Five Reasons The Rich Are Ruining The Economy By Hoarding Their Money

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On Jun e 26, 2014, David Atkins writes on AlterNet:

It has been nearly four decades since the Reagan revolution in supply-side economics came to power in the United States. Tax rates on the wealthiest Americans are at near record lows, asset values have been pumped up to record highs, and corporate America is sitting prettier than ever before. There can be no question but that the ideologues who promoted supply-side economics have succeeded in enforcing their vision policy on our lives. But their decades-long experiment has also proven to be structural failure at every possible level (except for padding the pockets of the top 1%.) Here are five things we know without doubt about supply-side economics today:

1. The money doesn’t trickle down.

Of all the failures of supply-side economics, this is the most damning. Conservatives often excuse poor wage growth and high unemployment as part of the global competitive marketplace, saying that everyone needs to tighten their belts. But not everyone is struggling–in fact, the rich are better off than ever. They control half of all the wealth, and the top 10% control almost 9/10ths of it. Corporate profits are at or near record highs, disproving the myth that the middle class must suffer due to competitive pressures. The Dow Jones index is threatening to burst past 17,000. Meanwhile, wages have stagnated since the Reagan era, even though productivity continues to increase. Corporate executives, in other words, are forcing workers to toil longer, harder and smarter than ever, but all the proceeds are going into the hands of the very rich while the people actually creating the wealth are struggling harder than ever to get by. Republicans either wave away this phenomenon as insignificant, or desperately attempt to blame regulation and “crony capitalism.” Of course, the last time economic trends were so disproportionately imbalanced against workers was the era before the regulatory and tax increases of the New Deal, nor is there any significant sense (outside perhaps of military contractors favored by the GOP establishment) in which government contracts play a larger role in the economy. Instead, the truth is obvious: corporations don’t exist to create jobs but to rake in money, and most rich people didn’t get rich by being generous. When you give corporations and the rich more money, they simply hoard it and find ways to make themselves even more money–preferably by employing as few people as possible, at the lowest wages possible.

2. The rich aren’t investing almost half of their resources.

This one is almost comical. In concept, supply-side economics is supposed to work by the corporate rich taking money gleaned by tax breaks and subsidies, and plowing it back into investments that theoretically employ people. Now, we already know that the economic life doesn’t actually work that way: when wealthy individuals and companies invest, they tend to do it in financialized vehicles, mergers, acquisitions and interest-bearing accounts while employing the fewest people possible at awful wages.

But even if it did work as supply-siders theorize, the brutal reality is that the rich aren’t investing almost half of their money (corporations aren’t doing much better, as their record profits sit largely idle avoiding taxation). 40% of the assets of the wealthy are sitting in deposits: the rich person’s equivalent of stuffing money into a mattress. Money sitting in deposits in Swiss and Cayman Islands accounts is essentially wasted wealth. It does as little good for the world economy as gold hoarded by a dragon in Middle Earth. It essentially sits there uselessly as an economic security blanket for the very people who need it least. By contrast, putting more money into the hands of the poor and middle class pays off immediately for the economy, as most people living paycheck to paycheck spend the money immediately or at least create a small backstop against bankruptcy and delinquency–thus creating immediate economic and social benefits. So not only does giving the rich more money not pay off when they do invest, it doesn’t even have the opportunity to pay off at all since almost half of the money isn’t even being invested.

3. Supply-side economics leads to a bubble economy with bigger and longer recessions.

One of the most dramatic and intentional yet underreported effects of supply-side economics was to convert a stable wage-based economy into an unstable asset-based economy. An economy focused on wage growth and broad prosperity tends to have slower overall growth and is at somewhat greater risk for inflation. It was understandable after the 1970s that some political elites would want to steer far in the other direction. But one of the many downsides to boosting asset growth at all costs is that assets fluctuate in value. Stocks and real estate both tend to rise over the long haul, but in the short term they are subject to bubbles and crashes. And the more money gets thrown into asset markets, the greater is the risk of irrational exuberance, the larger are the bubbles–and the worse are the plunges and panics.

This is extremely problematic at both the individual and macro levels. Individuals whose investments are inadequately diversified and/or who lack enough liquid cash face ruin during downturns. Individuals who lack assets at all find themselves out of work and underpaid when increasingly large recessions slash both wages and jobs. At the broadest level, entire societies bear the burden of asset bubbles when the downturns are so devastating as to threaten the very solvency of the markets themselves. Taxpayers are then forced to shoulder the burden of socializing the market’s losses even though its gains are privatized and go almost entirely to the top 1% of incomes. Lastly but not least, inflating housing markets by orders of magnitude within a generation may help those who already own homes to feel richer despite their stagnant wages–but at the severe social cost of making housing largely unaffordable to younger generations.

4. High inequality frays society and reduces trust in institutions.

It is not an accident that trust in major institutions has declined on a linear track with rising inequality. Study after study has shown that trust in our fellow citizens and in institutions at large are dependent on the level of inequality and corruption in society. This stands to reason: people know when they’re getting the short end of the stick, even if they can’t agree on why. Conservatives wrongly blame government spending and regulation. Liberals rightly blame disproportionate rewards going to the very wealthy. Not surprisingly, then, high levels of inequality also create strong partisanship within society as politicians and pundits alike ratchet up the rhetoric of blame. As both secular and religious institutions seem equally powerless to address increasing economic and social insecurity, the social fabric begins to fray and people tend to self-segregate in many ways, including politically. Economic tension and social tension tend to go hand in hand.

5. Supply-side economics creates deficits.

Keynesian economists like Paul Krugman will note up front that deficits don’t matter nearly as much as most conservative economists claim they do, and that conservatives only seem to care about the deficit when Democrats are in power. Still, insofar as government deficits do matter, it’s clear that supply-side economics exacerbates them. Remember that supply-side economics requires tax cuts for the wealthy in order to work. There was a time when conservatives could claim without derision that reducing tax burdens on the rich would lead to so much increased growth that government revenues would actually expand to cover and surpass the upfront tax losses.

That argument has been proven laughably untrue. Government deficits nearly tripled under Ronald Reagan. The tax cuts passed by George W. Bush dramatically increased the budget deficit without even considering increased military and homeland security spending after 9/11. We now know beyond a doubt that whatever the inflection point on the Laffer curve where decreased taxes do lead to greater revenues actually is, it’s apparently far higher than the pre-Reagan marginal rates on the wealthy. Liberals often accuse conservatives of intentionally creating large deficits while in power, then using deficit hysteria to “starve the beast” and slash government spending–which in turn damages the economy, reduces consumer demand and slows growth, thus increasing deficits again. Regardless of the merits of that claim, however, we do know for certain today that conservative economics inexorably increases government deficits.

