Why Elon Musk Is A Fast Talking Hustler Who Preys Upon Scientifically Illiterate Bureaucrats To Siphon Billions Of Dollars From Taxpayers

On Jun3 13, 2017, Ethan Huff writes on Natural News:

If the quintessential public welfare abuser had a corporate replica, it would be Elon Musk and his multibillion-dollar trio of companies: Tesla Motors Inc., SolarCity Corp., and Space Exploration Technologies Corp., also known as SpaceX. As successful as these three entities appear to be on their own, the truth of the matter is that none of them would even exist were it not for Musk’s crafty ways in swindling governments out of billions in taxpayer dollars to subsidize his various pet ventures.

It is estimated that since their respective launches, Tesla, SolarCity, and SpaceX have together benefited from an estimated $4.9 billion in government welfare payments. This means that everyday working folks are having a portion of their hard-earned wages handed over to Musk so he can pump out more Model S electric sedans, for instance, which typically sell to buyers who, on average, boast household incomes of about $320,000.

From the very beginning, Musk has centered his attention towards extracting as much cash as he can from the public coffers to fund his endeavors. This includes taking advantage of every incentive, grant, tax break, and environmental credit available at both the federal and local level. When this isn’t enough, Musk has been known to go even further, bringing together state leaders to compete for his business by doling out even more money.

The ways in which Musk obtains taxpayer funds for his various business ventures closely resembles what someone who’s addicted to food stamps might do to keep the E.B.T. card loaded without actually having to work. The public-private financing model upon which he relies is the primary means keeping Musk’s businesses alive, as neither Tesla nor SolarCity have yet to operate in the positive.

“He definitely goes where there is government money,” stated Dan Dolev, an analyst at Jefferies Equity Research, to the Los Angeles Times. “That’s a great strategy, but the government will cut you off one day.”

If you’re a taxpayer, you’re helping rich people buy Tesla cars and SolarCity solar panels

This hasn’t happened yet, though. In fact, Musk seems to be expanding his financial maneuvering whenever and wherever possible to seize an even greater share of the welfare pot for his companies. He recently smooth-talked New York State into contributing $750 million towards a new SolarCity manufacturing plant in Buffalo. SolarCity’s annual rent will be just $1, and the company will not be required to pay property taxes at the site for 10 years.

Meanwhile, New York taxpayers will be footing the bill, even though many of them could never afford to purchase SolarCity solar panels, even with the small subsidies offered by the government. They’ll also have to continue paying property taxes on their own homes and businesses, while SolarCity – which, again, wouldn’t exist without taxpayer money – gets a free ride for at least the next decade.

Or how about the $1.3 billion in incentives the state of Nevada recently awarded to Tesla to develop a large battery manufacturing facility near Reno? This incredible feat was accomplished after Musk aggressively negotiated with Nevada lawmakers for more than a year, pitting the leaders of other states against them to maximize his welfare handout. By playing welfare hardball, Musk was able to convince Nevada lawmakers to actually forego giving incentives to other industries such as film and insurance to instead funnel it all to him.

In Texas, a small community at the southern tip of the state awarded Musk’s SpaceX company with a generous $5 million benefits package that includes infrastructure spending and subsidies. These subsidies include a 15-year property tax break from the local school district, which means $3.1 million less for local schools, and $3.1 million more for SpaceX. And this is all in addition to the $10 million that the state of Texas also awarded to SpaceX for the apparent privilege of having a Musk facility on its land.

Each state, including Texas, that’s cooperated with Musk in giving him everything he demands has done so under the pretense of creating more jobs, and thus more revenue. The leaders of these states have been more than eager to gulp down Musk’s Kool-Aid because they really believe that what he’s bringing to the table in terms of innovation will far exceed their initial investment.

Will Musk ever fulfill his promise of releasing an affordable Tesla vehicle for the middle class?

This may end up being the case eventually. But as of now, a lot of Musk’s endeavors are still a pipe-dream in terms of actually paying off. Things get even more complicated when considering that he isn’t even keeping simple promises like releasing Tesla cars that are actually affordable to the average person like he said he would.

“In the early days at Tesla – when the company first produced an expensive electric sports car, which it no longer sells – Musk promised more rapid development of electric cars for the masses,” writes Jerry Hirsch for the L.A. Times, noting that Musk promised in a 2008 blog post to release a sedan costing no more than around $40,000. That, of course, never happened.

“In fact, the second model now typically sells for $100,000, and the much-delayed third model, the Model X sport utility, is expected to sell for a similar price. Timing on a less expensive model – maybe $35,000 or $40,000, after subsidies – remains uncertain.”

Bre Payton, writing for The Federalist, put it oh so well when she described Musk as “a pretty shady dude who preys on taxpayers by pressing on progressive lawmakers’ soft spot for renewable energy.” She says that both SolarCity and Tesla “have a reputation of sucking the marrow from taxpayers in the form of mandates, rebates, and tax breaks.”

NaturalNews would agree, based on Musk’s extensive track record of milking the system for his own personal gain – in the name of helping the environment and paving the way for a renewable future, of course.

http://www.naturalnews.com/2017-06-13-why-elon-musk-is-a-fast-talking-hustler-who-preys-upon-scientifically-illiterate-bureaucrats-to-siphon-billions-of-dollars-from-taxpayers.html

Such huge taxpayer-funded incentives are just the beginning as Elon Musk and his executive team have forecast growth to be in the several billions of dollars over the course of the next five years, further enriching the stock ownership portfolios of Musk corporations’  monopoly ownership. Yet the workers just get to have jobs, but no ownership such as could be provided using an Employee Stock Ownership Plan (ESOP) with new shares issued and paid for our of future earnings without reducing worker wages or other benefits, and at the same time incentivizing workers as true owner-partners in the enterprises.

Elon Musk represents one of the perfect examples of crony-end game capitalism disguised to the taxpaying citizens as necessary to create jobs and advance solutions to environmental enhancement. In this case, the game is played in the name of alternative transportation, planetary colonization and the environment. NO WHERE is there a stipulation that the subsidies, tax exemptions, loans and grants be conditioned on 100 percent worker owned companies, not as a collective but in individual worker titles, or that the financing is structured so that the workers will end up owning a significant share of the new capital assets and the benefits of the future wealth-creation and income generated. While supposedly more than 6,500 jobs will be created, subsidized by taxpayer incentives, in large measure the new factories will be technologically infused with advanced “robotics,” digitalized operations, and super-automation capital assets, that will be OWNED by Elon Musk and a select narrow group of wealthy owners who get to cash in on our taxpayer incentives and subsidies as the worth of the corporations accelerate.

Once again, taxpayer supported government welfare is extended to the private sector without the stipulation of broadening private, individual ownership of NEW productive capital investment related to technological innovation and invention. This is in the form of government subsidies, loan guarantees and tax incentives that are issued in the name of JOB CREATION, while oblivious to the CONCENTRATED CAPITAL OWNERSHIP CREATION resulting from bolstering the financial ownership interests of the awarded companies’ ownership class.

What is needed is a massive loan guarantee economic growth plan with the aim to balance production and consumption by empowering EVERY American to acquire private, individual ownership in FUTURE wealth-creating, income-producing productive capital asset investments and pay for their loans out of the earnings of the investments. This approach embraces the logic of corporate finance, that is, that the investments will over time, typically within 3 to 7 years, produce income to pay for the capital credit extended and to continue to produce income for the corporate owners over the course of numerous years in the future.

Unfortunately, with Elon Musk’s corporate enterprises and others, the subsidies, tax incentives, direct loans and loan guarantees do not stipulate the demonstration of broadened private, individual ownership among the employees of the companies receiving taxpayer financial support. Instead the direct loans and loan guarantees are pitched as JOB CREATION measures while completely hiding the fact that a privilege ownership class benefits as the owners of investment assets.

In the short-term FUTURE, ALL direct loans and loan guarantees should stipulate that corporations demonstrate broadened ownership of their corporations by their employees and other Americans. We should quickly reform the system to eliminate ALL tax loopholes and subsidies and provide equal opportunity to insured, interest-free capital credit to finance the FUTURE building of an economy that can support general affluence for ALL Americans.

The REAL issue regarding the structural problem with the economy, which is rigged to further the CONCENTRATED CAPITAL OWNERSHIP interests of the wealthiest Americans at the expense of the American majority who are exponentially facing job losses and labor worth devaluation as tectonic shifts in the technologies of production require less and less labor workers to produce the products and services needed and wanted by our society, is ignored. This issue is NEVER addressed, which is the crux of the problem causing our declining economy.

What we need is for the Federal Reserve to stop monetizing unproductive debt and begin creating an asset-backed currency that could enable every child, woman and man 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 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 back  by the government, but would not require citizens to reduce their funds for consumption to purchase shares. ALL subsidized loan guarantees would have the stipulation that the companies benefiting from the loan infusion demonstrate NEW owners be created among their employees and others in which ownership shares are purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets.

We need to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street or the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today––management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would serve to seed the new policy direction and would fulfill the government’s responsibility for the health and prosperity of the American economy.

Our political leaders, academia, and the media fail to understand that our financial system has resulted in a fundamental imbalance between production and consumption. We have ignored the systematic income inequalities that persist and grow exponentially due to the steady progress of tectonic shifts in the technologies of production, shifting productive input from labor to the non-human factor of production––productive capital, as generally defined as land, structures, human-intelligent machines, superautomation, robotics, digital computerized automation, etc. Productive capital assets are OWNED by individuals and, respecting private property principles, those individuals are entitled to the earnings generated by such assets.

The significant problem has been the systematic denial of participation as capital owners on the part of the majority of consumers. While the wealthy capital ownership class has essentially rigged the financial system to their benefit, and by that is meant to continually concentrate ownership of productive capital among the richest Americans, the majority of Americans have been and are dependent on JOB CREATION. Yet, none of our political leaders, academia or the media addresses this imbalance with the richest Americans entitled to income growth associated with productive capital ownership and the majority facing further job losses and degradation due to technological advancement.

Ordinary Americans of so-called “middle-class position” have used consumer debt financing as a means of bettering their life with an abundance of consumer products and services. The government has used income redistribution via taxation and national debt to prop up the economy with monies spent on supporting a massive military-industrial complex comprised of a small group of owners and millions of “employed,” and various social programs to uplift the American majority’s life and prevent their decline into poverty––supported by government dependency.

The ONLY way out of this mess, if we are to not become a complete socialist or communist communal state governed by an elite class, is to embrace growth managed in such a way that EVERY American is empowered to acquire over time a viable wealth-creating, income-producing capital estate and pay for their acquisition out of the FUTURE earnings of the investments. Such is the precise means that the richest Americans continually advance their wealth and thus, income.

We need leaders who will put this issue before the national debate stage, and we need the media to put forth the questions whose answers will provide the financial mechanism specifics to reverse the ever dominant OWNERSHIP CONCENTRATION. Such concentration and the economic power that result is taking control of our representative government, with productive capital ownership channeled through plutocratic finance into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

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

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

 

 

California’s Descent To Socialism: Joel Kotkin

Environmentalist Tom Steyer speaks to the Center for American Progress’s annual policy conference in Washington in this November 2014 file photo. (Manuel Balce Ceneta, AP Photo, File)Environmentalist Tom Steyer speaks to the Center for American Progress’s annual policy conference in Washington in this November 2014 file photo. (Manuel Balce Ceneta, AP Photo, File)

On June 11, 2017, Joel Kotkin writes on the Los Angeles Daily News:

California is widely celebrated as the fount of technical, cultural and political innovation. Now we seem primed to outdo even ourselves, creating a new kind of socialism that, in the end, more resembles feudalism than social democracy.

The new consensus is being pushed by, among others, hedge-fund-billionaire-turned-green-patriarch Tom Steyer. The financier now insists that, to reverse our worsening inequality, we must double down on environmental and land-use regulation, and make up for it by boosting subsidies for the struggling poor and middle class. This new progressive synthesis promises not upward mobility and independence, but rather the prospect of turning most Californians into either tax slaves or dependent serfs.

California’s progressive regime of severe land-use controls has helped to make the state among the most unaffordable in the nation, driving homeownership rates to the lowest levels since the 1940s. It has also spurred a steady hegira of middle-aged, middle-class families — the kind of tax-burdened people Gov. Jerry Brown now denounces as “freeloaders” — from the state. They may have access to smartphones and virtual reality, but the increasingly propertyless masses seem destined to live in the kind of cramped conditions that their parents and grandparents had escaped decades earlier.

A GREEN PEOPLE’S REPUBLIC?

There is some irony in a new kind of socialism blessed by some of the world’s richest people. The new policy framework is driven, in large part, by a desire to assume world leadership on climate-related issues. The biggest losers will be manufacturing, energy and homebuilding workers, who will see their jobs headed to other states and countries.

Under the new socialism, expect more controls over the agribusiness sector, notably the cattle industry, California’s original boom industry, which will be punished for its cows’ flatulence. Limits on building in the periphery of cities also threaten future growth in construction employment, once the new regulations are fully in place.

