told in Balzac’s novel “Père Goriot.”

Wealth was so concentrated in 1835 France that “those who could somehow lay hands on inherited wealth were able to live far better than those obligated to make their way by study and work.”

Piketty writes that because “study and work cannot possibly lead to a comfortable and elegant life … the only realistic strategy is to marry Mademoiselle Victorine and her inheritance,” which forces Rastignac to consider a proposal to murder her brother, who would otherwise inherit.

Balzac, who famously wrote that “behind every fortune lies a great crime,” lived in a world the vast majority of us would not want to see recur, a world in which merit and hard work mattered little.

Piketty argues that we are headed back in that direction, however, through misguided government policies that encourage dynastic wealth and favor returns to capital over income from labor. His dark vision is one in which even the strivers will have a tougher time, and more modest fortunes, than those whose primary basis for their riches is ancestry.

We need not return to the much greater wealth disparities of the Belle Époque, or what in America we call the Gilded Age, when industrialization and mass production produced fortunes unimaginable to those who had lived only a few decades before.

To make smarter choices, however, requires understanding the financial dynamics of the modern world and the legal structures that make them possible. Piketty’s new book is an important contribution to understanding what we need to do to produce more growth, wider economic opportunity and greater social stability.

What is amazing is that it appears that only now through the work of economist Thomas Piketty that other economists and commentators are realizing that inequality is not so much the result of earned income, usually salaries, but from the earnings  of capita. Piketty shows that today income from capital, not earnings, predominates at the top of the income distribution. This is NOT NEWS as Krugman appears to believe. Binary economist Louis Kelso first wrote about the economic inequality caused by concentrated capital ownership and thus earnings more than 50 years ago, and continue to do so into the 1980s until his death. As a colleague and business partner, I too have been writing about this economic injustice for more than 40 years. Where has Krugman been?But unlike Kelso, Krugman and Piketty say that to combat the accumulation and concentration of capital ownership there mutt be progressive taxation and redistribution overseen by the “State.” Kelso, advocated for broadening the FUTURE formation of capital productiveness so that we systematically create new owners so that EVERY child, woman and man has the opportunity to become a capital owner using insured capital credit repayable out of the earnings of capital investment (the mechanism used by the wealthy ownership class to constantly accumulate wealth-creating, income-producing capital assets).The Kelsonian-conceived JUST Third Way provides a blueprint for broadening the individual ownership of FUTURE capital asset formation and redistribution through a transfer tax as a way to dilute massive inheritance transfers, which otherwise bolster wealth ownership concentration.

David Cay Johnston and Piketty need to embrace solutions that do not further empower the “State” through tax extraction that redistributes wealth as “politicians” determine. They and others concerned with addressing economic just solutions should support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/;  Monetary Justice at http://capitalhomestead.org/page/monetary-justice; and the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

http://america.aljazeera.com/opinions/2014/3/thomas-piketty-capitalinequalityeconomics.html

Our Economic System Is Broken

On March 21, 2014, Thom Hartmann writes on his program’s blog:

Wall Street banksters raked in almost $27 billion dollars in bonuses last year, yet Congress can’t even get it together to raise the minimum wage. According to the New York State Comptroller’s office, the gamblers on Wall Street raked in $26.7 billion dollars in bonuses in 2013 – 15 percent more than they did the previous year. That’s enough money to double the paycheck of every single minimum wage worker in our country.

Our economic system is so completely broken that banksters got another pile of cash after wrecking our economy while millions of real working people put in long, hard hours for paychecks that leave them in poverty. And, this keeps happening even though it does not make a lick of economic sense. Every extra dollar paid to a low-wage worker generates about $1.20 for our economy. When that dollar goes to line the pockets of the super-rich instead, it adds less than 40 cents to our GDP. The banksters and the corporate elite can afford to stash their money away in foreign countries and high-return risky investments, while real working Americans have to spend every single dollar just to get by.

If that $26.7 billion in bonuses went to the working poor, instead of the gamblers on Wall Street, our economy would grow by more than $32 billion. That makes a whole lot more sense than gifting billions to the very people who crashed our economy. It’s time to fix this broken system, to stop rewarding the people who gamble with our economy, and time to put this money back into the hands of the real working people in America.

Yes, our economic system is broken and in need of serious reform.

The capitalism practiced today is what, for a long time, I have termed “Hoggism,” propelled by greed and the sheer love of power over others. “Hoggism” institutionalizes greed (creating concentrated capital ownership, monopolies, and special privileges). “Hoggism” is about the ability of greedy rich people to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption. It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

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

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

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

The “how” is answered in the Agenda of The JUST Third Way Movement at http://foreconomicjustice.org/?p=5797http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/; Monetary Justice at http://capitalhomestead.org/page/monetary-justice; and the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.

http://www.thomhartmann.com/blog/2014/03/our-economic-system-broken