In short, whatever excuses there might have been for voters and policymakers to buy into conservative economic theories in the 1980s, those excuses are now gone.

We know better. We know that supply-side money does not trickle down to workers. We know that corporations and the rich don’t even bother to invest a huge portion of their wealth. We know that pumping up assets and investments leads to more unstable economies. We know that supply-side economics is creating larger deficits, and we know that the rampant political corruption and massive inequality caused by supply-side economics is eroding the very fabric of our society.

Trickle-down economics does not work. What will work is simultaneously broadening private, individual ownership of new productive capital investment as the American economy grows, turning labor workers and others into new capitalists who wi…ll benefit from expanded earnings through the full-dividend payout of the earnings the investments generate, which in turn will strengthen consumer demand and create even greater economic growth and growing asset portfolios for ALL Americans, thus reducing dependence on government redistribution “make-work employment” and “welfare” programs.

Modern technology and rapidly developing intelligent systems technology means that modern industry, the employer of middle class prosperity, simply does not need millions of new workers, while the population of available workers is multiplying. Truly intelligent “machines” (productive capital) will have the potential to eliminate poverty and usher in a new age of prosperity, opportunity and economic justice while closing the gap between rich and poor through broadened access to capital credit for investment in new productive capital assets so that everyone can become a capitalist with income from ownership of the economy’s future productive capital assets.

Free market capitalism can be a good thing because it involves the principle of private ownership. Private ownership creates incentive for individuals and business corporations to acquire productive capital, because the profits accrue to the owners. The problem is that there presently exists no means by which the majority of American citizens can fully benefit from the unprecedented productive potential of technological innovation in which the non-human factor of production is displacing the human factor of production. As most customers for the products and services that can be produced are labor workers, market demand will exponentially decline unless society’s customer base can gain access to capital credit to acquire long term viable ownership portfolios in future productive capital assets. Up to this point in our history, wages and salaries have been paid to labor workers to provide income that generates consumer demand in the market. Without jobs, labor workers cannot buy the products and services that are produced, and without customers, business enterprises cannot expand production. The principle operative of capitalism is to maximize income to the owners of the business corporation, not to create jobs or provide income for labor workers.

This is a fundamental structural problem plaguing the capitalist system. It explains why the middle class is in decline and poverty persists despite capitalism’s obvious capability to produce and meet demand for products and services needed and wanted by our citizenry. With declining labor worker incomes and the prospects of more people living with insufficient or no income, demand in the market likewise declines. Without a job there is no money. And as technological innovation gains exponential momentum there will be fewer and fewer jobs for labor workers to produce the products and services that they cannot buy because they don’t have jobs. Thus, this vicious circle is the current embodiment of capitalism.

Capitalism is not designed to benefit the working class and poor. Capitalism is designed to benefit the owners of productive capital. Few people can save enough to become wealthy by investing their savings. Yet the financial system is based on “savings” and as a result the percentage of people that derives most of their income from returns on productive capital investments is small. But it does not have to be.

What if we could reverse this trend and turn the vast pool of Americans into productive capital owners and thus consumers? If that were done, more labor workers would be required (at least in the short term) to produce products and services that would be demanded by these new consumers, who are as well the new capitalist owners of the productive capital assets created to expand productive capacity to meet demand. This would effectively recover the economy from the present recession to the point where business enterprises again can profitably sell their products and services. And as companies expand to meet demand with investment in new productive capital, new owners would participate and through their income dividend payout create more demand.

Such a system can be created that rewards labor workers with skills that are in demand, while at the same time provide capital dividend income to them and to those not needed for the production of products and services. Such a creation would embrace productive capital as a replacement for labor as the principal factor in the production with continued productivity growth. Thus, the future economy would generate material wealth for ALL Americans created by technological invention embodied in superautomation, automate factories, intelligent machines, and sophisticated computerization.

See http://foreconomicjustice.com/11/economic-justice/ and the platform of the Unite America Party, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962.

Believe It Or Not: Karl Marx Is Making A Comeback

karl_marx-620x412On June 22, 2014, Sean McElwee writes on Salon:

Karl Marx is on fire right now. More than a century after his death, the co-author of “The Communist Manifesto” still has the honor of being the first smear against ideas slightly to the left of Hillary Clinton. (See: Thomas Piketty.) Marx also graced the cover of the National Review as recently ast last month. Few other thinkers, and certainly few non-religious figures, can claim the honor of being so widely misappropriated by the political rearguard. But, while most people consider Marx only as a sort of intellectual boogeyman, the manifestation of everything evil on the left, he has much to offer a left increasingly divorced from the working class.

To that end, Marx actually is enjoying something of a renaissance on the left these days. Jacobin, a socialist publication that publishes many Marxist thinkers, was profiled by the the New York Times and boasts Bob Herbert as a contributor. Benjamin Kunkel’s recent compilation of essays, “Utopia or Bust,” earned that author a profile in New York magazine, and the title “The Lena Dunham of Literature.” And that’s not even to mention Thomas Piketty’s blockbuster work, “Capital in the 21st Century,” which harkens back to Marx’s multi-volume magnum opus, “Das Kapital.” The wave has even extended so far as Capitol Hill, where Sen. Bernie Sanders, D- Vermont, openly calls himself a “democratic socialist.”

Marx most certainly wasn’t right about everything, but he wasn’t wrong about as much as people think. A revival of his thought is good news for progressive America. It can give the left fresh arguments that were previously forgotten to history, and new organizing strategies that they’ve long since abandoned.

The first problem with the left that Marx might have noted is the wholesale abandonment of the working class. As Perry Anderson points out in his essay, “Considerations on Western Marxism,”

The extreme difficulty of language of much of Western Marxism in the twentieth century was never controlled by the tension of a direct or active relationship to a proletarian audience.

Increasingly, the left is dominated by what the German Marxist Rosa Luxemburg might callKathedersozialisten – or “professorial socialists.” These thinkers, frequently drenched in academese, talk and debate in a way almost entirely designed to alienate anyone who does not already accept their conclusions. The professorial left seems to have innumerable answers for those wondering what Lacanian psychoanalysis has to offer us, but can give us little guidance as to whether the Working Families Party should support Cuomo or run its own candidate.

“Manifesto” co-author Friedrich Engels’s “The Condition of the Working Class in England” was a pioneering study of the working class. He and Marx both clearly saw the working class as the means to political power — and viewed persuading them as the most important task the left faced. When Maurice Lachatre asked Marx if he would be willing to serialize “Das Kapital,” Marx replied, “In this form the book will be more accessible to the working-class, a consideration which to me outweighs everything else.” One struggles, however, to imagine a latter-day Marxist champion like Theodor W. Adorno writing those words. The left abandoned the working class and the working class then abandoned the left. That needs to change.