Sadly, these steps don’t actually do anything for the climate, given the state’s already low carbon footprint and the fact that the people and firms driven out of the state tend to simply expand their carbon footprints elsewhere in their new homes. But effectiveness is not the motivation here. Instead, “combating climate change” has become an opportunity for Brown, Steyer and the Sacramento bureaucracy to perform a passion play, where they preen as saviors of the planet, with the unlikable President Donald Trump playing his role as the devil incarnate. In following with this line of reasoning, Bay Area officials and environmental activists are even proposing a campaign to promote meatless meals. It’s Gaia meets Lent.

A DIFFERENT KIND OF SOCIALISM

The oligarchs of the Bay Area have a problem: They must square their progressive worldview with their enormous wealth. They certainly are not socialists in the traditional sense. They see their riches not as a result of class advantages, but rather as reflective of their meritocratic superiority. As former TechCrunch reporter Gregory Ferenstein has observed, they embrace massive inequality as both a given and a logical outcome of the new economy.

The nerd estate is definitely not stupid, and like rulers everywhere, they worry about a revolt of the masses, and even the unionization of their companies. Their gambit is to expand the welfare state to keep the hoi polloi in line. Many, including Mark Zuckerberg, now favor an income stipend that could prevent mass homelessness and malnutrition.

HOW SOCIALISM MORPHS INTO FEUDALISM

Unlike its failed predecessor, this new, greener socialism seeks not to weaken, but rather to preserve, the emerging class structure. Brown and his acolytes have slowed upward mobility by environment restrictions that have cramped home production of all kinds, particularly the building of moderate-cost single-family homes on the periphery. All of this, at a time when millennials nationwide, contrary to the assertion of Brown’s “smart growth” allies, are beginning to buy cars, homes and move to the suburbs.

In contrast, many in Sacramento appear to have disdain for expanding the “California dream” of property ownership. The state’s planners are creating policies that will ultimately lead to the effective socialization of the regulated housing market, as more people are unable to afford housing without subsidies. Increasingly, these efforts are being imposed with little or no public input by increasingly opaque regional agencies.

To these burdens, there are now growing calls for a single-payer health care system — which, in principle, is not a terrible idea, but it will include the undocumented, essentially inviting the poor to bring their sick relatives here. The state Senate passed the bill without identifying a funding source to pay the estimated $400 billion annual cost, leading even former Los Angeles Mayor Antonio Villaraigosa to describe it as “snake oil.” It may be more like hemlock for California’s middle-income earners, who, even with the cost of private health care removed, would have to fork over an estimated $50 billion to $100 billion a year in new taxes to pay for it.

In the end, we are witnessing the continuation of an evolving class war, pitting the oligarchs and their political allies against the state’s diminished middle and working classes. It might work politically, as the California electorate itself becomes more dependent on government largesse, but it’s hard to see how the state makes ends meet in the longer run without confiscating the billions now held by the ruling tech oligarchs.

California is widely celebrated as the fount of technical, cultural and political innovation. Now we seem primed to outdo even ourselves, creating a new kind of socialism that, in the end, more resembles feudalism than social democracy.

The new consensus is being pushed by, among others, hedge-fund-billionaire-turned-green-patriarch Tom Steyer. The financier now insists that, to reverse our worsening inequality, we must double down on environmental and land-use regulation, and make up for it by boosting subsidies for the struggling poor and middle class. This new progressive synthesis promises not upward mobility and independence, but rather the prospect of turning most Californians into either tax slaves or dependent serfs.

California’s progressive regime of severe land-use controls has helped to make the state among the most unaffordable in the nation, driving homeownership rates to the lowest levels since the 1940s. It has also spurred a steady hegira of middle-aged, middle-class families — the kind of tax-burdened people Gov. Jerry Brown now denounces as “freeloaders” — from the state. They may have access to smartphones and virtual reality, but the increasingly propertyless masses seem destined to live in the kind of cramped conditions that their parents and grandparents had escaped decades earlier.

A GREEN PEOPLE’S REPUBLIC?

There is some irony in a new kind of socialism blessed by some of the world’s richest people. The new policy framework is driven, in large part, by a desire to assume world leadership on climate-related issues. The biggest losers will be manufacturing, energy and homebuilding workers, who will see their jobs headed to other states and countries.

Under the new socialism, expect more controls over the agribusiness sector, notably the cattle industry, California’s original boom industry, which will be punished for its cows’ flatulence. Limits on building in the periphery of cities also threaten future growth in construction employment, once the new regulations are fully in place.

Sadly, these steps don’t actually do anything for the climate, given the state’s already low carbon footprint and the fact that the people and firms driven out of the state tend to simply expand their carbon footprints elsewhere in their new homes. But effectiveness is not the motivation here. Instead, “combating climate change” has become an opportunity for Brown, Steyer and the Sacramento bureaucracy to perform a passion play, where they preen as saviors of the planet, with the unlikable President Donald Trump playing his role as the devil incarnate. In following with this line of reasoning, Bay Area officials and environmental activists are even proposing a campaign to promote meatless meals. It’s Gaia meets Lent.

A DIFFERENT KIND OF SOCIALISM

The oligarchs of the Bay Area have a problem: They must square their progressive worldview with their enormous wealth. They certainly are not socialists in the traditional sense. They see their riches not as a result of class advantages, but rather as reflective of their meritocratic superiority. As former TechCrunch reporter Gregory Ferenstein has observed, they embrace massive inequality as both a given and a logical outcome of the new economy.

The nerd estate is definitely not stupid, and like rulers everywhere, they worry about a revolt of the masses, and even the unionization of their companies. Their gambit is to expand the welfare state to keep the hoi polloi in line. Many, including Mark Zuckerberg, now favor an income stipend that could prevent mass homelessness and malnutrition.

HOW SOCIALISM MORPHS INTO FEUDALISM

Unlike its failed predecessor, this new, greener socialism seeks not to weaken, but rather to preserve, the emerging class structure. Brown and his acolytes have slowed upward mobility by environment restrictions that have cramped home production of all kinds, particularly the building of moderate-cost single-family homes on the periphery. All of this, at a time when millennials nationwide, contrary to the assertion of Brown’s “smart growth” allies, are beginning to buy cars, homes and move to the suburbs.

In contrast, many in Sacramento appear to have disdain for expanding the “California dream” of property ownership. The state’s planners are creating policies that will ultimately lead to the effective socialization of the regulated housing market, as more people are unable to afford housing without subsidies. Increasingly, these efforts are being imposed with little or no public input by increasingly opaque regional agencies.

To these burdens, there are now growing calls for a single-payer health care system — which, in principle, is not a terrible idea, but it will include the undocumented, essentially inviting the poor to bring their sick relatives here. The state Senate passed the bill without identifying a funding source to pay the estimated $400 billion annual cost, leading even former Los Angeles Mayor Antonio Villaraigosa to describe it as “snake oil.” It may be more like hemlock for California’s middle-income earners, who, even with the cost of private health care removed, would have to fork over an estimated $50 billion to $100 billion a year in new taxes to pay for it.

In the end, we are witnessing the continuation of an evolving class war, pitting the oligarchs and their political allies against the state’s diminished middle and working classes. It might work politically, as the California electorate itself becomes more dependent on government largesse, but it’s hard to see how the state makes ends meet in the longer run without confiscating the billions now held by the ruling tech oligarchs.

http://www.dailynews.com/opinion/20170611/californias-descent-to-socialism-joel-kotkin#.WUBNQTvrrcU.facebook

The Most Radical Aspect Of Jeremy Corbyn’s Program? Democratizing The Economy

A few months ago, a group of Labour Party researchers quietly delivered a report titled “Alternative Models of Ownership” to Shadow Chancellor John McDonnell.

On June 6, 2017, Michal Rozworski writes on In These Times:

“Alternative Models of Ownership” returns to a key demand of the Left, one posed since the nineteenth century: that we take over the machinery and fundamentally retool it — that we take a private system of production and transform it into a social organism und

So much about the 2017 Labour election campaign has been heartening: the energy, the conviction, the full-throated embrace of remaking government in the service of the many.

All of the main campaign pledges — from free tuition to thousands of new homes to a stronger National Health Service — will change where money and resources flow in the UK, from those who need them least to those who need them most. But one set of proposals, if implemented, would go further, starting to transform the foundations of the economy.

A few months ago, a group of Labour Party researchers quietly delivered a report titled “Alternative Models of Ownership” to Shadow Chancellor John McDonnell. Its core message is simple: the Left must begin to democratize the economy.

An abandoned creed

And democratizing the economy means challenging the most important fundamental of capitalist economics: the primacy of private ownership. In particular, private ownership of capital, of all the things — the buildings, the machines, the tools, the hardware, and the software — that we use to make other things. Without a say in how tools are used, workers themselves become passive tools. Being able to actively participate in decision-making and ownership go hand in hand. Democratizing means taking ownership.

These ideas are not new, but they have been suppressed under the decades-long advance of right-wing ideas, including within traditionally left-wing parties and movements. In the UK, one of the last major proposals for democratizing the economy was the Lucas Alternative Corporate Plan. It was put forward by unionized workers at the Lucas Aerospace in 1976 in response to imminent restructuring that would see many of them fired.

The unions at Lucas canvassed their members and produced a detailed plan for an alternative kind of restructuring that would see the company transformed: from one with half of its output going to the military, to one producing socially useful products. Expanding on existing technology, workers proposed retooling to make everything from sorely needed kidney dialysis machines to early solar cells to hybrid power drives for vehicles.

Despite a global campaign, the Alternative Plan failed without adequate government pressure on Lucas. With the election of Margaret Thatcher a few short years later, the window on any similar push for economic transformation was shut.

“Alternative Models of Ownership” is one example of the window’s reopening. Many of the document’s ideas have subsequently found their way into the Labour Party election platform. The right-wing press has used it as evidence that Corbyn would “take Britain back to the ’70s.” But they’re wrong: the plans are firmly oriented to the future.

Why take control

The UK today is in a low-investment, low-productivity trap. And workers are feeling the brunt of it: long-run wage growth is hitting lows not seen since the nineteenth century. Inequality has grown steadily since the financial crisis. The economy, in short, is not working for most people.

“Alternative Models of Ownership” makes the case, rarely heard today, that we can tackle the roots of economic injustice and inequality, not just manage their effects. Democratizing ownership can move the UK economy away from the short-termism of the rich, who profit from unproductive, low-wage work. Socialists have always sought a high-productivity economy, where common ownership translates productivity gains into less work, more leisure, and a better life — as Corbyn says — for the many, not the few.

Instead of the usual fearmongering about robots taking jobs, the report argues that we can, and should, share in the benefits of automation and technological progress. Owned in common, technological advances of the future could free us of drudgery, rather than merely leave us unemployed and destitute.

And while it still makes too much of the dreaded automation, which has yet to show up in the productivity statistics, the document avoids uncritically repeating the wildest prognoses of imminent catastrophic unemployment. Democratic control over production, it says, is a goal regardless of whether robots are doing 20 percent, or one day 90 percent, of the work. Automation can be a threat or a promise depending on the structure of the economy:

“The bigger immediate challenge is not the imminent rise of the robots but that too many people will remain trapped in robotic, drudgery-filled and low-productivity jobs. In this context, accelerating automation is a key political project. The goal should be to embrace the technological potential of modernity, accelerating into a more automated, productive future with all its liberating possibilities, while building new institutions around ownership, work, leisure and investment, where technological change is shaped by the common good.”

How to take control

So if more economic democracy is the end, Labour’s plans focus on three means of reaching it.

First, there are co-ops, membership organizations where ownership and decision-making are shared by the members. There are many types of co-ops, from consumer co-ops where members do nothing more than elect boards of governors every few years to fully worker-run co-ops where shop floor decisions are subject to democratic deliberation. At their best, co-ops ensure new technology is implemented quickly but work is redistributed so that jobs are not lost.

Unsurprisingly, the Labour document focuses on worker co-ops. It relies on three main examples — plywood processing in the US Northwest, the region of Emilia-Romagna in Italy, and the Mondragon network from Spain — to make the case that worker co-ops can be as efficient (if not more efficient) than their privately owned counterparts. This argument is key to presenting co-ops as a cure to the diagnosis of low productivity.

Next there is “municipal and locally-led” ownership. This broad category includes everything from community shops to farmers’ markets and development trusts to social enterprises. Many of these are halfway houses between capitalist enterprise and direct economic democracy. The important fact is that they are responsive to their communities, are limited, partially or totally, in using profits for anything other than reinvestment in the community, and have broader social or environmental goals.

Because of their generally small size and precarity as outcrops of democracy in rough capitalist seas, both co-ops and locally led institutions require other “anchor institutions” to sustain or protect them. For instance, co-ops have a harder time accessing finance because lenders cannot gain rights of control if things go wrong. Local social enterprises, on the other hand, often find it difficult to get off the ground without procurement contracts from local authorities for what they produce.

The third category of economic democracy, national ownership, is usually on a vastly different scale. Where co-ops or social enterprises are most often quite small, state-owned enterprises are usually found among the “commanding heights” of the economy.

