This week, Robert Reich joins Moyers & Company to discuss a new documentary film, Inequality for All, opening next week in theaters across the country. Directed by Jacob Kornbluth, the film aims to be a game-changer in our national discussion of income inequality. Reich, who Time magazine called one of the best cabinet secretaries of the 20th century, stars in this dynamic, witty and entertaining documentary.
A professor at the University of California Berkeley, Reich is the author of thirteen books, including The Work of Nations, which is available in 22 languages; Aftershock and Supercapitalism, which were best sellers; and his latest, Beyond Outrage: What Has Gone Wrong with Our Economy and our Democracy, and How to Fix It. He appears regularly on television and radio – you can hear him on public radio’s Marketplace – and blogs about politics and economics at RobertReich.org.
This week marks both the fifth anniversary of the fiscal meltdown that almost tanked the world economy and the second anniversary of Occupy Wall Street, the movement that sparked heightened public awareness of income inequality. Yet the crisis is worse than ever – in the first three years of the recovery, 95 percent of the economic gains have gone only to the top one percent of Americans. And the share of working people in the U.S. who define themselves as lower class is at its highest level in four decades.
More and more are fighting back. According to Robert Reich, Bill Clinton’s secretary of labor: “The core principle is that we want an economy that works for everyone, not just for a small elite. We want equal opportunity, not equality of outcome. We want to make sure that there’s upward mobility again, in our society and in our economy.”
Robert Reich speaks of inequality of opportunity in America. And he is absolutely correct in is assessment. But his solution is a “redistribution” solution rather than FUTURE “distribution” solution. Never does he suggest that we implement policies that broaden private sector individual ownership of FUTURE productive capital growth to provide income security for EVERY American.
Infographics on the distribution of wealth in America, highlighting both the inequality and the difference between our perception of inequality and the actual numbers. The reality is often not what we think it is.
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 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.
The premise of this argument presented as a documentary is that income inequality is a problem and is increasingly widening. The premise is that labor productivity has doubled and continues to increase, but labor is not sharing in this productivity. Of course, this is a false premise because labor productivity has not dramatically changed. What has changed is the exponential growth of technological change. Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to the owners of the tools, machines structures, and processes––what economist term “capital” and progressively less to workers who make their contribution through labor. Once one understands that fundamentally, economic value is created through independent human and non-human contributions, you will understand that the rich are rich because they are OWNERS. While this is an obvious and simple reality, the filmmakers and their lead advocate Robert Reich fail to even use the word “ownership” and what that relationship means in terms of producing the products and services that society needs and wants. Because of this failure to understand the economics of reality, the solutions advocated are always couched in some form of job creation, minimum wage increases, and welfare insurance programs (all of which are redistributive––appropriating earnings from those who own productive capital property.
Those who have even casually observe the history of humans should by now have realized that 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. The fact is that most changes in the productive capacity of the world since the beginning of the Industrial Revolution are due to technological improvements in our capital assets, while a relatively diminishing proportion can be attributed to human labor. Productive capital 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. Because of this undeniable fact, free-market forces no longer establish the “value” of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.
Because technology increases the profitability of companies throughout the world technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real capital while distributing the earning capacity of capital owners (via capital ownership of stock in corporations) to non-owners through jobs and welfare. Such policies do not function effectively.
Because this documentary completely missed the interrelationship between the increasing productiveness of capital and the relatively constant condition of our labor abilities, the suggestion that the focus should be on job creation and wage protection is oblivious to the opportunity to embrace technology and to finance new capital formation and the purchase buyout of existing capital using insured, zero-interest capital credit repayable with the future earnings of capital. Overtime this will result is equal opportunity to acquire capital with the earnings of capital, without denying consumption or requiring past savings, and significantly increase the earnings of the 99 percent, who will become “customers with money” to provide the demand to support the responsible growth of the economy and put our nation on a path to prosperity, opportunity and economic justice––with significant less inequality.
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 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.