Marx and Engels also offer the left a new way to discuss ideology. In his brilliant collection, “The Agony of the American Left,” Marx(ish) historian Christopher Lasch writes,

The Marxian tradition of social thought has always attached great importance to the way in which class interest takes on the quality of objective reality… Lacking an awareness of the human capacity for collective self-deception, the populists tended to postulate conspiratorial explanations of history.

Lasch is arguing that, to a large extent, humans are biased toward the state of affairs that currently exists and then work backwards to justify it to themselves. That is, we’re more likely to embrace a deeply unjust economic system, simply because it’s the one we’ve always known. A recent study bears this out, finding that market competition serves to psychologically legitimize inequalities that would otherwise be considered unjust. Because many on the left, especially populists, do not understand ideology, they often write and argue as though the entire American political system is controlled by a small cabal of business or political leaders conspiring to fool the masses.

The implications of ideology are important and numerous. The left must not fall into the trap of believing that all Americans actually do share our views, but that a conspiracy of the wealthy, or the power of GOP framing, or the influence of money are preventing us from succeeding. To some extent, these things may indeed harm the left, but widespread ideology — the automatic assumption of capitalism’s unmitigated merit, for example — is just as big a problem. We must win the war of ideas before we can win the war of democracy.

The great Italian politician Antonio Gramsci was well aware of the lure of such cabalistic conspiracies, but also of their limitations, and his idea about cultural hegemony led him to advocate for educating the working class. This task is difficult, but it will lead to more substantial progress than simply explaining away failures by complaining about the influence of the wealthy. The rich certainly have different interests than the rest of us, but Gilens and Page note in an often overlooked passage of their oft-cited paper on “American oligarchy,”

The preferences of average citizens are positively and fairly highly correlated, across issues, with the preferences of economic elites.

Groups like the Chamber of Commerce and other business-oriented organizations, on the other hand, have preferences that do not correlate with the interests of the middle class. But even with that caveat, the left should not overstate the extent to which Americans agree with the leftist economic critique. In an apt description of the American ideology, John Steinbeck noted, “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”

Finally, Marx’s moral critique of capitalism and markets has never been fully comprehended or considered by anyone (other than the socialists, of course) but the most ardent libertarians and a strain of thinkers broadly called communitarians. Broadly speaking, Marx’s critique of capitalism resembles the Catholic church’s critique: That by relying on greed and self-interest, markets degrade humans and encourage our worst impulses. Marx quotes Shakespeare’s “Timon of Athens”:

This yellow slave

Will knit and break religions, bless the accursed;

Make the hoar leprosy adored, place thieves

And give them title, knee and approbation

With senators on the bench

Marx writes, riffing off of Shakespeare, “I  am bad, dishonest, unscrupulous, stupid; but money is honoured and therefore so is its possessors. Money is the supreme good, therefore its possessor is good.” Jesus warned that the love of money is the root of all evil. This fact seems self-evident. Religious critics of capitalism have noted this core delusion for decades. Economist and Catholic E. F. Schumacher writes,

Call a thing immoral or ugly, soul-destroying or a degradation to man, a peril to the peace of the world or to the well-being of future generations: as long as you have not shown it to be ‘uneconomic’ you have not really questioned its right to exist, grow, and prosper.

With the exception of libertarians, who have tried to turn the immorality of capitalism into a sort of perverse morality (“greed is good”), most politicians and economists are entirely unconcerned with the fact that capitalism is based on a collective drawing upon our deepest desire: to exploit.

The underlying logic of capitalism is that if we all take our most primordial impulses and mix them up in the magical mechanism called “markets,” we are left with progress. Recent history suggests we may be left with only more ugliness. As G. A. Cohen writes, “the immediate motive to productive activity in a market society is (not always but) typically some mixture of greed and fear.” The participants in market transactions are not interested in fulfilling human needs — they are interested in making a profit. Fulfilling human needs is one way to make a profit — exploitation, the creation of desire through advertising or downright fraud are others. Human progress is an ancillary consideration, individual profit is the goal. Today, speaking in moral terms is not incredibly popular — inequality is seen not as a moral issue in which a small class has a dangerous amount of power, but instead as an inefficiency to be corrected with a technocratic policy.

We don’t know for certain what Marx would say about the modern left. Its radicals often foster a poisonous aversion to pragmatism in favor of pious purity, its politicians are guilty of  wholesale abandonment of the working class, and many of its leading thinkers have succumbed to a dreadful technocratism. Marx failed to account for the adaptability of capitalism and left little in the way of alternatives. In the end, this void was filled by murderers and fools. Marx, a deeply humanistic thinker, would certainly have abhorred the violence in his name some half a century after his death. But rational people do not blame Christ for the Crusades, nor Muhammad for 9/11 nor Nietzsche for the Holocaust. The taboo of Marx has prevented the left from learning his most important lesson; in the words of Gil Scott-Heron, “the revolution will not be televised.”

A worthy and MUST READ critique to this article on the “comeback of Karl Marx” is “Karl Marx: The Almost Capitalist” by binary economist Louis Kelso at http://www.cesj.org/resources/articles-index/karl-marx-the-almost-capitalist/

Also download free “The Capitalist Manifesto” by Louis O. Kelso and philosopher Mortimer Adler at http://www.kelsoinstitute.org/pdf/cm-entire.pdf

http://www.salon.com/2014/06/22/believe_it_or_not_karl_marx_is_making_a_comeback/?source=newsletter

Five Years After The Great Recession: Where Are We Now?

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On June 22, 2014, Don Lee writes in the Los Angeles Times:

It  was the worst U.S. economic calamity since the 1930s.

Over 19 months, the Great Recession erased trillions of dollars of wealth, destroyed 8 million jobs and robbed tens of thousands of their homes. More than half of adults lost a job or saw a cut in pay or hours, and almost everybody’s wealth fell.

In the five years since the recovery began, the economy has grown slowly, in fits and starts.

Millions of workers have remained unemployed for months, even years. Millions more, faced with huge drops in the value of their homes and uncertainty about future income, made radical changes in their plans and lifestyles. Seniors stayed in their jobs longer; young adults cocooned in their parents’ basements.

Even the good news has been tinged with bad: People are saving more, and consumers have cut back use of credit cards. Both trends are good for individuals’ long-term financial well-being, but not so good for the U.S. economy as a whole: Lower consumer spending means fewer customers for companies, fewer jobs for workers.

At the recovery’s five-year mark, here are things to keep in mind.

It’s not as bad as elsewhere in the world

It’s understandable that many Americans don’t feel much better off than five years ago. Unemployment seems stuck above 6%, most people have seen few or no raises. And the poverty rate remains the same or, by some accounts, has risen.