Even conventional economics grudgingly admits that there may be “natural” monopolies, sectors where fixed capital costs are so high that any number of firms greater than one is too costly. The post service is one example: a network of post offices that serves the entire population is a very costly thing to create. Not only does it not make sense to have two; anyone trying to create a second one will most likely fail, consumed by the high start-up costs (unless, of course, the government goes out of its way to hamstring or dismantle these monopolies).

“Alternative Model of Ownership” argues for state ownership where natural monopolies exist, in sectors where only the government can carry out the long-term and risky investment that scares off private investors, and where high-quality services are needed. This third category is — rightly! — kept quite broad. Economic democracy is not a narrow niche.

While state-owned enterprises give the government direct control over such things as pricing and production, there are no guarantees that they will be significantly more democratic, neither for their workers nor the citizens who use their goods or services. Labour’s report holds out the promise for a different kind of state, one that recognizes public ownership is a means for more democracy, not an end in itself.

In a more democratic state, workers might elect front-line managers within a national railway company whose board included representatives from unions, passenger rights groups, and local government. Community councils of patients could help chart the strategy of a public hospital — an idea the NHS briefly flirted with in the 1970s. Economic democracy is far more than public ownership.

What to control

Of the ideas within “Alternative Models of Ownership,” the one that figures most prominently in the Labour manifesto is nationalization. Or rather, renationalization. Corbyn has pledged to take crucial services such as rail and mail back under public ownership.

The privatization of the British railroads has been a textbook disaster: service has decreased, fares have skyrocketed, and ridership has dropped. The UK is a total laggard in the construction of high-speed rail — precisely the type of high-cost, high-risk endeavor with huge social and ecological benefits that is largely undertaken by state-run rail companies elsewhere.

The Royal Mail has seen some of the same dynamics in service quality and cost since becoming a for-profit business. Labour has committed to taking both back into public hands step by step: taking over rail companies as their franchises expire and reversing Royal Mail privatization.

A third major sector of the UK economy that’s gone from public into private hands is power generation and distribution. Unlike the cases of rail and mail, the pledge to bring the energy system back under public ownership draws on the second plank of “Alternative Models of Ownership”: Labour has said it will create a decentralized system where a single nationally owned grid is framed by a network of new municipally owned energy providers. The plan is to create new municipal entities alongside existing private providers, outcompeting and eventually replacing them with a combination of lower costs, better service, and mandated green power.

Moving the debate forward

John McDonnell has also spoken regularly about expanding co-ops, especially in cases where companies are failing and workers risk being laid off. Additionally, McDonnell has spoken of the “Right to Own,” a key proposal of Alternative Models of Ownership, which McDonnell says would give workers “first rights on buying out a company or plant that is being dissolved, sold, or floated on the stock exchange.” Labour is right to include co-ops as a potential source of economic democracy but its report isn’t as critical as it should be. In the first instance, there are times when businesses are struggling for good reason, whether due to technological obsolescence, a change in fashion or some other cause. Funds should then be directed not just to taking over the firms but to reorienting them.

This is what the precursors to Labour’s current policy at Lucas Aerospace wanted — and it is a much bigger project, one that may require far more than just buy-out funds: retraining, technical expertise, retooling, perhaps at least temporary nationalization to obtain funding.

More broadly, co-ops under capitalism often end up adopting capitalist business practices, even against the best wishes of their members. Wage disparities, an increasingly professionalized cadre of managers, arbitrary shop floor discipline — all of these are symptoms that have come to plague long-standing co-ops, for example ones in the Mondragon network. Others, such as those in the US plywood industry, have slowly died as the industry transformed.

There is nothing inherently good about small scale. It can, sometimes, root producers in communities and create some semblance of democratic ownership. But it can also generate inefficiencies, smaller cushions for risk, and provincialism — more parochial management or a lack of innovation.

Starting small may be easier, but ultimately more control over economic decision-making means more control over investment across the economy. Democratic planning has always been dogged by the question of directing investment. Alongside local experiments, we must be thinking about the heights of the global economy, the heart of our modern capitalist planning apparatus: the financial system. That it is missing from “Alternative Models of Ownership” shows the long road to more wholesale transformation.

In some sectors, economic democracy will be easier at the local level, in others larger entities will be more stable and resilient. There is an old left argument that capitalism creates its own conditions for being surpassed. Today’s enormous corporations pay poverty wages, despoil the environment, and are run as personal fiefdoms. But they also increase technical productivity and bring masses of people together, revealing the unquestionably social nature of work.

Despite the myth of meritocracy, workers in today’s global supply chains and massive service operations can see immediately that no one person, no Sam Walton, no Richard Branson, is responsible for making them run. We are bound together by a grand machinery. Under capitalism, the machinery distributes its growing bounty unequally, destroying human lives and nature in the process.

“Alternative Models of Ownership” returns to a key demand of the Left, one posed since the nineteenth century: that we take over the machinery and fundamentally retool it — that we take a private system of production and transform it into a social organism under democratic control.

Doing so requires steeling ourselves for a big fight. The report offers many proposals for democratic end goals, but we must also devise strategies for the inevitable struggles to achieve them. We cannot fall into a technocratic trap. Nationalizing industries or instituting municipal control are not neutral proposals but class demands. Labour’s surge in the polls and its fantastic campaign are a start – but we need a long-term focus on building the power that will be capable of making these ideas reality.

“Alternative Models of Ownership” is a real step forward, reviving the demand for economic transformation. It is an ambitious document and, undoubtedly, one of the most radical we have seen in mainstream politics for a long time. Jeremy Corbyn’s Labour is proposing not just that we have a bigger slice of the pie, but a bigger say over how it is made.

http://inthesetimes.com/article/20197/jeremy-corbyn-labour-democracy-economy-election

 

Why Is The Middle Class Shrinking?

On December 30, 2015, Steven Horowitz writes on FEE, the Foundation for Economic Education:

Economic inequality continues to be a major political issue even as the headlines scream about terrorism and climate change. Bernie Sanders has made it a centerpiece of his presidential campaign, and other candidates have addressed it along the way. And a recent study by the Pew Research Center has added new, though misplaced, fuel to the fire of those concerned about inequality.

The Pew study has been discussed in the media, and one key point has been grossly misunderstood. Among other things, the study found that the American middle class is shrinking and is now just under half of the population. Commentators quickly began to refer to the “hollowing out” of the middle class and to tie this study to the concerns about growing inequality.

However, a close look at the data shows that the middle class has shrunk since 1971 because more members of the middle class have moved up the income ladder than down it.

Don’t believe me? Look for yourself at the terrific graphic that the Financial Times created to illustrate the data:

You can watch as the folks on the left slowly slide to the right over 44 years. When you compare the 1971 distribution with the 2015 one, what do you see? A growth in households earning around $80,000 or above, adjusted for inflation, since 1971 and a significant decline in those making less than that amount (with the exception of the folks right around $0). It’s true that there’s not a fat middle class anymore, but why should that trouble us if there are more high-income households and fewer low-income households overall?

The funny part of this is that if you read the story in the Financial Times that accompanies this graphic, it’s as if they never actually looked at the graphic they produced. Their narrative is at odds with it, as the narrative proclaims the doom-and-gloom story that the graphic actually refutes. As they say, never let the facts get in the way of a good story.

This growth in household income may, to some extent, be a by-product of the same economic processes that have produced the concerns about inequality, illustrated in this graphic by the significant growth of the ultra-rich.

There are far more very rich people today than there were 44 years ago, but the growth of the upper class has gone hand in hand with the enrichment of a large number of less-well-off households. Are there ways in which economic inequality is good, then? I think the answer to that question is yes. If so, then, what are they? Here are two defenses of economic inequality that proponents of the free market could make.

First is the more obvious one: growing inequality is good because it might be a consequence of economic institutions that produce all kinds of results that we think are desirable. For example, if competitive markets lead to peace and rising prosperity for all but also create inequality along the way by allowing some folks to get very rich, then we should at least tolerate that inequality because the things that produce it also produce other things we like.

This is the usual defense libertarians invoke, and it’s a good argument. The critic, however, might say that even if the defense is true, it doesn’t prove that inequality is necessary for that result. There’s a difference between saying, “Good economic institutions will produce inequality while creating good economic outcomes for all,” and saying, “Good economic outcomes for all can’t be produced without inequality.” The critic would likely ask how reducing the inequality that markets produce will harm their ability to produce those good results.

And here is where we come back to the Pew study and get a second defense of inequality. One way the middle class (and all of us) has become richer in the last generation is that the cost of so many goods and services has dropped in terms of the number of hours we have to work at the average wage in order to purchase them. The lower price of basic goods has enabled more and more people to afford things like large TVs, smartphones, and new, cheaper medications.

One thing that has made this process happen is inequality. In The Constitution of Liberty, F.A. Hayek argued,

A large part of the expenditure of the rich, though not intended for that end, thus serves to defray the cost of the experimentation with the new things that, as a result, can later be made available to the poor.… Even the poorest today owe their relative material well-being to the results of past inequality.

Having a group of very rich people is what enables yesterday’s luxuries to become today’s basics.

There are two parts to this process: cost bearing and discovery. The very rich are able to afford the high prices of new technologies, thereby providing an incentive for firms to market new and expensive products. Once the rich pay the high initial price and cover the fixed costs of research and development, sellers can begin to price closer to the much lower marginal cost of producing additional units, making the good much more affordable to more people.

But the rich are also an economic canary in the coal mine that informs producers whether they are getting it right.

For example, a critic of inequality might complain that no one “really needs” a $100,000 luxury car with all kinds of new high-tech gadgets on it. But the fact that some can afford it and want to buy it helps the car companies figure out which new features might be popular. Rear-view cameras were once only available on top-end cars, but they have slowly become a standard feature. The same may soon be true of collision warning systems now available on high-end models of some cars.

In fact, everything we think of as basics today was once the province of only the well-off. The first microwaves were expensive and bought mostly by the rich. I can remember my parents paying about $900 for a VCR in the late 1970s. VCRs, of course, fetch a price close to zero these days. The rich who bought the early LCD TVs helped manufacturers defray the fixed production costs and figure out what people wanted, and now these TVs are in the vast majority of houses at a more affordable price.

The inequality at any point in time is a key part of the process that creates wealth for the rest of society over the years to follow. The very rich enable producers to experiment and cover their costs, and that makes more goods more affordable for the rest of us, from fun toys to life-saving necessities.

The inequality produced by the market is a key part of how the market moves forward, enriching all of us in the process. And that’s why the middle class is shrinking: the rich, through the competitive market, have helped make the middle class richer.

https://fee.org/articles/why-is-the-middle-class-shrinking/

Author Steven Horowitz’s argument ties “the rich” to production of goods, products and services as the ONLY way such goods, products and services will be developed and produced. This is a false argument in that broadly owned, as opposed to narrow owned productive capital assets (the reason for economic inequality), will produce even more affluence experienced by far more people as long as the full earnings generated by the investments are paid out to the new owners, which will create far more “costumers with money” to support demand for increased competitive development and production.

Broadly owned productive capital assets that create wealth and produce income for their owners will grow wealth for EVERY child, woman, and man who owns capital. As more and more “customers with money” are created, producers will engage in experimentation and cover their costs from the increased profits produced by increasing numbers of “customers with money.” and at the same time goods, products and services will become more affordable for EVERY citizen without inducing inflation.

To broaden individual capital ownership simultaneously with the growth of the economy requires system reform.

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

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

Now Just Five Men Own Almost As Much Wealth As Half The World’s Population

It’s not a meritocracy. It’s an oligarchy. (Photo: Pixabay/CC0)

On June 12, 2017, Paul Buchheit writes on Common Dreams:

Last year it was 8 men [see http://www.foreconomicjustice.org/?p=16799]. then down to 6, and now almost 5.

While Americans fixate on Trump, the super-rich are absconding with our wealth, and the plague of inequality continues to grow. An analysis of 2016 data found that the poorest five deciles of the world population own about $410 billion in total wealth. As of 06/08/17, the world’s richest five men owned over $400 billion in wealth. Thus, on average, each man owns nearly as much as 750 million people.

Why Do We Let a Few People Shift Great Portions of the World’s Wealth to Themselves? 

Most of the super-super-rich are Americans. We the American people created the Internet, developed and funded Artificial Intelligence, and built a massive transportation infrastructure, yet we let just a few individuals take almost all the credit, along with hundreds of billions of dollars.

Defenders of the out-of-control wealth gap insist that all is OK, because, after all, America is a ‘meritocracy’ in which the super-wealthy have ‘earned’ all they have. They heed the words of Warren Buffett: “The genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did.”

But it’s not a meritocracy. Children are no longer living better than their parents did. In the eight years since the recession the Wilshire Total Market valuation has more than TRIPLED, rising from a little over $8 trillion to nearly $25 trillion. The great majority of it has gone to the very richest Americans. In 2016 alone, the richest 1% effectively shifted nearly $4 trillion in wealth away from the rest of the nation to themselves, with nearly half of the wealth transfer ($1.94 trillion) coming from the nation’s poorest 90%—the middle and lower classes. That’s over $17,000 in housing and savings per lower-to-middle-class household lost to the super-rich.

