In Washington’s “think-tank” study on inequality, they fail to mention how big corporations and Wall Street have weakened the nation’s labor and antitrust laws. So whose side is Washington really on?
On April 7, 2015, Robert Reich writes on Nation Of Change:
Not long ago I was asked to speak to a religious congregation about widening inequality. Shortly before I began, the head of the congregation asked that I not advocate raising taxes on the wealthy.
He said he didn’t want to antagonize certain wealthy congregants on whose generosity the congregation depended.
I had a similar exchange last year with the president of a small college who had invited me to give a lecture that his board of trustees would be attending. “I’d appreciate it if you didn’t criticize Wall Street,” he said, explaining that several of the trustees were investment bankers.
It seems to be happening all over.
A non-profit group devoted to voting rights decides it won’t launch a campaign against big money in politics for fear of alienating wealthy donors.
A Washington think-tank releases a study on inequality that fails to mention the role big corporations and Wall Street have played in weakening the nation’s labor and antitrust laws, presumably because the think tank doesn’t want to antagonize its corporate and Wall Street donors.
A major university shapes research and courses around economic topics of interest to its biggest donors, notably avoiding any mention of the increasing power of large corporations and Wall Street on the economy.
It’s bad enough big money is buying off politicians. It’s also buying off nonprofits that used to be sources of investigation, information, and social change, from criticizing big money.
Other sources of funding are drying up. Research grants are waning. Funds for social services of churches and community groups are growing scarce. Legislatures are cutting back university funding. Appropriations for public television, the arts, museums, and libraries are being slashed.
So what are non-profits to do?
“There’s really no choice,” a university dean told me. “We’ve got to go where the money is.”
And more than at any time since the Gilded Age of the late nineteenth century, the money is now in the pockets of big corporations and the super wealthy.
So the presidents of universities, congregations, and think tanks, other nonprofits are now kissing wealthy posteriors as never before.
But that money often comes with strings.
When Comcast, for example, finances a nonprofit like the International Center for Law and Economics, the Center supports Comcast’s proposed merger with Time Warner.
When the Charles Koch Foundation pledges $1.5 million to Florida State University’s economics department, it stipulates that a Koch-appointed advisory committee will select professors and undertake annual evaluations.
The Koch brothers now fund 350 programs at over 250 colleges and universities across America. You can bet that funding doesn’t underwrite research on inequality and environmental justice.
David Koch’s $23 million of donations to public television earned him positions on the boards of two prominent public-broadcasting stations. It also guaranteed that a documentary critical of the Kochs didn’t air.
As Ruby Lerner, president and founding director of Creative Capital, a grant-making institution for the arts, told the New Yorker’s Jane Mayer, “self-censorship” practiced by public television … raises issues about what public television means. They are in the middle of so much funding pressure.”
David Koch has also donated tens of millions of dollars to the American Museum of Natural History in New York and the Smithsonian National Museum of Natural History, and sits on their boards.
A few weeks ago dozens of climate scientists and environmental groups asked that museums of science and natural history “cut all ties” with fossil fuel companies and philanthropists like the Koch brothers.
“When some of the biggest contributors to climate change and funders of misinformation on climate science sponsor exhibitions … they undermine public confidence in the validity of the institutions responsible for transmitting scientific knowledge,” their statement said.
Even though gift agreements by universities, museums, and other nonprofits often bar donors from being involved in decisions about what’s investigated or shown, such institutions don’t want to bite hands that feed them.
This isn’t a matter of ideology. Wealthy progressives can exert as much quiet influence over the agendas of nonprofits as wealthy conservatives.
It’s a matter of big money influencing what should and should not be investigated, revealed, and discussed – especially when it comes to the tightening nexus between concentrated wealth and political power, and how that power further enhances great wealth.
Philanthropy is noble. But when it’s mostly in the hands of a few super-rich and giant corporations, and is the only game available, it can easily be abused.
Our democracy is directly threatened when the rich buy off politicians.