But from a global perspective, the picture looks very different.

Anemic as the U.S. recovery is, it’s much better than that of debt-flummoxed Europe or still-stagnant Japan. The United States is once again the locomotive of global growth. 

Despite this winter’s doldrums, the U.S. economy is expected to outpace those of other major developed nations this year, including three of the world’s top five economies — Japan, Germany and France. None of them is projected to come close to matching American growth, which economists expect will be about 3% for the rest of this year and next.

“A meaningful rebound in U.S. economic activity is now underway, and we expect growth to exceed potential over the next few quarters,” Christine Lagarde, managing director of the International Monetary Fund, said this month.

China is likely to keep sprinting ahead as it closes in on supplanting the U.S. as the largest economy. But it started way behind economically, so big growth spurts are not unexpected.

With more than three times the population of the U.S., China has an income per person that is less than one-fifth of America’s $53,000. So it will be decades before the average Chinese citizen approaches a standard of living comparable to the typical American’s.

And the U.S. still has many competitive advantages, among them its large, expanding and comparatively youthful population. Unlike some rich countries, America isn’t suffering from a shrinking workforce. It continues to attract the best and brightest from all over, many to America’s best universities, which remain unrivaled.

U.S. spending for research and development rose 4.4% in 2011 to more than $429 billion, the latest National Science Foundation count shows. That’s 2.85% of the U.S. economy, little changed from its peak in the mid-1960s. The U.S. share of global R&D accounts for a world-leading 30% of all such investments.

A lot depends on where you live

From economist Stephen Levy’s view in Palo Alto, Calif., things today are as good as they were before the Great Recession, maybe better.

On a typically gorgeous May morning in the Bay Area, he woke up to find that the top newspaper headline was about businesses in San Francisco trying to find workers because unemployment there had fallen to a little above 4%. The next day, the front pages of local papers were splashed with photos of Google’s new driverless cars.

Living in Silicon Valley “is a huge plus,” Levy said.

Incomes have indeed jumped in technology-rich areas, as well as other highly educated centers such as Boston and Seattle. America’s energy boom, meanwhile, has knocked the jobless rate down to a mere 2.7% in North Dakota and helped re-invigorate Louisiana and other states along the Gulf Coast.

Meanwhile, cities such as Pittsburgh and Minneapolis that rely more on healthcare have sprung back relatively quickly, as have places with low housing and operating costs, particularly Texas and other parts of the South.

Things have been slower for folks along such industrial belts as Illinois and Michigan, even though carmakers have rebounded and other manufacturers are starting to make more of their products in the U.S.

Many areas still haven’t come back from the real estate collapse; unemployment remains in double digits through much of California’s Central Valley, for example, and reviving economies in Georgia and Arizona still have further to go.

The recession hit the housing-bubble economies of the West and South hardest, but now those states are again leading the way in migration and home building. And a familiar pattern is returning to bolster growth in those areas: Young people are escaping rural America for the city and older residents are settling in warmer climates.

If you’re rich, the recovery looks great

Household net worth — what you have, minus what you owe — rose to a record $81.7 trillion in the first quarter.

But that growth in wealth has not been even. Over the last five years, the rich got richer.

That’s because wealthier Americans are far more likely to own stocks, and household assets in equities have more than doubled since 2008 to $20.6 trillion earlier this year.

Moreover, for the wealthy, a downturn or a slow recovery can provide advantages: With real interest rates near zero, the price of assets — investment property, securities, luxury goods and so forth — remains relatively cheap.

But what about the rest of us?

The economy reached another milestone last month: All 8.7 million jobs lost in 2008 and 2009 have now been regained.

But while the nation’s payrolls are back to their previous high, they haven’t kept pace with growth in the working-age population over the last few years.

Moreover, many of the jobs lost have been replaced with lower-paying ones.

As of May, total employment in construction and manufacturing, where pay is relatively high, was down more than 3 million compared with before the recession.

By contrast, restaurants, temporary help firms and retail outlets have added 3 million jobs, making them three of the fastest-hiring industries during the recovery. But their average hourly pay ranges from $12.35 for restaurants to $16.96 for retail, compared with $24.72 for manufacturing and $26.59 for construction.

There have been robust job gains in healthcare, where workers in doctors’ offices typically earn more than $37.54 an hour, and in fields such as computer design, with average pay of $42.58.

But the share of middle-income jobs has been declining, reflecting a polarized labor market that puts little value on routine work but offers ever-bigger rewards to those with specialized knowledge and skills.

Also, for the average American, housing is the main source of wealth, and that market hasn’t grown much throughout most of the country. It still has a long way to go to recover the equity lost in the recession — almost $2 trillion without adjusting for inflation.

The median household net worth — the point at which half are above and half below — was about $74,000 in 2009 dollars, well below the level hit in the late 1990s when adjusted for inflation, according to calculations by Moody’s Analytics.

Young adults are a missing ingredient to the rebound

Tenbeete Solomon, 22, took her freshly minted business degree from the University of Maryland to Nordstrom for a commission-based sales job in the personal styling section.

Her fellow Maryland alumna Jillian Downing, an English major, has an administrative internship with the Federal Deposit Insurance Corp., which lasts only through September.

“It’s scary, the job market is scary,” says Downing, also 22.

Underemployment has become a vexing problem. Four out of 10 recent college graduates have jobs that typically do not require a bachelor’s degree, and many of the positions don’t pay much. And the job market is a lot worse for those without a bachelor’s degree.

The college class of 2014 is the most indebted ever, keeping many from going out on their own and helping boost a shortage of first-time home buyers.

If the past is any guide, the hard work and investment made by people like Solomon and Downing will eventually pay off, but underemployment among college graduates may stay very high.

The problem for college graduates began well before the Great Recession, around 2000, as employment demand stirred by the computer revolution started to wane. Specifically, there’s evidence of sharply curtailed opportunities for people in so-called cognitive-task occupations, those typically associated with college graduates.

“We’re not saying things came to an end in 2000,” said David Green, an economics professor at the University of British Columbia. But he noted that investment in software as a share of the economy rose strongly until the end of the millennium.

He and Canadian colleagues Paul Beaudry and Benjamin Sand have concluded that the declining fortunes of young adults could be linked to this broader slowdown, as each successive group of college graduates since 2000 has tended to show poorer results in cognitive employment and wage levels.

At Maryland’s commencement ceremony last month, Susan Taylor, 53, was thrilled to see her daughter earn her English degree at her alma mater. Her daughter doesn’t have a job yet and owes about $30,000 in college loans, near the national average.

“I realize it’s not the same situation now as when I graduated,” said Taylor, an elementary school teacher who remembers having no problem finding a job straight out of college.