A meritocracy? Bill Gates, Mark Zuckerberg, and Jeff Bezos have done little that wouldn’t have happened anyway. ALL modern U.S. technology started with—and to a great extent continues with—our tax dollars and our research institutes and our subsidies to corporations.

Why Do We Let Unqualified Rich People Tell Us How To Live? Especially Bill Gates! 

In 1975, at the age of 20, Bill Gates founded Microsoft with high school buddy Paul Allen. At the time Gary Kildall’s CP/M operating system was the industry standard. Even Gates’ company used it. But Kildall was an innovator, not a businessman, and when IBM came calling for an OS for the new IBM PC, his delays drove the big mainframe company to Gates. Even though the newly established Microsoft company couldn’t fill IBM’s needs, Gates and Allen saw an opportunity, and so they hurriedly bought the rights to another local company’s OS — which was based on Kildall’s CP/M system. Kildall wanted to sue, but intellectual property law for software had not yet been established. Kildall was a maker who got taken.

So Bill Gates took from others to become the richest man in the world. And now, because of his great wealth and the meritocracy myth, MANY PEOPLE LOOK TO HIM FOR SOLUTIONS IN VITAL AREAS OF HUMAN NEED, such as education and global food production.

—Gates on Education: He has promoted galvanic skin response monitors to measure the biological reactions of students, and the videotaping of teachers to evaluate their performances. About schools he said, “The best results have come in cities where the mayor is in charge of the school system. So you have one executive, and the school board isn’t as powerful.”

—Gates on Africa: With investments in or deals with MonsantoCargill, and Merck, Gates has demonstrated his preference for corporate control over poor countries deemed unable to help themselves. But no problem—according to Gates, “By 2035, there will be almost no poor countries left in the world.”

Warren Buffett: Demanding To Be Taxed at a Higher Rate (As Long As His Own Company Doesn’t Have To Pay) 

Warren Buffett has advocated for higher taxes on the rich and a reasonable estate tax. But his company Berkshire Hathaway has used “hypothetical amounts” to ‘pay’ its taxes while actually deferring $77 billion in real taxes.

Jeff Bezos: $50 Billion in Less Than Two Years, and Fighting Taxes All the Way 

Since the end of 2015 Jeff Bezos has accumulated enough wealth to cover the entire $50 billion U.S. housing budget, which serves five million Americans. Bezos, who has profited greatly from the Internet and the infrastructure built up over many years by many people with many of our tax dollars, has used tax havens and high-priced lobbyists to avoid the taxes owed by his company.

Mark Zuckerberg (6th Richest in World, 4th Richest in America) 

While Zuckerberg was developing his version of social networking at Harvard, Columbia University students Adam Goldberg and Wayne Ting built a system called Campus Network, which was much more sophisticated than the early versions of Facebook. But Zuckerberg had the Harvard name and better financial support. It was also alleged that Zuckerberg hacked into competitors’ computers to compromise user data.

Now with his billions he has created a ‘charitable’ foundation, which in reality is a tax-exempt limited liability company, leaving him free to make political donations or sell his holdings, all without paying taxes.

Everything has fallen into place for young Zuckerberg. Nothing left to do but run for president.

The False Promise of Philanthropy 

Many super-rich individuals have pledged the majority of their fortunes to philanthropic causes. That’s very generous, if they keep their promises. But that’s not really the point.

American billionaires all made their money because of the research and innovation and infrastructure that make up the foundation of our modern technologies. They have taken credit, along with their massive fortunes, for successes that derive from society rather than from a few individuals. It should not be any one person’s decision about the proper use of that wealth. Instead a significant portion of annual national wealth gains should be promised to education, housing, health research, and infrastructure. That is what Americans and their parents and grandparents have earned after a half-century of hard work and productivity.

https://www.commondreams.org/views/2017/06/12/now-just-five-men-own-almost-much-wealth-half-worlds-population

This is yet another article that should be an eye-opener to the reality of concentrated capital asset ownership among a tiny wealthy capital ownership class.

Paul Buchheit discredits the philosophy of “meritocracy” that has enabled people to become wealthy and stay wealthy — those holding power selected on the basis of their ability. Buchheit challenges the idea that “the super-wealthy have ‘earned’ all they have.”

I concur with the statement by Buchheit that “ALL modern U.S. technology started with — and to a great extent continues with — our tax dollars and our research institutes and our subsidies to corporations. I would describe the wealth (the non-human productive capital assets) concentration as a fault of the system. As I see it, the challenge requires us to reform the system in order to create a more human economy supports inclusive prosperity, inclusive opportunity and inclusive economic justice, while preserving personal rights in property; but one that does not result in 1 percent of the world’s population owning the same wealth as the other 99 percent moving forward as we build a future economy that can support general affluence for EVERY child, woman, and man.

While Buchheit challenges the belief that “the super-wealthy have ‘earned’ all they have,” (and I concur with Buchheit’s challenge), there is the matter of rights in property ownership, which must be upheld if we are to achieve economic democracy.

The system is the culprit. The system has been rigged by the wealthy and their political cronies to put up barriers that inhibit or prevent ordinary people from purchasing wealth-creating, income-producing capital that pays for itself out of its own future earnings. That is because the system requires “past savings” (denial of consumption) to finance capital formation projects. And ONLY those with substantial labor incomes are able to “save” or individuals have inherited “past savings” necessary to pledge as security collateral against risk of capital credit failure. Few actually “invent” or “innovate” without outside support.

The way to abate further concentrations of wealth, financial mechanisms need to be employed with the opportunity for EVERY child, woman, and man to use to build their own wealth overtime concurrently with the growth of the economy powered by new non-human inventions and innovations that eliminate the necessity for mass labor input.

In place of retained earnings and debt financing that only further concentrates capital asset ownership among those who already own and who have accumulated past savings, the government should require business corporations to issue and sell full-voting, full-dividend payout stock to more people to underwrite new productive capital formation, with the purpose of providing opportunity for new owners, both employees of corporations and non-employees, to participate in a growing economy by purchasing the newly issued stock using insured, interest-free  “pure credit” repayable out of the full earnings generated by the earnings produced by the actual future capital assets. Of course, there needs to be a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital — the rich. This is because “poor” people have no security or collateral, or sufficient income resulting in savings to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

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

Still, there is at least a theoretical chance, and sometimes a very real chance, that the investment might not pay for itself, or it might not pay for itself in the projected time period (typically three to seven years). So, there is a business risk. This is why a form of capital credit insurance needs to be provide to secure the loans banks make to finance new capital formation project and create new capital owners. Otherwise, the lender has no reason to loan unless it has two sources of repayment. In addition to determining that the investment is viable and that the company is credit worthy and reliably expected to make loan repayments, there needs to be security against default. Thus, for the lender to make the loan security must be provided. This is the purpose of past savings meaning valuable assets can be seized should the investment not return sufficient earnings as projected.

But there is another way to provide loan security facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).

Accessible capital credit insurance, that replace the requirement for “past savings.” is essential to broadening capital ownership with the benefit that expanded capital ownership drives expanded consumer power to purchase products and services.

Capital formation investments are made by companies annually because they are based on projections a number of years out (at least 5 to 10 years) with the expectation that the investment will pay for itself as a result of sustainable growth and consumer demand. Thus, the concept embraces the idea that capital formation is self-financing. The question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan.

Conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers and the pledge of past savings. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners. Pew Research found that 53 percent of Americans own no stock at all nor retirement accounts, and out of the 47 percent who do, the richest 5 percent own two-thirds of that stock. And only 10 percent of Americans have pensions, so stock market gains or losses don’t affect the incomes of most retirees.

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

Thus, as binary economist Louis Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”

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

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.

To read more about how to universally distribute economic power amongst individual citizens and never allow capital ownership to concentrate see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11 and my article “How To Resolve The Destruction Of American Jobs Problem” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9. This article calls for an actionable policy to resolve the elimination of jobs as a result of technological invention and innovation, as well a competitive globalization of production.

Bernie Sanders Drops A Bombshell Report That Exposes Trump’s Infrastructure Scam

As the ranking member of the Senate Budget Committee, Sen. Bernie Sanders (I-VT) has released a report that exposes Trump’s infrastructure plan as a scam designed to benefit Wall Street.

On June 7, 2017, Jason Easley writes on Politicus USA:

The report exposes how Trump’s infrastructure plan actually cuts infrastructure funding:

Under Trump’s proposal, billionaires on Wall Street, wealthy campaign contributors and even foreign governments would receive hundreds of billions in tax breaks to purchase our highways, airports and water treatment plants. They would then be allowed to impose huge new tolls and fees on the backs of American commuters and homeowners.

The reality is that Trump’s plan to sell off our nation’s highways, bridges and other vital infrastructure to Wall Street, private investors, and foreign governments is an old idea that does not work. Trump’s plan to rebuild America relies heavily on the use of public-private partnerships to finance infrastructure projects with private equity capital. Such financing, whether through private equity or traditional tax-exempt municipal bonds, is repaid by ordinary citizens through a combination of taxes
and user fees.

Private equity financing is markedly more expensive than traditional government financing, however – by as much as three to six times. Considering the scale of infrastructure development under consideration, that difference could be enormous. For example: the charge for a $100 million-dollar investment using traditional government bond financing (at 3 percent, over 30 years) is about $90 million. For private equity capital, at a 15 percent return, the total skyrockets to $450 million.

Trump’s infrastructure plan is to cut real infrastructure spending while giving tax cuts to corporations and billionaires so that they can buy the nation’s infrastructure and profit off of it with tolls and fees. Once the infrastructure is privatized, the new owners will be motivated to keep expenses down and profit up. The easiest way to accomplish this goal would be to spend less on the maintenance of roads and bridges while charging user fees to all.

Sen. Sanders said, “Donald Trump wants to hand over critical public infrastructure to private investors who will squeeze profits from the American people by putting up new tolls and exorbitant user fees. That is unacceptable. We shouldn’t be selling off our infrastructure to billionaires to make huge profits on the backs of working people.”

Trump’s plan is a con. Sen. Sanders and his report make an important point. While the Russia scandal consumes the bulk of the national spotlight, Trump is continuing his efforts to use the presidency to make the wealthiest Americans ever richer.

Bernie Sanders Drops A Bombshell Report That Exposes Trump’s Infrastructure Scam

 

I cautioned about this development back in March 2017. See http://www.foreconomicjustice.org/?p=16542. Also see http://www.foreconomicjustice.org/?p=14998.

I think what is important to understand is that in the case of infrastructure, the actual physical assets are under the legal structures of utilities, authorities, or commissions, with ownership or control held by a wealthy ownership class or the politicians in power. Otherwise such assets are controlled by states and federal government, who rely on taxpayers to fund and maintain such assets.

In most cases the entities that own the utilities and other non-taxpayer-direct supported assets are individuals who have concentrated the ownership of the assets, and thus profits return to those who own.

There is no question that  rebuilding and expanding our infrastructure is an effective way to both create jobs and address the rampant infrastructure problems that are accumulating in our country.

Such work needs to be taxpayer supported not financed whereby narrowly owned private companies are able to “steal” and own our utilities, highways, parks, etc.

Any “create jobs” justification is relatively short-term and does not position working people where they need to be in our future economy. There is MORE INCOME to be earned by workers through OWNING the companies (corporations) who are awarded the taxpayer-supported contracts to do the work. As a major component of Bernie Sanders initiative there must be included the stipulation that the companies bidding and ultimately awarded the contract work be EMPLOYEE OWNED. These companies can transform to employee-owned companies by structuring themselves using an Employee Stock Ownership Plan (ESOP), which Bernie Sanders supports. Already there are over 11,000 companies who are structured using an ESOP.

To fully understand and undertake this policy approach see http://www.cesj.org/learn/capital-homesteading/ch-vehicles/employee-stock-ownership-plans-esops/, http://www.cesj.org/learn/capital-homesteading/ch-vehicles/employee-stock-ownership-plans-esops/infrastructural-reforms-tax-incentives-encouraging-employee-stock-ownership-plans-esops/, http://www.cesj.org/resources/articles-index/whose-pie-and-why-esops/ and http://www.cesj.org/resources/articles-index/beyond-esop-steps-toward-tax-justice/

A concurrent solution that should be explored is to implement Citizens Land Banks (CLB), that are owned by the individuals they serve, thus broadening private ownership of income-producing power plants, utilities, toll roads and bridges and other infrastructure.

A CLB is a for-profit, professionally-managed, citizen-owned-and-governed community land planning and development enterprise, designed to enable every citizen of a community of any size to acquire a direct ownership stake in local land, natural resources and basic infrastructure.

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

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

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

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

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

What Is Needed To Resolve The Destruction Of American Jobs Problem?

On June 9, 2017, Gary Reber at ForEconomicJustice.org writes:

The Huffington Post has published my latest article entitled “What Is Needed To Resolve The Destruction Of American Jobs Problem?” at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

It is time to WAKE UP America! American workers will continue to be displaced by technology and out-sourcing.