But no less dangerous is the quieter and more insidious buy-off of institutions democracy depends on to research, investigate, expose, and mobilize action against what is occurring.
http://www.alternet.org/robert-reich-colleges-churches-and-non-profits-doing-wealthys-dirty-work
The problem is that the wealthy ownership class is reacting to an attack on their wealth and ALL efforts to redistribute their wealth to those with less or no wealth ownership stakes in the form of State coerced minimum wage legislation and all programs of redistribution of wealth.
What is needed is a focus on policies to ensure equal opportunity to produce, full production and broader capital ownership accumulation.
Robert Reich is caught up in the manifestation of 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 along with minimum wage legislation as the means to distribute income is not achievable without a significant growth economy. 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. At the same time the rich, who are rich because they OWN wealth-creating, income-producing capital assets, keep on getting richer and richer, and thus more politically powerful. The resulting impact of our current approaches has been plutocratic government and concentration of capital ownership, which denies every citizen his or her pursuit of economic happiness (property).
Market-sourced income (through concentrated capital ownership) has concentrated in individuals and families who will not recycle it back through the market as payment for consumer products and services. They already have most of what they want and need so they invest their excess in new productive power, making them richer and richer through greater capital ownership. This is the source of the distributional bottleneck that makes the private property, market economy ever more dysfunctional. The symptoms of dysfunction are capital ownership concentration and inadequate consumer demand, the effects of which translate into poverty and economic insecurity for the 99 percent majority of people who depend entirely on wages from their labor or welfare and cannot survive more than a week or two without a paycheck. The production side of the economy is under-nourished and hobbled as a result.
What Reich advocates is an inflation-inducing approach to increase the income earned by minimum wage workers––that increase would come from raising the minimum wage to $15 per hours incrementally over the next three years rather than implementing monetary reform to empower EVERY citizen, whether minimum wage earners or not, including those workers earning above minimum wage, those unemployed, and others not needing employment or unemployable.
Reich’s premise and the foundation of his argument is that the typical worker today is more than twice as productive. Thus, adjusted for both inflation and productivity gains the minimum wage should be raised.
What’s wrong with this analysis? Reich fails to acknowledge that fundamentally, economic value is created through human and non-human contributions.
Reich fails to acknowledge that “tools”––the non-human factor–-significantly has and continues to change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention and innovation. Reich does not attribute 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. Instead, he bases his argument on the false belief that labor is becoming more productive.
The true reality is that physical 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.
Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
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. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. 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.
Reich fails to understand the fact that 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. If Reich understood this he would hopefully conclude that because productive capital is increasingly the source of the world’s economic growth it should become the source of added property ownership incomes for all. This postulation is simple to grasp: 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, Reich still pretends to believe that labor is becoming more productive, and ignores the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the American economy.
At Agenda 2000, the advocacy firm I founded in the late 1960s, we used 90 percent, while the Rand Corporation statistic was 98 percent, to represent the productive capital factor input to creating products and services. In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital assets. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work by workers with capital work by the owners of productive capital assets.
As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or in other countries, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through make-work job creation, minimum wage requirements, and welfare programs. Such policies do not function effectively, yet these are precisely the policies that Reich advocates.
Reich is devoid of REAL solutions that address the core problem causing income and wealth inequality.
In a democratic growth economy, in which both human and non-human productive inputs are understood, the ownership of productive capital assets would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income, from full earnings dividend payouts, would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth and more profitable enterprise. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy. As a result, our business corporations would be enabled to operate more efficiency and competitively, while broadening wealth-creating ownership participation, creating new capitalists and “customers with money” to support the products and services being produced.
Reich is stuck in one-factor, labor work, thinking. If he had studied the writings of binary economist Louis Kelso he would be able to understand the economics of reality. Kelso was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
What Reich and his peers in academia should focus on is addressing the question: how do you use the logic of corporate finance, the logic that the corporation insists upon is minimal, that is, the logic of investing in things that will pay for themselves––how do you use it for the individual, how do you bring the economic game down from the corporation to the human scale?
The obvious answer is to implement policies that will broaden individual ownership of wealth-creating, income-producing productive capital assets simultaneously with the growth of the economy. Unlike Reich’s call for inflation-inducing minimum wage boosts, a form of coerced State redistribution, REAL income growth would result through expanded personal property ownership of new growth productive capital assets.