We are still waiting for the Next Big Thing

Fracking. Driverless cars. 3-D printing. Robotics. Facebook.

Although all of these economically stimulating innovations represent American ingenuity, none has emerged as a game-changer for the economy in the way the Internet or the personal computer did.

Yet the hopes of many, even those who distrust the current economy and have little faith in government, rest on the development of these and other revolutionary technologies.

The most common refrain among optimists and politicians is that America can do it again because America has done it before.

While business start-ups have slowed and the Great Recession may have permanently lowered the growth potential for the U.S., many believe the nation still is the most likely economy in the world to spawn the next big thing.

America’s aging population and slowing labor force growth, combined with weaker capital investments during the recession in recent years, could undoubtedly curb the economy’s future performance. And the latest wave of social media applications has raised questions about what value they are creating for the broader economy, something captured in the credo at Paul Thiel’s venture capital firm: “We wanted flying cars, instead we got 140 characters.”

Even so, the information revolution and all its offshoots give experts excitement about more breakthroughs to come — if not innovative products, then new ways to tackle old problems.

“Am I on Facebook? No,” said Edward Glaeser, an economics professor at Harvard University. “But hundreds of millions of people use it, and one way to see value is how much time people are allocating to it.”

Moreover, he said, innovations in information technology are improving the flow of ideas, raising the possibility of more breakthroughs. “I don’t think history gives us much reason to be cynical.”

Who’s right is the crucial question. But we may reach the 10th anniversary of the Great Recession’s end before we know the answer.

In a nutshell, WE ARE WORST OFF. Don Lee fails to addresses the underlying reason for the mounting economic inequality and anemic growth of the economy, which has dampened job prospects while enriching the capital ownership asset holdings of the wealthy ownership class.

Lee acknowledges that “over the past five years the rich have gotten richer” but fails to state that the reason they are rich in the first place is because their main source of income is derived from ownership dividends, rents, and capital gains.  While the masses struggle to make ends meet on a weekly and monthly basis, the wealthy  ownership class is able to take advantage of near zero percent interest rates to further invest in the economy’s growth and speculate on stock market capital gains.

I have followed the writings of Don Lee for a few years now and he has consistently sidestepped the issue of concentrated ownership and the fact that the economic growth gains have not been the result of human labor productiveness but due to the non-human factor of production–– capital assets in the form of productive land, structures, machines, tools, super-automation, robotics, digital computerized processing, etc.  Fundamentally, economic value is created through human and non-human contributions.

Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in binary economist Louis Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary.”

Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.

At Agenda 2000 (an advocacy firm founded by myself with Louis Kelso as Chairman), we used 90 percent, while the Rand Corporation statistic was 98 percent, to represent the productive capital factor input to creating products and services. In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work with capital work. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes capital ever more productive. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through jobs, minimum wage, and welfare. Such policies do not function effectively.

In a democratic growth economy, based on Kelso’s binary economics, the ownership of capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.

There are a list of papers by economic scholars that support the point that technological and system changes account for almost 90 percent of “productivity growth.”  See footnote 6 of Norman Kurland’s (President of the Center for Economic and Social Justice)  paper “A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation” published in 2001 (Vol. 30) by the Journal of Socio-Economics and pages 173-195 of the CESJ book Capital Homesteading for Every Citizen.  This point is also on page 25 and footnote 49 on page 10 of the Capital Homesteading book. (See www.CESJ.org)

See also the excellent article by Professor Robert Ashford on pages 99-132 of CESJ’s Curing World Poverty book to explain how the term “productivity” as used by economists differs from the term “productiveness” as used by Kelsonians. “Productivity” stems from the erroneous “labor theory of value” and a one-factor analysis that rejects the value of “Say’s Law of Markets.” Kelso’s binary or two-factor theory of economics would avoid redistributive non-market-based distributions of income under the wage slave, welfare slave, charity slave, consumer debt slave system in today’s slow-growth world by enabling all citizens to own and increase their incomes from all non-human increases to the productive process.

These papers and free downloadable books are available at the CESJ Web site at www.cesj.org and should be read by economic commentators such as Don Lee at the Los Angeles Times.

If only academia, political organizations, think tanks, and the media would put as much effort into advocating for BROADENED OWNERSHIP of wealth-creating, income-producing productive capital expansion of the economy and empowering EVERY child, woman and man to acquire capital without the requirement of “past savings” but with the earnings of the capital assets, we could eliminate poverty and economic inequality and substantially grow the American economy.

Massachusetts Passes The Highest State Minimum Wage In The Country

On June 19, 2014, Bryce Covert writes on ThinkProgress:

minimum wage

CREDIT: FLICKR/WISCONSIN JOBS NOW

On Wednesday night, the Massachusetts House passed a bill that will raise the state’s minimum wage to $11 an hour by 2017. The Senate already passed that wage level, and after a procedural vote there it will head to Gov. Deval Patrick (D), who is expected to sign it into law.

An earlier Senate version of the bill would have also automatically increased the minimum wage as inflation rose, but that provision was dropped in the final version.

An $11 wage is the highest passed by any state this year. Eight other states have increased their wages so far: Delaware and West Virginia went above $8 an hour;Michigan went up to $9.25; Minnesota increased its wage to $9.50; Hawaii,Maryland, and Connecticut passed a $10.10 wage; and Vermont went to $10.50 an hour. The $10.10 an hour level is what President Obama and Congressional Democrats had pursued for a federal hike, but Republicans blocked the move.

While $11 an hour will be the highest state wage, some cities are going even further. Seattle will raise its wage to $15 an hour over ten years, and a nearby town already passed the same wage, although it’s currently being held up in court.ChicagoNew York City, and San Francisco are all eyeing a $15 minimum wage as well.

While some worry that higher minimum wages will hurt jobs or businesses, states that already had high wages haven’t had that experience. Washington, which has the highest current wage at $9.32 an hour, experienced the biggest increase in small business employment last year. Over the 15 years since it increased its wage to a national high, job growth has remained at a steady, above average rate. All told, a comprehensive look at state minimum wage increases over two decades didn’t find evidence that they impacted job creation.

This is a ridiculous assertion of a gradual increase to $11.00 per hour by 2017. This is subsistence income. A minimum wage is not the solution to economic inequality and will perpetuate economic inequality and poverty, and thus taxpayer-supported redistribution to pay for welfare services.

 If only academia, political organizations, think tanks, and the media would put as much effort into advocating for BROADENED OWNERSHIP of wealth-creating, income-producing productive capital expansion of the economy and empowering EVERY child, woman and man to acquire capital without the requirement of “past savings” but with the earnings of the capital assets, we could eliminate poverty and economic inequality. BUT the focus continues to be on JOBS and REDISTRIBUTION as the ONLY MEANS to a substance income.

http://thinkprogress.org/economy/2014/06/19/3450807/massachusetts-minimum-wage-11/

From Manufacturing To Distribution, Sharrow Does It All

On June 21, 2014, Construction Equipment Guide published:

Sharrow Lifting Products of New Brighton, Minn., has come a long way since its inception in 1952 to the successful company that is it now.