Companies continue to destroy jobs and to out-source production, e.g. Carrier in Indiana and GE in Wisconsin.

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

The men and women who have lost their jobs to the “lowest-cost forces” of globalization are victims of the narrow focus on JOBS as the only way to participate in production and earn income. Without a JOB people become despaired, frightened and dependent on others in the form of government welfare programs to survive. Yet the wealthy are not dependent on JOBS as the source of their wealth is OWNERSHIP of the non-human means of production, the assets forming the bulk of the productivity of their businesses.

Full employment is not an objective of businesses nor is conducting business statically in terms of geographical location. Companies strive to achieve cost efficiencies to maximize profits for the owners, thus keeping labor input and other costs at a minimum. They strive to minimize marginal costs, the costs of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

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

Over the past century there has been an ever-accelerating shift to productive capital — which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 239 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advances amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which goods, products and services are produced from labor intensive to capital intensive — the core function of technological invention and innovation. Binary economist Louis Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary.

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

The numbers of men and women working at the GE plant already have declined over the years as a result of technological invention and innovation, enabling the company owners to reduce costs by substituting “machines” for people in production. Assuredly, the new plant in Canada will be even further “automated” in the means to produce GE engines. As for Carrier, they also continue to replace workers with advanced “machine” technologies.

What happened in Wisconsin and Indiana is just a microcosm of what the future holds. That is, if we don’t reform the monetary system and the financial system that enable new capital asset (non-human forms of productive assets) formation.

The United States is headed for more personal and family economic turmoil and social unrest and upheaval due to a faulty economic system that fosters the concentration of wealth-creating, income-generating productive capital — the ownership of non-human productive assets such as land, structures, machines, super-automation, robotics, digital computerized operations, etc. The system is faulty because economic growth is based on individual and family accumulations of savings, with ALL economic growth dependent on past savings directly “invested” or pledged as security collateral to guarantee loan risks. Both uses of past savings concentrate productive capital ownership amongst a small wealthy capital ownership class. This will leave the vast majority, or the so-called 99 percent, who are property-less as related to ownership of productive capital assets, unable to save sufficiently and instead struggling to sustain their livelihood month to month, as they fear for job loss and having to rely on taxpayer-supported government welfare.

To change the rules and reform the system, the outcome of FUTURE policies must be to facilitate financing economic growth with “FUTURE SAVINGS,” and simultaneously create new capitalist owners of wealth-creating, income-generating productive capital assets. “FUTURE SAVINGS” are profits used to repay loans for new capital formation and acquisition of existing productive assets by new owners.

Critically, we must recognize that Americans and the world’s people do not have to end up destitute and bereft as the FUTURE unfolds due to fundamentally flawed assumptions in modern economics and finance: that new capital formation is impossible without first cutting consumption, saving, then investing. The result has been that the “supply of loanable funds” derived from past savings determines the “production possibilities curve” or rate at which economic growth can be sustained.

If we are to achieve the goal of general affluence for every human being, the first requirement is to increase progressively the total amount of the income to be shared. This requires increased production, not redistribution, in order to generate incomes that would be distributed according to market principles. This is the ONLY means to promote a fuller utilization of our productive facilities and a consequent progressive increase in the aggregate income to be available for distribution, and to which increasing quantities of newly created products and services would become available to everyone.

“Distribution is the trouble” said Dr, Harold G. Moulton, President of Brookings Institution, in his 1935 book The Formation Of Capital. Said Moulton, “The way our income is distributed provides an inadequate purchasing power for our full production.”

The problem that needs to be addressed is threefold: 1) how to increase production, 2) how to distribute the income from production according to relative inputs of human labor and non-human productive capital, and 3) how to distribute that income to people who will use the increased income for consumption, not reinvestment (to further concentrate ownership of wealth-creating, income-generating productive capital assets).

In today’s economic world, economic progress and the financing of FUTURE growth is subject to a reliance on existing accumulations of savings that result from cutting current consumption. Income, instead of being spent on consumption to keep production and consumption in balance, is diverted into savings. With fewer customers purchasing what is produced, the financing of FUTURE productive capital used to produce new products and services becomes less financially feasible.

As is noted in the forward to the “new edition” of Moulton’s The Formation Of Capital, written by Norman G. Kurland, Michael D. Greaney and Dawn K. Brohawn, my colleagues at the Center for Economic and Social Justice (www.cesj.org):

“Financial feasibility refers to the ability of new capital investment to pay for itself out of the future earnings of the new capital. This is an application of Adam Smith’s observation that the purpose of production is consumption. A standard test to determine whether a company should invest in new capital is whether there is sufficient consumer demand to support the marketable good or service to be produced. In other words, why add a new productive asset or tool if no one is going to buy (consume) what it produces? Thus, as Moulton emphasizes in this book, demand for capital is derived from consumer demand.

“Worse, from the standpoint of political and social stability, using past savings to finance growth accelerates, and provides a rationalization for maintaining and even increasing, concentrated ownership of the means of production. It also leads to expanding the role and powers of the State in a desperate effort to stabilize the economy. The rights of private property (i.e., the rights to the fruits of, and control over, what one owns) are taken from individual citizens and transferred to the State.”

The resulting problem is that to the extent that the savings investment approach increases production, the economic benefit accrues to the current owners, who re-invest to acquire more productive capital wealth rather than consume a growing portion of their capital incomes. This concentrates ownership even further.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security – those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

The conventional approach relies on savings for additional investment in new productive capital assets, instead of providing the means to satisfy people’s material needs and wants. The result has been to create a global ownership class of very rich people who reinvest most of their capital incomes to further their concentrated wealth ownership.

Supporters of this economic paradigm argue that no income generated by capital should be used for consumption. Instead, all capital income should be reinvested in ways that create new capital, thereby providing jobs for the masses until full employment is reached. Thus, most economist today assume that there is virtually no other means whereby most people can earn an income except in the form of wages paid for their labor.

Moulton summarized the results of his investigation:

“We find no support whatever for the view that capital expansion and the extension of the roundabout process of production may be carried on for years at a time when consumption is declining. [i.e., when saving is taking place.] The growth of capital and the expansion of consumption are virtually concurrent phenomena.”

Of course, the supporters of the arcane economic paradigm ignore and are oblivious to the reality that tectonic shifts in the technologies of production are destroying jobs and devaluing the worth of labor as increasingly the non-human productive capital factor is replacing the need for labor in the production of goods, products and services needed and wanted by society.

Understanding Moulton is absolutely necessary in order for us to set out on a path to inclusive prosperity, inclusive opportunity, and inclusive economic justice. The question that Moulton poses is what should be the source of financing for capital formation?

Moulton answered the question as follows:

“A new and even more dynamic factor has come into the process of capital formation through the evolution of modern commercial banking. The development of the banking system, with its ability to manufacture credit, has served to render funds immediately available for the purposes of capital creation without the necessity of waiting upon the slower processes of accumulating funds from individual savings. The result is to sustain productivity at a higher level and to facilitate the growth of new capital at a more rapid rate than would otherwise have occurred.”

In other words, as noted in the forward to Moulton’s new edition:

“New capital formation can be financed by using money created by the commercial banking system. It is not necessary (and even counterproductive from the standpoint of economic equilibrium and sustainable growth) to rely on cutting consumption to generate the savings necessary to finance new capital formation.

“Following Moulton’s reasoning, the remedy to an economic downturn is thus not to manipulate the money supply by increasing government debt or bailing out failed speculation (which, among other problems, distorts the operation of the market and places a debt burden on future taxpayers). Nor is it an effective, long term solution to stimulate demand by subsidizing artificial job creation, legislating higher minimum wages, ignoring market forces in collective bargaining negotiations, imposing price controls or supports (especially on interest rates), or redistributing existing wealth. Such measures may be necessary at times as expedients, but are ultimately self-defeating. Instead, what is needed is to:

“1) Increase production by financing new capital formation through the extension of bank credit backed by the present value of the future stream of income to be generated by the new capital.

“2) Get the profits generated by the new capital into the hands of all workers and citizens who will use it for consumption, not reinvestment in additional new capital.”

In reading The Formation Of Capital, Moulton fails to list as a possible solution widespread, direct private ownership of the means of production. As noted by my colleagues at CESJ in the forward to the new edition:

“A broad base of owners and diversity in the forms of productive capital owned would ensure that all workers and as many people as possible, including the disabled and poorest of the poor, would receive income generated by many forms of advancing technology, and would use the income from their capital for consumption rather than reinvestment.”

Moulton’s omission was addressed by Louis Kelso and Mortimer J. Adler in their 1958 book The Capitalist Manifesto. Kelso, a successful corporate lawyer and self-schooled economist, was also an expert in finance who later formed a leading investment banking firm specializing in his financial mechanism, the Employee Stock Ownership Plan (ESOP) and other methods for financing worker and broader citizen individual ownership in productive capital. In the late 1960s, I had the privilege to form, with Kelso, Agenda 2000 Incorporated, a consulting firm, whose advocacy mission was to provide financial mechanism for economic development based on the Kelsonian principles underlying the binary economic or two-factor model of economic reality.

The Capitalist Manifesto made the moral and economic case for widespread ownership of the means of production. How to finance widespread productive capital ownership was spelled out in the assertive subtitle to The New Capitalists: A Proposal To Free Economic Growth From The Slavery Of Savings. (Both books are available as free downloads at http://www.kelsoinstitute.org/pdf/cm-entire.pdf and http://www.kelsoinstitute.org/pdf/nc-entire.pdf, respectively.)

Not surprisingly, the source that Kelso and Adler referenced most often in The New Capitalists is Moulton’s The Formation Of Capital. Moulton showed how the extension of commercial bank credit can be used to finance capital formation without requiring existing accumulations of savings. What Kelso and Adler argued as the solution to the income distribution problem was to democratize access to direct, private ownership of new capital formation.

Over the past century there has been an ever-accelerating shift to productive capital — which reflects tectonic shifts in the technologies of production. Advancing technology continues to rapidly take over the vast bulk of production from human labor.

As pointed out in the forward to the new edition of The Formation Of Capital, Moulton demonstrated that the chief means by which capital formation is financed in a modern industrial and financial economy is commercial bank credit backed by the present value of the future stream of income to be generated by the newly formed capital assets themselves with the collateralization requirement of existing accumulations of savings (already owned assets). To this Kelso added that 1) the ownership of the new capital financed with what he called “pure credit” must be broadly owned, and 2) the universal collateralization requirement could be met by using capital credit insurance and reinsurance in place of existing accumulations of savings.

Kelso’s refinements of Moulton’s work underpin a comprehensive national economic program called “Capital Homesteading” (http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/), developed by the Center for Economic and Social Justice. The “Capital Homestead Act” (aka Economic Democracy Act), which gives a legislative framework to the program, is a way to implement both Moulton’s insights and Kelso’s solution to the income distribution problems of a modern economy. It would empower every American child, woman and man, including the poorest of the poor, with equal opportunity and the social tools to acquire, control and enjoy the fruits of productive corporate capital assets. Based on a new socio-economic paradigm that some have called the “JUST Third Way” (as the moral alternative to traditional capitalism and socialism), Capital Homesteading also offers a template that can be tailored to eradicate poverty and economic powerlessness in the poorest of nations around the globe. (See the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/).

The means by which Capital Homesteading proposes to achieve its goals involve major restructuring of America’s tax system and Federal Reserve policies (see abridged http://foreconomicjustice.org/?p=8942). These are designed to lift artificial barriers to more equitable distribution of FUTURE corporate capital and stimulate faster growth rates of private sector investment. Capital Homesteading would shift primary national income maintenance policies from inflationary artificial wage increases and unproductive income redistribution expedients, to market-based ownership sharing and dividend incomes.

Federal Reserve policies need to be reformed to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks (Section 13.2 of the Federal Reserve Act at https://www.federalreserve.gov/aboutthefed/section13.htm), and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation (ala the Federal Housing Administration concept), through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

The proposed Capital Homestead Act would reform monetary institutions and tax laws to democratize access to capital (productive) credit. By universalizing citizen access to direct capital ownership by making available “interest-free” productive credit and new, asset-backed money for increasing production, Capital Homesteading would close the power and opportunity gap between today’s haves and have-nots, without taking away property from today’s owners.

As my colleagues conclude in the forward to the new edition:

“Moulton’s insights in The Formation Of Capital suggest a practical and morally sound basis for restructuring the financial system to enable money to be created as needed to finance sustainable economic growth. World poverty can be eradicated, something not possible within the current economic paradigms, which rely on existing accumulations of savings to finance capital formation. With the specter of another economic depression looming over today’s world, and with the widening gap between “haves” and “have-nots” threatening social harmony, there is no real justification for delaying the implementation of a program of Capital Homesteading to establish and maintain a free, prosperous and just economy for all.”

For other related articles, please see my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

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

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

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.foreconomicjustice.org/?p=16730 and “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058. And also “Achieving The Green Economy” at http://foreconomicjustice.org/?p=9082.

