On February 17, 2015, Elias Isquith writes on Salon:
The market for clearly, cogently and concisely explaining why American society is so riven with economic inequality — and why it’ll be so hard to reverse — is, unfortunately, booming. But even in a crowded field, University of California, Berkeley, professor and former Secretary of Labor Robert Reich is a distinctly able guide to understanding the political economy of the United States in the Second Gilded Age. If you haven’t already, check out “Inequality for All,” the 2013 documentary he made with Jacob Kornbluth, to see for yourself.
With the Republican Party’s supposed embrace of inequality politics in the news as of late, Salon figured now would be a good time to chat with Reich about what politicians from both parties are calling the greatest challenge of our time. We also touched on the controversial Trans-Pacific Partnership, the policies Democrats must embrace to reverse inequality, and why the economy is not necessarily as healthy as it seems. Our conversation is below and has been edited for clarity and length.
Former Florida governor and likely 2016 presidential candidate Jeb Bush recently gave a speech about inequality — except he referred to it as “the opportunity gap.” Why is viewing the issue from an opportunity lens rather than an equality lens less than ideal?
Because the opportunity lens doesn’t deal with two big facts, one economic and one political.
The economic fact is what’s happened to the middle class. If you’re only looking at opportunity and you’re worried about equal opportunity, you are not grappling with the fact that the middle class is shrinking and is under greater and greater stress. That means it’s harder to move up into the middle class and it’s harder for anyone in the lower middle class — which we used to call the working class — to have an equal opportunity to get ahead. When the middle class is shrinking and stressed, there are fewer places in it, by definition. Also, when it’s shrinking and stressed, it’s less willing to be generous to the poor and the working class in terms of giving helping hands.
And the political fact?
In simple terms, power follows property. Concentrated capital asset ownership, and thus the money derived from such property, is corrupting American politics. The fight is intensifying between the owner “haves” and the non-owner “have-nots.” If we continue with the past’s unworkable trickle-down economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.
We need to end the corruption built into our exclusionary system of monopoly capitalism––the main source of corruption of any political system, democratic or otherwise. We need leaders who will advocate the need to radically overhaul the Federal tax system and monetary policies and institute proposals to get money power to the 99 percent of American citizens who now only rely on their labor worker earnings.
Economic power has to be universally distributed amongst individual citizens and never allowed to concentrate. We need to economically empower all individuals and families through direct and effective ownership of the non-human, capital asset means of production.
We need a value system based on the importance and dignity of every human person. The “pursuit of happiness” phrase in the Declaration of Independence was interchangeable in those times with the word “property.” The original phrasing was “the right to life, liberty and property.” “The pursuit of happiness” phrase was a substitute for the “property” phrase. In the forerunner of the Declaration of Independence and Bill of Rights, the 1776 Virginia Declaration of Rights declared that securing “Life, Liberty, with the means of acquiring and possessing Property” is the highest purpose for which any just government is formed. Democratizing economic power will return us to the pristine innocence and economic power diffusion we had in a pre-industrial society where labor was the principal factor in the creation of wealth.
Fundamentally, economic value is created through human and non-human contributions. NOTE, real physical productive capital isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production. Financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things.
The role of physical productive capital is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets. It is only human nature to want to protect that what you own and the money produced therefrom, so the wealthy ownership class use their wealth to control the political system. The impact of tectonic shifts in the technologies of production have resulted in subsequent technological advances that have and will continue to amplify the productive power of non-human capital. As a result of allowing capital ownership to become concentrated, plutocratic finance has channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.
While Americans believe in political democracy, political democracy will not work without a property-based free market system of economic democracy. The system is the problem, but it can and must be overhauled. The two prerequisites are political power, which is the power to make, interpret, administer, and enforce laws, and economic power, the power to produce products and services, whether through labor power or productive capital.
Binary economist Louis Kelso wrote: “In the distribution of social power, whether it be political power or economic power, all things are relative. The essence of economic democracy lies in the elimination of differences of earning power resulting from denial of equality of economic opportunity, particularly equal access to capital credit. Differences of economic status resulting from differences in advantages taken and uses made of differences based on inequality of economic opportunity, particularly those that give access to capital credit to the already capitalized and deny it to the non- or -undercapitalized, are flagrant violations of the constitutional rights of citizens in a democracy.”