The company was originally named C.C. Sharrow Company after founder Clarence Charles “Shorty” Sharrow. Over the course of the next three decades, Sharrow’s sons, Clarence, Larry and Bob, joined the business before eventually taking ownership in the early 1970s. Under family ownership, the company maintained as a solid but stable business operation for the next 20 years.

With an eye towards retirement, the Sharrow brothers began developing an ownership transition strategy in the early 1990s that involved an Employee Stock Ownership Plan (ESOP). With the plan set into motion, the ownership and management transition went smoothly as employees quickly gained equity in the company.

Under a new management team staffed by employees with extensive experience and an intimate knowledge of the company’s operations, Sharrow Lifting Products has grown three-fold since 1994. Within that time, the company has added new lines of business and two additional branch locations.

“We are not much for singling out any specific employees, but I would be quick to say that our employee base, as a whole, is the best group of people we have had in our long company history and the largest reason for our success and optimism for the future,” said current president Bob Downs.

Sharrow Lifting Products’s current lines include a range of heavy duty lifting products, such as custom made slings and associated rigging hardware and fixtures. 

The company also has a crane and hoist line where it designs, installs, inspects and services all brands of overhead cranes and all brands of electric and manual hoists. Sharrow also has a training division offering classes for customers based on many industry related topics.

In addition, Sharrow rents a full line of electric and manual hoists, trolleys and a line of hydraulic equipment. “Our largest sale was a few years back when we landed the order for the cable assemblies that operate the retractable roof at the Arizona Cardinal stadium in Phoenix. This was our most famous job to date,” said Downs.

The New Brighton facility has 31,000 sq. ft. (2,880 sq m) under roof including a full sized training room. The Hibbing, Minn., facility has 4,500 sq. ft. (418 sq m).

Sharrows sales staff and technicians receive ongoing specialized training from both vendors and industry specialists. Sharrow also offers a wide variety of industry specific training courses for its customer base. In addition, there are standard classes and also customizable classes offered year round.

Sharrow products have no specific life span, as it is a function of the care and use they are subjected to. Sharrow is a job shop, so some common slings and rigging hardware are always available for walk-in customers, but most slings are custom built as ordered and turned around in either hours or a few days depending on the workload.

After 62 years in business, the future for Sharrow still looks very bright. The employee owners are committed to increasing both their size and efficiency. As they fine tune their processes, it will give Sharrow the proper basis to continue to open additional branches across the area and beyond, according to Downs.

“The largest challenge in the past and into the future has always been finding quality people that ‘get it,’ Downs added. “We seek employees that are committed to the goal of many — knowing that their commitment to the whole will in turn give them what they need for themselves and their families. That, in essence, is what employee ownership is all about, and what our success is based on.”

Region: Midwest Edition | StoryID: 23047 | Published On: 6/21/2014

Binary economist Louis Kelso was the architect and pioneer of the Employee Stock Ownership Plan (ESOP), which Kelso invented to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield––on the promise of the capital investment’s future income.

The ESOP provides access by employees to capital credit to buy company stock and pay for it in pre-tax dollars out of what the assets underneath that stock yield. Bank loans are made to the ESOP trust that represents employees, instead of to the company (current owners). The trust gives the lender a note and with the borrowed monies makes the investment in the company stock. The company then issues stock to the ESOP trust. The company now has the money, which otherwise could have been borrowed directly without the ESOP (benefiting current owners), to make the planned investment and repay the loan from pre-tax forecasted future capital earnings. The company promises the bank to make pre-tax full-dividend payments to the ESOP trust to enable the trust to replay the lender. Assuming that it would take five years for that capital investment to pay for itself, at the end of five years the employees now own the full stock value in the expanded company.

Companies can use the ESOP as the credit mechanism to create employee ownership in ratios up to a 100 percent leverage buyout. Nothing has been taken away from the existing owners. However, using the ESOP, the existing owners will surrender the exclusive right to acquire more ownership in the company and have a smaller percentage of ownership in the total company, but they have not been prevented from making a fair rate of return on their thus-far accumulated ownership shares because the company earns a rate of return throughout the process. After the loan has been paid off with pre-tax earnings, the employees will have more earnings from capital and they will have more consumer power to purchase products and services. Multiply this by tens of thousands of employee-owned companies and the economy revs up to grow dramatically.

There are now over 11,000 profitable ESOP companies, of which 1,500 of those companies are worker majority owned, with workers paying for their stock shares out of future corporate profits, not by reducing their take-home labor worker incomes.

DAVEY TREE NAMED LARGEST EMPLOYEE-OWNED SERVICE FIRM IN U.S.

On June 20, 2014, the Record-Courier published:

The Davey Tree Expert Company in Kent has been named the largest employee-owned service firm company in the U.S., according to data from the National Center for Employee Ownership.

The NCEO’s 2014 Employee Ownership 100 list includes the nation’s largest companies that are at least 50 percent owned by an employee stock ownership plan or other broad-based employee ownership plan.

Davey, which employs 7,800 people, is the seventh-largest firm on the list that is 100 percent employee-owned and is the overall 17th largest in the U.S. by total employees. Davey has been employee-owned since 1979 and is the largest employee-owned company in Ohio.

“People are our greatest assets,” said Karl Warnke, Davey’s chairman, president and CEO. “We have been committed to employee ownership for 35 years, and that unwavering dedication has allowed Davey to grow and become a stable yet progressive institution.”

The companies on the list employ approximately 710,000 people worldwide, up from 674,000 in 2013. Companies on both the 2013 and 2014 lists saw their employment rise approximately 4 percent.

An estimated 11 million people currently participate in 12,000 ESOPs in the U.S., according to the NCEO. ESOP companies have an estimated $858 billion in stock participation plan assets.

Research shows ESOP companies that contribute significantly each year to an ownership plan, in addition to offering employees a means to participate in decisions affecting their jobs and that routinely share information about the company’s financial performance with their employees, perform better than firms that do not, according to the NCEO. Details on this research, as well as the full Employee Ownership 100, can be found at the NCEO’s website at www.nceo.org.

The full Employee Ownership 100 list is available online at www.nceo.org/articles/employee-ownership-100.

The Davey Tree Expert Company, with U.S. and Canadian operations in more than 47 states and five provinces, provides a variety of tree care, grounds maintenance and consulting services for the residential, utility, commercial, and government markets. Founded in 1880, Davey has been employee owned for 35 years and has more than 7,800 employees who provide Proven Solutions for a Growing World. For more information, visit www.davey.com.