Copyright 2017, Gary Reber

Saudis Take 100% Control [OWNERSHIP] Of America’s Largest Oil Refinery

On May 1, 2017, Matt Egan writes on CNN Money:

America’s largest oil refinery is now fully owned by Saudi Arabia.

Saudi Aramco, the kingdom’s state-owned oil behemoth, took 100% control of the sprawling Port Arthur refinery in Texas on Monday, completing a deal that was first announced last year.

Port Arthur is considered the crown jewel of the US refinery system. The Gulf Coast facility can process 600,000 barrels of oil per day, making it the largest refinery in North America.

Aramco previously owned 50% of Port Arthur through a joint venture co-owned with Royal Dutch Shell (RDSA) called Motiva Enterprises.

But the two oil giants had a rocky relationship and reached a deal in March 2016 to separate their assets. Shell put out a statement on Monday confirming the “completion” of that break-up.

In addition to Port Arthur, Aramco is acquiring full ownership of 24 distribution terminals. Aramco also gets the exclusive right to sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland, the eastern half of Texas and the majority of Florida.

Related: Trump’s energy plan isn’t a game-changer

Aramco’s deal allows the oil giant to shore up one of its best customers — the US — ahead of next year’s planned IPO. Now that it controls the largest American refinery, Aramco can send more Saudi crude into the US for refining to sell to North American drivers.

Saudi Arabia is already America’s second-largest source of crude, behind only Canada. The US imported 1.3 million barrels of Saudi crude a day in February, up 32% from last year, according to the Energy Information Administration.

Saudi Arabia is hoping the Aramco IPO will be valued at a stunning $2 trillion. The kingdom continues to grapple with low oil prices and a bloated budget, making it critical that the Aramco IPO goes off without a hitch. Saudi Arabia, the largest oil exporter in the world, dramatically slashed taxes on Aramco in March in an effort to quell concern about the oil giant’s valuation.

Related: Saudi Arabia reverses pay cuts for state workers

Even as Saudi Arabia extends its reach in the US, the Trump administration has pushed for American energy independence by unleashing the domestic energy industry. Trump said in a May 2016 speech that he wants to bring about independence from “our foes and the oil cartels.”

Trump also threatened before he was elected to halt imports of oil from Saudi Arabia and other Arab countries if they didn’t commit ground troops to fight ISIS.

After Trump was elected, Saudi energy minister Khalid al-Falih later warned that blocking the kingdom’s crude could backfire.

“Trump will see the benefits and I think the oil industry will also be advising him accordingly that blocking trade in any product is not healthy,” Falih told the Financial Times in November.

Despite that rhetoric, relations between the US and Saudi Arabia appear to have improved under Trump. Saudi Arabia’s powerful deputy crown prince Mohammed bin Salman met with Trump in the Oval Office in March, a meeting heralded by the kingdom as an “historic turning point” between the two countries.

http://money.cnn.com/2017/05/01/investing/saudi-arabia-buys-largest-oil-refinery-port-arthur/index.html

Gary Reber Comments:

What should have occurred is the employees of the Port Arthur refinery should have purchased the refinery using an Employee Stock Ownership Plan (ESOP) modeled in the form of a buy-out, instead of  allowing a foreign government (Saudi Arabia) to buy-out the American owners of Port Arthur. This transaction should have occurred, even it it require a loan guarantee by the federal government.

Unfortunately, our leaders are brainless! They are allowing the wholesale sell-off our manufacturing productive infrastructure to foreigners instead of providing a financial system that empowers American workers and other citizens to acquire OWNERSHIP of productive capital assets put up for sale.

It is not difficult to structure interest-free financial mechanisms by which EVERY child, woman, and man, can acquire personal OWNERSHIP interests in self-liquidating capital assets, whether old or new productive capital assets. It is also not difficult to structure security collateral in the form of commercial capital credit insurance and reinsurance (ala the Federal Housing Administration concept) as a replacement for past savings (equity) insurance to guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital — the rich.

It is absolutely unbelievable that our leaders are so dumb; OR they really do not want to enrich ordinary Americans and ONLY want to further enrich the already wealthy capital ownership class.

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

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

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

 

 

In Paul Ryan’s Backyard, Good Jobs Are Moving To Canada

On June 7, 2017, Heather Long writes on CNN Money:

Kenneth Olsen lives in House Speaker Paul Ryan’s district in Wisconsin. He wishes Ryan had been there to see his wife of 42 years slump in her chair and cry when he told her the news: His GE factory job is being eliminated.

GE factory jobs move from Wisconsin to Canada

“She’s looking at me, saying, ‘what are we going to do?'” Olsen, a soft-spoken 60-year-old said, pausing to brush away tears as he spoke to CNNMoney. “And I’m sitting there going, ‘I’m not sure.'”

Olsen earns nearly $30 an hour as a dispatcher at the GE Power plant in Waukesha, Wisconsin. The factory churns out big industrial engines. Olsen is the maestro of the welding department, coordinating where workers and parts go.

“I’m very worried about losing my house,” Olsen says. Even if he finds another job, he knows there’s little chance he’ll earn anywhere near what he earns here. Most companies hiring in the area pay $15 or less.

President Trump has blasted companies for shipping U.S. jobs to Mexico. But Canada is also aggressively luring factories from across the northern border. The Canadian government gave GE $2 billion in incentives to shut down in Wisconsin and move to a city in Ontario, Canada.

It’s a huge blow for the town of Waukesha. The engine factory has been a bedrock of the community for over a century. All 350 people working on the factory floor will lose their jobs.

“GE has some of the higher paying manufacturing jobs in the city of Waukesha,” says Mayor Shawn Reilly, a Republican.

kenneth olsen waukesha
Kenneth Olsen’s good-paying factory job in Wisconsin is about to move to Canada.

Should Trump punish GE?

Joe Barlow has labored at the same GE (GE) plant for nearly 25 years. He’s so mad about the jobs going to Canada that he threw out every GE product in his house, including the toaster and light bulbs.

“I don’t own anything GE anymore,” Barlow said. “All my family is on board that no one will ever buy another GE product.”

Barlow voted for Donald Trump, helping tip Wisconsin red in a presidential election for the first time since 1984. For Barlow, it resonated deeply when Trump promised to put a hefty tax on companies that send jobs overseas.

“I hope [Trump] follows through on his 35% tax and punishes those businesses” that offshore work, Barlow said. He would like to see GE first on that list.

GE CEO Jeff Immelt is a member of President Trump’s manufacturing advisory council. Workers at the Waukesha plant, many of whom voted for Trump, are baffled that the president gave Immelt such a prominent role.

Bret Mattice is particularly surprised. He voted for the first time ever in 2016, casting his ballot for Trump because he felt Trump wasn’t like the establishment Republicans and CEOs at all.

“Trump’s values were different than all of them,” says Mattice, another long-time worker at the plant. He believes Trump cares about the “average person.”

Mattice gives Trump a B+ grade so far.

GE has begun construction in Canada

wisconsin joe barlow
Joe Barlow voted for Donald Trump. Barlow hopes Trump will keep to his campaign promise to punish comanies that send U.S. jobs overseas.

Immelt has a history of advising presidents. Before his role with Trump, Immelt was chair of President Obama’s Council on Jobs. Obama actually visited the GE Power plant in Waukesha in 2014. He stood in the very place where Mattice and Barlow work every day and proclaimed that it was a model American factory.

No longer. Soon it will be a Canadian plant.

GE has already started construction in Ontario. The company put out a press release calling it a “brilliant factory.”

The company’s U.S. footprint has shrunk substantially. In 1995, almost 70% of GE’s employees were working in the U.S. By the end of 2015, less than 40% of GE’s workers were in America, according to a CNNMoney analysis.

GE says the company has “changed dramatically” as it has sold off GE Capital,NBC Universal and its appliance unit. Its business today is more global and industrial. That’s why GE bought the Waukesha Engine plant in 2010.

Wisconsin has lost over 125,000 factory jobs

The workers in Wisconsin had hoped Trump would intervene to save their jobs. Their union sent the president a letter on February 6. But now they think their days at GE are numbered. GE has already begun packing up equipment.

“They cut out one piece of your heart at a time. They move jobs out, they move equipment out, they clear space and turn it into stockrooms,” says Jeff Neibauer, who’s spent nearly a quarter century at the factory.

Neibuaer and his colleagues will soon join a growing list of Wisconsin manufacturing workers who have been tossed aside. The state has shed over 125,000 manufacturing jobs since 2000.

Who’s to blame? GE blames the government

wisconsin manufacturing jobs

GE blames the job losses on Congress.

In the summer of 2015, Congress shut down the Export-Import Bank. It’s a government organization that provides money to help boost American exports.

Powerful nations that the U.S. competes against, including China and Germany, have something similar to the Ex-Im Bank. But many Republicans, including Ryan, slammed the bank as “corporate welfare.”

“Congress has failed to take action,” a GE spokesperson told CNNMoney. “We are the only major economy on the planet without a fully functioning export credit agency.”

At the end of 2015, Congress re-authorized the bank. But it hasn’t been able to do any major deals above $10 million because the U.S. Senate hasn’t confirmed enough people to serve on the bank’s board.

Trump used to favor shutting the bank down, but he recently did a U-turn and nominated more people to fill the vacant board seats.

“If Ex-Im had been reauthorized during that time, the decision to close Waukesha would not have been made,” a GE spokesperson told CNNMoney.

Ryan says the bank had nothing to do with GE’s choice to go to Canada.

“GE’s decision to upend the livelihoods of hundreds of Wisconsinites was deeply disappointing,” Speaker Ryan’s spokeswoman AshLee Strong, told CNNMoney. “The bank was reauthorized in 2015, yet the plant is still closing.”

The workers who are about to lose their jobs feel like pawns. They don’t believe GE’s story — or their congressman’s.

“I would like nothing more than to see Donald Trump come into that planet with Jeffrey Immelt and say, ‘This is ground zero for job creation. Let’s fill my campaign promise of keeping jobs here,'” says Scott Schmidt, a 44-year-old who thought he’d be at the GE factory for his entire career.

wisconsin joe acker
Joe Acker is a military veteran who is about to lose his job at a GE factory in Wisconsin.

‘You can’t support a family on $17 an hour’

The GE Power plant itself is located in Rep. Jim Sensenbrenner’s district. He’s a Republican who has been in Congress since 1979 and is a millionaire. But many of GE’s employees live in Speaker Ryan’s district next door.

Among the workers, there’s a feeling that Ryan and Sensenbrenner are out of touch with middle-class life.

“You can’t support a family on $17 an hour,” says Joe Acker, a military veteran who still wears a buzz cut and loves making things. The day he got the job at the GE engine factory over a decade ago, he went home and told his wife he was going to work on the “Superbowl of Engines.”

The GE jobs pay $30 an hour, almost double Wisconsin’s median wage of $17.50. These are the “good jobs” Trump talks about not wanting to lose.

Randy Bryce, a 52-year-old iron worker, is planning to run against Ryan for the congressional seat. It’s being called a longshot, but Bryce, who makes $32 an hour, says he hears a lot of anger that “the middle class is under attack in Wisconsin.”

What about the workers?

GE Wisconsin wages

Every GE worker CNNMoney spoke with believed they would be at the factory until retirement. The wages and benefits they earned allowed them to own homes, put kids through college and have the kind of retirement that allows you to buy a camper and tootle around America.

Now they are furiously paying off debt, and warning their kids that they may not be able to afford college.

GE put up notice on the factory floor telling workers not to speak to CNNMoney.

“At no time should employees speak for the company. Nor should they initiative contact with, or respond to, anyone in the media,” GE wrote. The notice listed several phone numbers to call. Two were for people outside the U.S., according to a photo of the notice shared with CNNMoney.

GE first made the announcement that it was moving the factory to Canada on September 28, 2015. Employees have had time to prepare and Mayor Reilly says the company is trying to be a good partner and not leave a vacant lot in its wake, but it still stings. The blue collar workers are losing their jobs in Waukesha, but GE is keeping the white collar engineering jobs there.

“Everybody’s always trying to (ask), how can we make it cheaper and faster and put more money into CEO’s pockets?” Acker says. “We’re the ones who are creating the product. We should have a piece of that pie too.”

http://money.cnn.com/2017/06/07/news/economy/ge-jobs-moving-to-canada-paul-ryan/index.html

Gary Reber Comments:

This article is a call to WAKE UP America!

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

The men and women who have lost their jobs to the “lowest-cost forces” of globalization are victims of the narrow focus on JOBS as the only way to participate in production and earn income. Without a JOB people become despaired, frightened and dependent on others in the form of government welfare programs to survive. Yet the wealthy are not dependent on JOBS as the source of their wealth is OWNERSHIP of the non-human means of production, the assets forming the bulk of the productivity of their businesses.

Full employment is not an objective of businesses nor is conducting business statically in terms of geographical location. Companies strive to achieve cost efficiencies to maximize profits for the owners, thus keeping labor input and other costs at a minimum. They strive to minimize marginal costs, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

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

Over the past century there has been an ever-accelerating shift to productive capital — which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 239 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advances amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive — the core function of technological invention and innovation. Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary.