The system is the problem. 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 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.”
Unfortunately, pursuing economic democracy has been frustrated by the systemic concentration of economic power and exclusionary access to future capital credit to the advantage of the wealthiest Americans. The so-called 1 percent rulers of corporations have rigged the financial system to enable this already rich ownership class to systematically further enrich themselves as capital formation occurs and technological industrialization spreads throughout the world, leaving behind the 99 percent to depend on income redistribution through make work “full employment” policies, government boondoggles, excessive military build-up and dependence on arms production and sales, and social welfare programs due to the lack of an alternative to full employment and the growing economic helplessness and dependency. The unsatisfied needs and wants of society are not in that 1 percent or for that matter the 5 percent; those people are not the ones who are hurting.
We need to change our national economic policy to reform the system with the result that productive capital acquisition would take place through commercially insured, interest-free capital credit, resulting in a quiet revolution in which economic plutocracy will transform to economic democracy. The national economic policy should be universal participation in the ownership of productive capital, alongside full employment of the labor workforce as a direct result of economic growth
At present, there is a brewing power struggle going on in the United States between individual human beings (citizens) and the plutocratic powers who manipulate our government and the would-be plutocratic powers (top corporate executive managers and financial barons). What a unite America political movement1 should really be about is returning America to economic democracy. If we do not achieve economic democracy, then plutocracy will lead to fascism—the ownership of productive capital by the rich and by their institutions.
As Kelso would say, today’s techniques of finance are designed to make the rich richer. None are designed to make the poor richer. That’s why the poor are poor. The reason they are poor is because they do not have viable capital ownership. Thus, we need to focus on revising today’s techniques of finance to broaden capital ownership.
The purpose of production in a market economy is the consumption of products and services by the consumers who make up the economy. But without income, the non-capital ownership class, the 99 percenters, cannot afford to purchase the products and services they desire. But when incomes rise among consumers who have the need and desire to improve their material standard of living, the market demand for products and services strengthens, which in turn increases production and results in a growth economy.
Abraham Lincoln said that the purpose of government is to do for people what they cannot do for themselves. Government also should serve to keep people from hurting themselves and to restrain man’s greed, which otherwise cannot be self-controlled. Anyone who seeks to own productive power that they cannot or won’t use for consumption are beggaring their neighbor––the equivalency of mass murder––the impact of concentrated capital ownership.
The fact is money power rules. When money power is broadly distributed in the hands of the citizens, not the politicians or bankers, the people shall rule.
To accomplish this objective, we need to adopt the proposed Capital Homestead Act (http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf). The end result would be that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government.
A shift to Capital Homesteading will enable us to change direction and systematically build earning power into consumers. We have the opportunity to reverse the depression perpetrated by systematically limiting the 99 percent to labor wages alone and through technology eliminating their jobs. We need solutions to grow the economy in ways that create productive jobs and widespread equity sharing. We need to systematically make capital credit to purchase capital accessible to economically underpowered people (the 99 percenters) in which the income from the capital investment is isolated until it pays for itself, and then begins to produce a stream of dividend income to the new capitalists. This can only be accomplished by enabling every person to have access to capital ownership and purchase the capital, and pay for it out of what the capital produces. It’s time good and well-intentioned people woke up and adopted a just third way beyond the greed model of monopoly capitalism and the envy model of the traditional welfare state. This will promote peace, prosperity, and freedom through harmonious justice.
Binary economist Norm Kurland argues, “The haves represent a tiny fraction of humanity. Our ideas will split them between those who see our point and understand that they would benefit everyone without taking anything away from them during their lives, and those who want to keep ownership in an exclusive club. The latter cannot publicly attack the institution of private property without threatening the legal foundation that gives them their monopoly over the money system and the ownership system.”
Only through economically empowering each individual can we achieve economic democracy, which will finally make political democracy a meaningful reality.
We need leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every child, woman, and man as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every child, woman, and man to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.
The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to become a capital worker as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.
The question that requires an answer is now timely before us. It was first posed by Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what ownership is. Therefore, by ignoring such issues of economic justice and ownership, our leaders are ignoring the concentration of power through ownership of productive capital, with the result of denying the 99 percenters equal opportunity to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”
1 See platform for the Unite America Party, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.