Binary economist Louis Kelso was the architect and pioneer of the Employee Stock Ownership Plan (ESOP), which Kelso invented to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield––on the promise of the capital investment’s future income.

The ESOP provides access by employees to capital credit to buy company stock and pay for it in pre-tax dollars out of what the assets underneath that stock yield. Bank loans are made to the ESOP trust that represents employees, instead of to the company (current owners). The trust gives the lender a note and with the borrowed monies makes the investment in the company stock. The company then issues stock to the ESOP trust. The company now has the money, which otherwise could have been borrowed directly without the ESOP (benefiting current owners), to make the planned investment and repay the loan from pre-tax forecasted future capital earnings. The company promises the bank to make pre-tax full-dividend payments to the ESOP trust to enable the trust to replay the lender. Assuming that it would take five years for that capital investment to pay for itself, at the end of five years the employees now own the full stock value in the expanded company.

Companies can use the ESOP as the credit mechanism to create employee ownership in ratios up to a 100 percent leverage buyout. Nothing has been taken away from the existing owners. However, using the ESOP, the existing owners will surrender the exclusive right to acquire more ownership in the company and have a smaller percentage of ownership in the total company, but they have not been prevented from making a fair rate of return on their thus-far accumulated ownership shares because the company earns a rate of return throughout the process. After the loan has been paid off with pre-tax earnings, the employees will have more earnings from capital and they will have more consumer power to purchase products and services. Multiply this by tens of thousands of employee-owned companies and the economy revs up to grow dramatically.

There are now over 11,000 profitable ESOP companies, of which 1,500 of those companies are worker majority owned, with workers paying for their stock shares out of future corporate profits, not by reducing their take-home labor worker incomes.

http://www.recordpub.com/news%20local/2014/06/20/davey-tree-named-largest-employee-owned-service-firm-in-u-s

Fear Not The Coming Of The Robots

On June 21, 2014, Steven Rattner writes in The New York Times:

JUST over 50 years ago, the cover of Life magazine breathlessly declared the “point of no return for everybody.” Above that stark warning, a smaller headline proclaimed, “Automation’s really here; jobs go scarce.”

As events unfolded, it was Life that was nearing the point of no return — the magazine suspended weekly publication in 1972. For the rest of America, jobs boomed; in the following decade, 21 million Americans were added to the employment rolls.

Throughout history, aspiring Cassandras have regularly proclaimed that new waves of technological innovation would render huge numbers of workers idle, leading to all manner of economic, social and political disruption.

As early as 1589, Queen Elizabeth I refused a patent on a knitting machine for fear it would put “my poor subjects” out of work.

In the 1930s, the great John Maynard Keynes predicted widespread job losses “due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”

So far, of course, they’ve all been wrong. But that has not prevented a cascade of shrill new proclamations that — notwithstanding centuries of history — “this time is different”: The technology revolution will impair the livelihoods of millions of Americans.

Even The Economist has weighed in, with a special section declaring on its cover that robots are the “immigrants from the future.”

Let’s go back to first principles. Call it automation, call it robots, or call it technology; it all comes down to the concept of producing more with fewer workers. Far from being a scary prospect, that’s a good thing.

Becoming more efficient (what economists call “productivity”) has always been central to a growing economy. Without higher productivity, wages can’t go up and standards of living can’t improve.

That’s why, in the sweep of history, the human condition barely improved for centuries, until the early days of the industrial revolution, when transformational new technologies (the robots of their day) were introduced.

Consider the case of agriculture, after the arrival of tractors, combines and scientific farming methods. A century ago, about 30 percent of Americans labored on farms; today, the United States is the world’s biggest exporter of agricultural products, even though the sector employs just 2 percent of Americans.

The trick is not to protect old jobs, as the Luddites who endeavored to smash all machinery sought to do, but to create new ones. And since the invention of the wheel, that’s what has occurred.

When was the last time you talked to a telephone operator? And yet if rotary dial telephones hadn’t been invented, millions of Americans would currently be wastefully employed saying “Central” every time someone picked up a telephone receiver. More recently but similarly, the Internet has rendered human directory assistance nearly extinct.

Of course, I can’t prove that the impact of some new wave of technological innovation won’t ever upend thousands of years of history. But it hasn’t happened yet.

If technology were supplanting jobs, productivity — the measure of each worker’s output — would be rising sharply. However, that’s not happening. In fact, productivity growth in recent years has been sluggish (an even scarier concern). That has led to fears about the opposite problem, the possibility that technological advances won’t be robust enough to provide the productivity increases needed to sustain income growth.

I don’t buy that either. As recently as 30 years ago, few of us would have foreseen the information technology revolution, with the vast gains in efficiency that have flowed from it.

To be sure, technology has changed the nature of work — more specialized training is now required for many jobs — and consequently, it has contributed to the sharp rise in income inequality.

But technology is not the prime culprit behind our languid employment and income growth. That honor belongs to globalization, and particularly the ability of companies to substitute far less expensive and increasingly skilled labor in developing countries.

To address these very real challenges, we should be embracing technology, not fearing it. That means educating and training Americans to perform the more skilled jobs that cannot yet be performed by workers in developing countries. And let’s not forget that we are world leaders in industries like education, medicine, technology, entertainment and yes, even financial services.

Many of these sectors generate skilled jobs — nurses, who are in high demand, earn an average of $65,000 per year — and even substantial export dollars. Of course, not every worker can be retrained, and so we must help those who aren’t suitable for the new jobs through more robust social welfare programs.

We mustn’t become a nation of robot worriers. That will merely guarantee that our incomes and standards of living will continue to stagnate.

Steven Rattner has “productivity” confused with “productiveness.” The economic growth gains have not been the result of human labor productiveness but due to the non-human factor of production–– capital assets in the form of productive land, structures, machines, tools, super-automation, robotics, digital computerized processing, etc.  Fundamentally, economic value is created through human and non-human contributions.

Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in binary economist Louis Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary.”

Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.

At Agenda 2000 (an advocacy firm founded by myself with Louis Kelso as Chairman), we used 90 percent, while the Rand Corporation statistic was 98 percent, to represent the productive capital factor input to creating products and services. In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work with capital work. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes capital ever more productive. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through jobs, minimum wage, and welfare. Such policies do not function effectively.

In a democratic growth economy, based on Kelso’s binary economics, the ownership of capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.