Furthermore, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Binary economist Louis Kelso postulated that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive, and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.

The numbers of men and women working at the GE plant already have declined over the years as a result of technological invention and innovation, enabling the company owners to reduce costs by substituting “machines” for people in production. Assuredly, the  new plant in Canada will be even further “automated” in the means to produce GE engines.

What happened in Wisconsin is just a microcosm of what the future holds. That is, if we don’t reform the monetary system and the financial system that enable new capital asset (non-human forms of productive assets) formation.

The United States is headed for more personal and family economic turmoil and social unrest and upheaval due to a faulty economic system that fosters the concentration of wealth-creating, income-generating productive capital––the ownership of non-human productive assets such as land, structures, machines, super-automation, robotics, digital computerized operations, etc. The system is faulty because economic growth is based on individual and family accumulations of savings, with ALL economic growth dependent on past savings “invested” or to pledge as security collateral to lenders to further concentrate productive capital ownership. This will leave the vast majority, or the so-called 99 percent, who are property-less as related to ownership of productive capital assets, unable to save sufficiently and instead struggling to sustain their livelihood month to month, as they fear for job loss and having to rely on taxpayer-supported government welfare.

To change the rules and reform the system, the outcome of FUTURE policies must be to facilitate financing economic growth with “FUTURE SAVINGS,” and simultaneously create new capitalist owners of wealth-creating, income-generating productive capital assets. “FUTURE SAVINGS” are profits used to repay loans for new capital formation and acquisition of existing productive assets by new owners.

Critically, we must recognize that Americans and the world’s people do not have to end up destitute and bereft as the FUTURE unfolds due to fundamentally flawed assumptions in modern economics and finance: that new capital formation is impossible without first cutting consumption, saving, then investing. The result has been that the “supply of loanable funds” derived from past savings determines the “production possibilities curve” or rate at which economic growth can be sustained.

If we are to achieve the goal of general affluence for every human being, the first requirement is to increase progressively the total amount of the income to be shared. This requires increased production, not redistribution, in order to generate incomes that would be distributed according to market principles. This is the ONLY means to promote a fuller utilization of our productive facilities and a consequent progressive increase in the aggregate income to be available for distribution, and to which increasing quantities of newly created products and services would become available to everyone.

“Distribution is the trouble” said Dr, Harold G. Moulton, President of Brookings Institution, in his 1935 book The Formation Of Capital. Said Moulton, “The way our income is distributed provides an inadequate purchasing power for our full production.”

The problem that needs to be addressed is threefold: 1) how to increase production, 2) how to distribute the income from production according to relative inputs of human labor and non-human productive capital, and 3) how to distribute that income to people who will use the increased income for consumption, not reinvestment (to further concentrate ownership of wealth-creating, income-generating productive capital assets).

In today’s economic world, economic progress and the financing of FUTURE growth is subject to a reliance on existing accumulations of savings that result from cutting current consumption. Income, instead of being spent on consumption to keep production and consumption in balance, is diverted into savings. With fewer customers purchasing what is produced, the financing of FUTURE productive capital used to produce new products and services becomes less financially feasible.

As is noted in the forward to the “new edition” of Moulton’s The Formation Of Capital, written by Norman G. Kurland, Michael D. Greaney and Dawn K. Brohawn, my colleagues at the Center for Economic and Social Justice (www.cesj.org):

“Financial feasibility refers to the ability of new capital investment to pay for itself out of the future earnings of the new capital. This is an application of Adam Smith’s observation that the purpose of production is consumption. A standard test to determine whether a company should invest in new capital is whether there is sufficient consumer demand to support the marketable good or service to produced. In other words, why add a new productive asset or tool if no one is going to buy (consume) what it produces? Thus, as Moulton emphasizes in this book, demand for capital is derived from consumer demand.

“Worse, from the standpoint of political and social stability, using past savings to finance growth accelerates, and provides a rationalization for maintaining and even increasing, concentrated ownership of the means of production. It also leads to expanding the role and powers of the State in a desperate effort to stabilize the economy. The rights of private property (i.e., the rights to the fruits of, and control over, what one owns) are taken from individual citizens and transferred to the State.”

The resulting problem is that to the extent that the savings investment approach increases production, the economic benefit accrues to the current owners, who re-invest to acquire more productive capital wealth rather than consume a growing portion of their capital incomes. This concentrates ownership even further.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

The conventional approach relies on savings for additional investment in new productive capital assets, instead of providing the means to satisfy people’s material needs and wants. The result has been to create a global ownership class of very rich people who reinvest most of their capital incomes to further their concentrated wealth ownership.

Supporters of this economic paradigm argue that no income generated by capital should be used for consumption. Instead, all capital income should be reinvested in ways that create new capital, thereby providing jobs for the masses until full employment is reached. Thus, most economist today assume that there is virtually no other means whereby most people can earn an income except in the form of wages paid for their labor.

Moulton summarized the results of his investigation:

“We find no support whatever for the view that capital expansion and the extension of the roundabout process of production may be carried on for years at a time when consumption is declining. [i.e., when saving is taking place.] The growth of capital and the expansion of consumption are virtually concurrent phenomena.”

Of course, the supporters of the arcane economic paradigm ignore and are oblivious to the reality that tectonic shifts in the technologies of production are destroying jobs and devaluing the worth of labor as increasingly the non-human productive capital factor is replacing the need for labor in the production of products and services needed and wanted by society.

Understanding Moulton is absolutely necessary in order for us to set out on a path to inclusive prosperity, inclusive opportunity, and inclusive economic justice. The question that Moulton poses is what should be the source of financing for capital formation?

Moulton answered the question as follows:

“A new and even more dynamic factor has come into the process of capital formation through the evolution of modern commercial banking. The development of the banking system, with its ability to manufacture credit, has served to render funds immediately available for the purposes of capital creation without the necessity of waiting upon the slower processes of accumulating funds from individual savings. The result is to sustain productivity at a higher level and to facilitate the growth of new capital at a more rapid rate than would otherwise have occurred.”

In other words, as noted in the forward to Moulton’s new edition:

“New capital formation can be financed by using money created by the commercial banking system. It is not necessary (and even counterproductive from the standpoint of economic equilibrium and sustainable growth) to rely on cutting consumption to generate the savings necessary to finance new capital formation.

“Following Moulton’s reasoning, the remedy to an economic downturn is thus not to manipulate the money supply by increasing government debt or bailing out failed speculation (which, among other problems, distorts the operation of the market and places a debt burden on future taxpayers). Nor is it an effective, long term solution to stimulate demand by subsidizing artificial job creation, legislating higher minimum wages, ignoring market forces in collective bargaining negotiations, imposing price controls or supports (especially on interest rates), or redistributing existing wealth. Such measures may be necessary at times as expedients, but are ultimately self-defeating. Instead, what is needed is to:

“1) Increase production by financing new capital formation through the extension of bank credit backed by the present value of the future stream of income to be generated by the new capital.

“2) Get the profits generated by the new capital into the hands of all workers and citizens who will use it for consumption, not reinvestment in additional new capital.”

In reading The Formation Of Capital, Moulton fails to list as a possible solution widespread, direct private ownership of the means of production. As noted by my colleagues at CESJ in the forward to the new edition:

“A broad base of owners and diversity in the forms of productive capital owned would ensure that all workers and as many people as possible, including the disabled and poorest of the poor, would receive income generated by many forms of advancing technology, and would use the income from their capital for consumption rather than reinvestment.”

Moulton’s omission was addressed by Louis Kelso and Mortimer J. Adler in their 1958 book The Capitalist Manifesto. Kelso, a successful corporate lawyer and self-schooled economist, was also an expert in finance who later formed a leading investment banking firm specializing in his financial mechanism, the Employee Stock Ownership Plan (ESOP) and other methods for financing worker and broader citizen individual ownership in productive capital. In the late 1960s, I had the privilege to form with Kelso Agenda 2000 Incorporated, a consulting firm, whose advocacy mission was to provide financial mechanism for economic development based on the Kelsonian principles underlying the binary economic or two-factor model of economic reality.

The Capitalist Manifesto made the moral and economic case for widespread ownership of the means of production. How to finance widespread productive capital ownership was spelled out in the assertive subtitle to The New Capitalists: A Proposal To Free Economic Growth From The Slavery Of Savings. (Both books are available as free downloads at http://www.kelsoinstitute.org/pdf/cm-entire.pdf and http://www.kelsoinstitute.org/pdf/nc-entire.pdf, respectively.)

Not surprisingly, the source that Kelso and Adler referenced most often in The New Capitalists is Moulton’s The Formation Of Capital. Moulton showed how the extension of commercial bank credit can be used to finance capital formation without requiring existing accumulations of savings. What Kelso and Adler argued as the solution to the income distribution problem was to democratize access to direct, private ownership of new capital formation.

Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. Advancing technology continues to rapidly take over the vast bulk of production from human labor.

As pointed out in the forward to the new edition of The Formation Of Capital, Moulton demonstrated that the chief means by which capital formation is financed in a modern industrial and financial economy is commercial bank credit backed by the present value of the future stream of income to be generated by the newly formed capital assets themselves with the collateralization requirement of existing accumulations of savings (already owned assets). To this Kelso added that 1) the ownership of the new capital financed with what he called “pure credit” must be broadly owned, and 2) the universal collateralization requirement could be met by using capital credit insurance and reinsurance in place of existing accumulations of savings.

Kelso’s refinements of Moulton’s work underpin a comprehensive national economic program called “Capital Homesteading” (http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm), developed by the Center for Economic and Social Justice. The “Capital Homestead Act,” which gives a legislative framework to the program is a way to implement both Moulton’s insights and Kelso’s solution to the income distribution problems of a modern economy. It would empower every American man, woman and child, including the poorest of the poor, with equal opportunity and the social tools to acquire, control and enjoy the fruits of productive corporate capital assets. Based on a new socio-economic paradigm that some have called the JUST Third Way” (as the moral alternative to traditional capitalism and socialism), Capital Homesteading also offers a template that can be tailored to eradicate poverty and economic powerlessness in the poorest of nations around the globe. (see the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797.)

The means by which Capital Homesteading proposes to achieve its goals involve major restructuring of America’s tax system and Federal Reserve policies (see abridged http://foreconomicjustice.org/?p=8942). These are designed to lift artificial barriers to more equitable distribution of FUTURE corporate capital and stimulate faster growth rates of private sector investment. Capital Homesteading would shift primary national income maintenance policies from inflationary artificial wage increases and unproductive income redistribution expedients, to market-based ownership sharing and dividend incomes.

The proposed Capital Homestead Act would reform monetary institutions and tax laws to democratize access to capital (productive) credit. By universalizing citizen access to direct capital ownership by making available “interest-free” productive credit and new, asset-backed money for increasing production, Capital Homesteading would close the power and opportunity gap between today’s haves and have-nots, without taking away property from today’s owners.

As my colleagues conclude in the forward to the new edition:

“Moulton’s insights in The Formation Of Capital suggest a practical and morally sound basis for restructuring the financial system to enable money to be created as needed to finance sustainable economic growth. World poverty can be eradicated, something not possible within the current economic paradigms, which rely on existing accumulations of savings to finance capital formation. With the specter of another economic depression looming over today’s world, and with the widening gap between “haves” and “have-nots” threatening social harmony, there is no real justification for delaying the implementation of a program of Capital Homesteading to establish and maintain a free, prosperous and just economy for all.”

For other related articles, please see my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.

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

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

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.foreconomicjustice.org/?p=16730 and “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058. And also “Achieving The Green Economy” at http://www.nationofchange.org/achieving-green-economy-1373980790. Also see it complete with the footnotes at http://foreconomicjustice.org/?p=9082.

 

 

 

Senate Kills “Work And Save” Initiative

In the June 2017 AAPR.org Bulletin is this notice:

The U.S. Senate narrowly overturned a federal guideline designed t help states establish a retirement plan to benefit private-sector workers who aren’t offered one by employers.

By a vote of 50 to 49, senators in May eliminated the “work and save” guidance that states had sought from the U.S. Department of Labor to help them set up savings programs without running afoul of federal rules. The vote essentially followed party lines, with all but two GOP lawmakers in favor of killing the measure.

The AARP had urged the Senate to keep the guidance in place. “Overturning it will “limit opportunities for families who want to save for a better life as they age,” said Nancy LeaMond, AARP Executive Vice President.

http://www.aarp.org/politics-society/advocacy/financial-security/info-2014/work-and-save-101.html

Today, a secure retirement is out of reach for millions of Americans, especially those who work for small businesses.

  • Fifty-seven million Americans have no access to a retirement savings plan through their employers—that’s over 50 percent of the 18-to-64-year-old population.
  • When employers give workers the option of payroll deduction for retirement savings, their participation rate is a whopping 1,300 percent higher than that of those without the option, research  shows.
  • The average monthly Social Security benefit is only about $1,200 per month. While Social Security is a critical piece of the puzzle, it is not enough to ensure people can live independently as they get older.

How can we make it easier for Americans to save so they can live the lives they want in retirement? The answer is simple: a Work and Save plan.

