On September 10, 2013, Robert Reich writes an oped on NationOfChange.org:
Forbes Magazine, which calls itself the “capitalist tool,” seems to have a penchant for publishing right-wing diatribes posing as serious economic analyses. The latest is by Paul Roderick Gregory, who accuses me of “false facts and false theories” in a recent piece I wrote about why high wages are good for the economy.
Gregory then criticizes me for suggesting that Henry Ford benefited financially by increasing the wages of his workers, who could then afford to purchase Model T’s. Gregory says Ford increased the wages of his workers because, in Gregory’s words, “Ford could afford” to pay his auto workers more, given the enormous productivity increases generated by his assembly lines.
Of course Ford could afford it; he couldn’t have done paid them more otherwise. But the fact Ford could afford to pay his workers more doesn’t explain why he chose to do so. As any self-respecting Forbes’ capitalist tool knows, just because a corporation can afford to pay its workers more, doesn’t mean it will do so. Ford paid his workers more because he found it in his economic interest to do so.
It is no coincidence that 1928 and 2007 marked the high-water points of income inequality, and that the bottom fell out the following years. When most of the gains of economic growth go to the top, the vast majority no longer has the purchasing power they need to buy what the economy is capable of producing.
Gregory doesn’t like the notion of “middle-out economics” and believes that the captains of industry are the real job creators. But businesses need consumers in order to prosper and grow. Consumers in the middle class and below are the real job creators. In the United States, 70 percent of economic activity is personal consumption. Unless the vast middle class, and everyone seeking to join it, have enough money in their pockets — and share sufficiently in the gains from growth — businesses cannot possibly do well.
Like most polemicists who don’t really have arguments to support their diatribes, Gregory resorts to ad hominem attack (my arguments is, he says, a “hackneyed respires of Karl Marx;” I’m not a real economist, he says, but a lawyer who “studied a smattering of economics at Oxford,” and so on). Gregory has a history of attacking others, such as Paul Krugman (who happens to have received a Nobel Prize in economics), with the same mixture of illogic, distortion, and disdain.
Robert Reich’s argument is essentially that the economy needs “customers with money” to sustain growth and for every citizen to share sufficiently in the gains from growth. But Reich is no student of the economics of reality. He can only see the “share sufficiently” in terms of higher wages and more job opportunities.
Reich fails to acknowledge that the reason the rich are rich is that in large measure their income is derived through dividends, capital gains, interest and rent, through their ownership of wealth-creating, income-generating productive capital assets. The 99 percent class of Americans are essentially propertyless as related to ownership of productive capital assets and are solely dependent on wages and salaries from jobs. The growing rich-poor gap is being propelled by tectonic shifts in the technologies of production that are destroying jobs (thus expanding the available pool of workers competing with each other) and devaluing the worth of labor and by globalization, which shifts employment to other countries where labor is less costly as well as regulations and controls.
The role of physical productive capital is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. 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 the consumer populous is increasingly not able to get the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption. It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
Yet, Robert Reich nor Paul Roderick Gregory never advocate for broadened private sector individual ownership of productive capital assets simultaneously with the growth of the economy. Why?
For solutions see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624
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