There are a list of papers by economic scholars that support the point that technological and system changes account for almost 90 percent of “productivity growth.”  See footnote 6 of Norman Kurland’s (President of the Center for Economic and Social Justice)  paper “A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation” published in 2001 (Vol. 30) by the Journal of Socio-Economics and pages 173-195 of the CESJ book Capital Homesteading for Every Citizen.  This point is also on page 25 and footnote 49 on page 10 of the Capital Homesteading book. (See www.CESJ.org)

See also the excellent article by Professor Robert Ashford on pages 99-132 of CESJ’s Curing World Poverty book to explain how the term “productivity” as used by economists differs from the term “productiveness” as used by Kelsonians. “Productivity” stems from the erroneous “labor theory of value” and a one-factor analysis that rejects the value of “Say’s Law of Markets.” Kelso’s binary or two-factor theory of economics would avoid redistributive non-market-based distributions of income under the wage slave, welfare slave, charity slave, consumer debt slave system in today’s slow-growth world by enabling all citizens to own and increase their incomes from all non-human increases to the productive process.

These papers and free downloadable books are available at the CESJ Web site at www.cesj.org and should be read by economic commentators such as Steven Rattner at The New York Times. Unfortunately the published article provides no way to comment.

http://www.nytimes.com/2014/06/22/opinion/sunday/steven-rattner-fear-not-the-coming-of-the-robots.html?_r=0

Listening to the OECD And IMF (!?#*!) On The EITC/Minimum Wage Connection

On June 16, 2014, Jared Bernstein writs on The Huffington Post:

I see where my CBPP colleague CC Huang has a nice post up summarizing one of the recommendations from a new Organization for Economic Co-operation and Development’s (OECD) report on the U.S. economy.

The report touts the virtues of the EITC as a wage subsidy for low-income workers that both encourages work and reduces poverty. They go on to emphasize an EITC reform that we too have gotten solidly behind:

“To make the EITC even more effective, the OECD suggests strengthening the credit for childless workers (including non-custodial parents) by expanding their credit and lowering the age eligibility threshold from 25 to 21. Since childless workers now receive little or no EITC, it’s ‘less effective at increasing employment and reducing poverty’ among this group, according to the OECD. In part because the EITC for childless workers is so meager, childless workers arethe sole group that the federal tax system taxes into poverty.“The EITC is a rare anti-poverty program that gets a fair bit of love from both sides of the aisle. But to their great credit, the OECD goes a step further, making the important additional point that an EITC expansion “would be more effective if supported by a higher minimum wage.”

Back to CC:

“As we’ve explained, the EITC and federal minimum wage are complementaryways to support low-wage workers, not alternatives. One reason is that the EITC, by increasing the number of people seeking jobs in the low-wage sector, can put downward pressure on the wages that employers offer potential workers. A higher minimum wage helps offset that effect.”

The OECD points out that the effects of minimum-wage increases on employment are ‘uncertain’ and recommends carefully monitoring the impact of any such increase. But it also notes, ‘[t]he value of the minimum wage has declined significantly in real terms over time’ and ‘[r]elative to the median wage, the current federal minimum wage is well below the average statutory minimum wage in OECD countries.’ [See first figure below; it’s also low relative to the median wage: see second figure.]

So far, so good. But here’s the clincher. The International Monetary Fund (IMF), an institution no one would mistake for wild-eyed econo-radicals, made much the same argument in their new U.S. report:

“…given its current low level (compared both to U.S. history and international standards), the [US] minimum wage should be increased. This would help raise incomes for millions of working poor and would have strong complementarities with the suggested improvements in the EITC, working in tandem to ensure a meaningful increase in after-tax earnings for the nation’s poorest households.”

The quality and depth of the IMF’s work has hugely improved in recent years, but still… for old hands like yours truly, reading this excerpt brought to mind the flying pig you see here.

2014-06-18-realmin.png

2014-06-18-ratiomin.png

 If only academia, political organizations, think tanks, and the media would put as much effort into advocating for BROADENED OWNERSHIP of wealth-creating, income-producing productive capital expansion of the economy and empowering EVERY child, woman and man to acquire capital without the requirement of “past savings” but with the earnings of the capital assets, we could eliminate poverty and economic inequality. BUT the focus continues to be on JOBS and REDISTRIBUTION as the ONLY MEANS to a substance income.

A Graphical Understanding Of The Just Third Way

The referenced 10 graphics will be helpful to better understand the Just Third Way:

http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf

Hopefully, people will then go to the homepage of the Center for Economic and social Justice to scan it for articles and free downloadable books to go deeper into understanding the terms, the logic of binary economic theorythe three interdependent principles of economic justice, the four pillars of the Just Third Way, and how the Capital Homestead Act would change the economic system.

No, The Poor Aren’t Poor Because They Refuse To Work

On June 17, 2014, Bryce Convert writes on ThinkProgress:

An Ohio father picks up food at a food pantry

An Ohio father picks up food at a food pantry

CREDIT: AP

In March, Rep. Paul Ryan (R-WI) said that one cause of poverty is a “culture problem” for inner city men: “men not working and just generations of men not even thinking about working or learning the value and the culture of work.” While he backed away from the racially charged ‘inner city’ language, he stood by the idea that we can alleviate poverty if poor people would just work more. That’s a common idea: that the poor just need to work more or work harder to escape their financial situations.

But that may not in fact be the case. In fact, the majority of able-bodied, adult, non-elderly poor people worked in 2012, according to a data analysis by economist Jared Bernstein. There were about 21 million non-disabled, poor adults that year, and about half of them, or 11 million, worked. Another 3 million didn’t work because they were in school. If those in school are taken out of the picture, 57 percent of the poor people we would expect to work did so. Five million didn’t work because they had an illness or disability.

It’s true that these figures are lower than for better-off Americans. Among non-poor, able-bodied adults, 85 percent worked in 2012. But the poor were facing an economy where the unemployment rate was over 8 percent and even today there are more than two job seekers for every job opening. Unemployment rates have also been higher for those with less education, who tend to have lower incomes: those without a high school diploma have a 9.1 percent unemployment rate and those with a diploma have a 6.5 percent rate, while college graduates have just a 3.2 percent rate.

It’s not hard to see why someone might work and still end up poor. Working a minimum wage job full time brings in about $14,500 a year, which leaves a parent of two $3,000 below the poverty line. The minimum wage isn’t enough to afford rent in any state in the country. This wasn’t always the case. In the 1960s, the minimum wage kept that family of three out of poverty, and even in the 1970s it kept a family of two above the line. Raising the wage would lift millions out of poverty and reduce the poverty rate.

There are other misconceptions about why the poor end up poor. Some think they bring hardship on themselves by being unwise with their money. But the poor spend a smaller percentage of their budgets on eating out and entertainment while spending more on the necessities than their better off peers. And while both rich and middle class Americans have increased their spending habits since the recession, the poorest have actually cut back.

 

http://thinkprogress.org/economy/2014/06/17/3449910/poor-work/