A Commonsense Solution

A Work and Save plan makes it easier for businesses to create a private retirement savings account for employees, helping them take charge of their financial futures and live independently as they age.

Why Work and Save?

  • Promote Financial Freedom: Social Security alone isn’t enough to depend on. Work and Save accounts make it easier for workers to grow the additional savings they will need to live a secure and independent future.
  • Give Americans a Choice: Accounts are voluntary. It’s up to employees to decide if they want to participate.
  • Give Employees Control: Accounts are portable. When employees switch jobs, they can take their Work and Save accounts with them.
  • Save Taxpayer Dollars: Giving employees a simple way to save for retirement will mean fewer Americans will need to rely on government safety net services, which will save taxpayer dollars.
  • No Risk: A Work and Save plan would be easy for employers to set up, and there would be no ongoing costs or risk to the employers or the state.

Learn more about AARP efforts and what is happening in your state at aarp.org/stateadvocacy.

Gary Reber Comments:

We have an extremely serious problem. The truth is this: the concept of a do-it-yourself retirement is a fraud. It is a fraud because to expect people to save up enough money to see themselves through a 20- or 30-year retirement is a dubious proposition in the best of circumstances.

“The experts” keep telling you to cut consumption and accumulate what you don’t consume as savings . . . but they don’t tell you that the more you do this, the worse off you are, especially if everybody does it.

If people are saving instead of buying (consuming products and services), people in business have no reason to borrow your money to produce more goods, products and services — you aren’t buying what they’re producing now! They should produce more? Face it, you’re not going to be able to circumvent Say’s Law of Markets.

Yet, the savings deception poses numerous questions, such as:

– Are you saving enough? With every paycheck? Through a work plan, such as 401(k)? On your own, such as putting money in an IRA, annuity or brokerage account set up just for retirement? Have you set up automatic contribution to pay yourself first (save)? It can be tough, but steady saving is the best way to build a nest egg. Are you saving at least 5 percent of your gross income? Remember that 76 percent (re: AARP) of retirees wish they had saved more! –

Realistically, the vast majority of American workers do not earn enough in wages to effectively save enough to sustain them in retirement,  and will end up dependent on family caregivers or the government. A relative small group of Americans earn enough from wages to effectively save and speculate placing their bets on secondhand securities growth unable to earn dividend income from corporations because very few even payout an earnings dividend to their owners.

There are, in addition, some serious conceptual problems with saving. The most obvious is that any savings program requires that workers reduce what for most is inadequate consumption income in order to accumulate savings for inadequate retirement income.

Then there’s the more serious problem that savings programs are funded by reducing consumption at a time when what is needed to stimulate the economy is increasing consumption. That’s what past savings is, after all: the excess of income over consumption. Our economy is based on for-profit companies that constantly compete with each other (on a local, national and global scale) for attracting “customers with money” to purchase their goods, products or services in order to generate profits and thus return on investment (ROI). As it is, there are fewer and fewer “consumers with money” and this trend will continue as long as the problem persists in the United States of the exponential disassociation of production and consumption and the denial of ordinary citizens to gain access to productive capital ownership (the non-humans means to produce) to improve their economic well-being.

I’ve said it before and I’ll say it again: It’s great to be unemployed and retired if you can afford it!

So far the attempts to address the fact that Americans are not saving enough for retirement do not address the REAL cause. And the proposals put forth fall far shot by “trillions” of dollars.

The plain truth is that more than four in five older Americans expect to keep working during their latter years, a sign that traditional retirement is out of reach for vast swaths of society. According to a recent survey poll conducted by the Associated Press-NORC Center for Public Affairs Research, among Americans ages 50 and older who currently have jobs, 82 percent expect to work in some form during retirement.

Noteworthy also, is the fact that only 50 percent of workers (re: AARP) have access to a workplace retirement savings plan and not all are saving at least up to the company match. Furthermore, the union movement has deteriorated and has failed to transform to a producers’ ownership union movement and embrace a cooperative approach to survival, whereby they redefine “more” income for their workers in terms of the combined wages of labor and capital (ownership) on the part of the workforce. They need to continue to represent the workers as labor workers in all the aspects that are represented today — wages, hours, and working conditions — and, in addition, represent workers as full voting stockowners as capital ownership is built into the workforce. What is needed is leadership to define “more” as two ways to earn income.

In reality, then, “retirement” is increasingly becoming a misnomer.

For those who have been dependent on employment and/or welfare, the problem is that financially sustainable retirement is and will no longer be a reality. Even with Social Security, which is funded through payroll taxes called the Federal Insurance Contributions Act tax (FICA) and/or Self Employed Contributions Act Tax, (SECA), one must have had a job to be eligible for the entitlement — and the amount of Social Security is based on the income level generated from one’s employment record of payroll tax contributions.

Employer-provided pensions continue to decrease and personal savings is not the norm among the vast majority of American households who must spend virtually every earned dollar on living expenses, and incur consumer debt to secure automobiles and housing, as well as other consumption. While increasingly individuals are finding it necessary to continue working in retirement to supplement their income, most older Americans discontinue full-time career work and struggle to meet obligations with minimum-pay part- and full-time jobs. A proportion of retirees also receive income from welfare programs, such as Supplemental Security Income and other life-support services funded through tax extraction and government debt.

The impact of savings on the economy actually suppresses growth as savings reduce what for most is inadequate consumption income. As my colleague Michael D. Greaney at the Center for Economic and Social Justice (www.cesj.org) explains: “Suppose an economy produces $1,000,000 worth of goods and services in a year. Being good little girls and boys, everybody saves 20 percent of his or her income, or an aggregate of $200,000 — production equals income, you know. That means that $200,000 remains unsold.

“What happens to the $200,000? Well . . . nothing, actually. Nobody wants to borrow it to make more goods and services that will just pile up unsold, so it goes into the bank at zero interest, or into a sock under the bed at zero interest. In the meantime, because there’s no new investment going on, there’s nothing to live on when you retire, anyway.”

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

This perspective should serve as the “reality” from which to explore prospects for effectively dealing with eroding retirement security.

Proposals that have received national media attention offer limited income security funded out of current savings, meaning further reductions in consumption out of already inadequate incomes.

Such proposals will not succeed in providing any real, substantial retirement security for the majority of Americans whose jobs do not earn more than substance week-to-week and month-to-month wages. Retirement proposals are designed to encourage Americans to save for retirement and require personal savings and denial of consumption. This is unrealistic given that the Americans with the least opportunity must reduce what is inadequate consumption income in order to accumulate savings for retirement, which for the vast majority of Americans will be inadequate.

Does anyone really believe that the interest rate to be paid under any of the proposed programs that have been floated will be sufficient and able to avert the decline in the value of the money as the government continues to flood the economy with increasingly non-asset-based debt (inflation)? It is inflation that really kills consumer demand. As the value of the currency is eroded, people pay more and get less. This in turn lowers the demand for new productive capital, and thus new jobs.

Retirement proposals rely on the requirement to reduce consumption in the economy at a time when what is needed is productive capital expansion of the economy supported by increased consumption.

As my colleague Michael D. Greaney at the Center for Economic and Social Justice (www.cesj.org) states, “under the prevailing Keynesian paradigm, of course, ‘saving’ is always defined as the excess of income over consumption. If you want to save, then, the iron assumption of Keynesian economics is that you must consume less.”

The American consumer is being put into an impossible situation of being asked to consume more to drive the economy and reduce saving, and at the same time are being told they must reduce consumption dramatically in order to accumulate sufficient savings for retirement.

Of course, the whole problem would go away if we financed both retirement and wealth-creating, income-producing physical productive capital needs out of “future savings,” thereby increasing the capacity to consume and support the economy while simultaneously building financial security for every American citizen.

A far better and productive approach would be to create a new way for working and non-working Americans to start their own retirement savings: MyCHA. CHA stands for Capital Homestead Account. It would be a super-IRA or asset tax shelter for citizens. The Treasury should start creating an asset-backed currency, issuing an equal amount of interest-free capital credit annually to all citizens, that will enable every child, woman and man to establish a CHA at their local bank to acquire a growing dividend-bearing stock portfolio comprised of newly-issued, full-dividend earning stock (not the secondhand stock traded on the gaming securities markets) representative of true investment in viable American growth corporations to supplement their incomes from work and all other sources of income.

We can create new asset-backed money for investment through the existing but dormant Section 13(2) rediscount mechanism of each of the 12 regional Federal Reserve banks that would be backed by “future savings” (that is, future profits from higher levels of marketable goods, products, and services).

The CHA would function as a savings and income account that effectively would build a nest egg over time, using interest-free, insured (with respect to the lending institutions) capital credit loans repayable out of future earnings without the requirement of past savings as loan security collateral. A CHA would be offered to EVERY American, whether employed or not. Of course, those employed may also have additional opportunities to acquire personal ownership in their companies using an Employee Stock Ownership Plan (ESOP) trust financial mechanism.

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 with viable projects and private sector jobs for local, national and global markets. The shares would be purchased using capital credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods, products 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 interest-free loan would be covered by private sector capital credit risk insurance and reinsurance (a government reinsurance agency ala the Federal Housing Administration concept), but would not require citizens to reduce their funds for consumption to purchase shares. There would be no prerequisite requirement to qualify for an annual set capital credit loan other than American citizenship, nor would there be any risk on the part capital credit loan recipient.

This idea to stimulate economic growth and provide retirement security for EVERY American is based on the premise that what is needed is for the system to facilitate spreading the ownership of productive capital more broadly and simultaneously as the economy grows with full payout of dividend earnings, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of present corporate productive capital wealth assets. In doing so, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader.

This would benefit the traditionally disenfranchised poor and working and middle class, who are propertyless in terms of owning productive capital assets. It would also result is tremendous economic growth, which would benefit everyone including the already wealthy ownership class, and create opportunities for real jobs, not make-work as an expanded economy is built that can support general affluence for EVERY American citizen. Thus, as productive capital income is distributed more broadly and the demand for products and services is distributed more broadly from the earnings of capital, the result would be the sustentation of consumer demand, which will promote economic growth. That also means that over time, EVERY child, woman and man could accumulate a significant diversified portfolio of wealth-creating, income-producing productive capital assets to provide economic security in retirement and not be dependent on having to work during retirement or rely on government-assisted welfare.

One might ask how we failed to grasp the significance of productive capital’s input and the necessity for broad private sector individual ownership? Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment — thus the political focus on job creation and redistribution of wealth rather than on full production and broader productive capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Yet, the wealthy ownership class knows that this notion is idiotic.

In real productive terms, productivity gains are the result of tectonic shifts in the technologies of production, which consequently eliminates the need for human labor, destroys jobs, and devalues the worth of labor.

One should ask what form would the structural reforms take. At birth, an CHA capital account would be established for a lifetime to become increasingly a productive capital owner. Employment in this new enlightened age would start at the time one enters the economic world as a labor worker, to become increasingly a productive capital owner, and at some point to retire as a labor worker and continue to participate in production and to earn income as a productive capital asset owner until the day you die.

This is not a flick-the-switch solution (none are) but a long-term solution that within eight years will begin to reap financial gains for EVERY citizen, and thereafter to exponentially grow.

As for breaking up the present monopoly capital asset ownership holdings, as a substitute for inheritance and gift taxes, a transfer tax should be imposed on the recipients whose asset holdings exceeded $1 million. This would encourage those owning concentrations of productive capital assets (effectively the 1 to 10 percent) to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.

Other stipulations for the structural reform would entail tax policy reform to incentivize corporations to pay out all profits to their owners as taxable personal incomes to avoid paying stiff corporate income taxes and to finance their growth by issuing new full-dividend payout shares for broad-based individualized employee and citizen ownership with full-voting rights.

We need to encourage the insurance industry to expand their product lines to market Capital Credit Insurance to cover the risk of default for banks making loans to Capital Homesteaders under the proposed Capital Homestead Act (aka Economic Democracy Act). Under the provisions of the Act, risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance issued by a new government agency (ala the Federal Housing Administration concept), but would not require citizens to reduce their funds for consumption to purchase shares.

The end result is that ALL American citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing our country’s trend where all citizens are becoming more dependent for their economic well-being on the “state,” our only legitimate social monopoly.

Implementing the Capital Homestead Act would significantly empower ALL Americans to accumulate over time a viable, diversified ownership portfolio in our nation’s growth companies and create a truly unique, global-leading just and environmentally responsible Ownership Society that fosters personalism, creativity and innovation. Embarking on a new path to prosperity, opportunity and economic justice will expand growth of our market economy in ways that democratize future ownership opportunities, while building a future economy that can support general affluence for EVERY American.

In conclusion, the conventional savings required —denial-of-consumption — programs would be completely unnecessary if we had Capital Homesteading. We desperately need political leadership that will advocate for the passage of the Capital Homestead Act.

See references to the proposed Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

For more on how to accomplish such structural reform, see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.foreconomicjustice.org/?p=17032 and “The Income Solution To Slow Private Sector Job Growth” at http://www.foreconomicjustice.org/?p=9872.