On June 14, 2012, former Labor Secretary and Professor of Public Policy at the University of California Berkeley Robert Reich joined Lawrence O’Donnell on MSNBC’s The Last Word to share his thoughts on the GOP economic plan. Watch the video.
Trickle-down economics does not work. What will work is simultaneously broadening private, individual ownership of new productive capital investment as the American economy grows, turning labor workers and others into new capitalists who will benefit from expanded earnings through the full-dividend payout of the earnings the investments generate, which in turn will strengthen consumer demand and create even greater economic growth and growing asset portfolios for ALL Americans, thus reducing dependence on government redistribution “make-work employment” and “welfare” programs.
Modern technology and rapidly developing intelligent systems technology means that modern industry, the employer of middle class prosperity, simply does not need millions of new workers, while the population of available workers is multiplying. Truly intelligent “machines” (productive capital) will have the potential to eliminate poverty and usher in a new age of prosperity, opportunity and economic justice while closing the gap between rich and poor through broadened access to capital credit for investment in new productive capital assets so that everyone can become a capitalist with income from ownership of the economy’s future productive capital assets.
Free market capitalism can be a good thing because it involves the principle of private ownership. Private ownership creates incentive for individuals and business corporations to acquire productive capital, because the profits accrue to the owners. The problem is that there presently exists no means by which the majority of American citizens can fully benefit from the unprecedented productive potential of technological innovation in which the non-human factor of production is displacing the human factor of production. As most customers for the products and services that can be produced are labor workers, market demand will exponentially decline unless society’s customer base can gain access to capital credit to acquire long term viable ownership portfolios in future productive capital assets. Up to this point in our history, wages and salaries have been paid to labor workers to provide income that generates consumer demand in the market. Without jobs, labor workers cannot buy the products and services that are produced, and without customers, business enterprises cannot expand production. The principle operative of capitalism is to maximize income to the owners of the business corporation, not to create jobs or provide income for labor workers.
This is a fundamental structural problem plaguing the capitalist system. It explains why the middle class is in decline and poverty persists despite capitalism’s obvious capability to produce and meet demand for products and services needed and wanted by our citizenry. With declining labor worker incomes and the prospects of more people living with insufficient or no income, demand in the market likewise declines. Without a job there is no money. And as technological innovation gains exponential momentum there will be fewer and fewer jobs for labor workers to produce the products and services that they cannot buy because they don’t have jobs. Thus, this vicious circle is the current embodiment of capitalism.
Capitalism is not designed to benefit the working class and poor. Capitalism is designed to benefit the owners of productive capital. Few people can save enough to become wealthy by investing their savings. Yet the financial system is based on “savings” and as a result the percentage of people that derives most of their income from returns on productive capital investments is small. But it does not have to be.
What if we could reverse this trend and turn the vast pool of Americans into productive capital owners and thus consumers? If that were done, more labor workers would be required (at least in the short term) to produce products and services that would be demanded by these new consumers, who are as well the new capitalist owners of the productive capital assets created to expand productive capacity to meet demand. This would effectively recover the economy from the present recession to the point where business enterprises again can profitably sell their products and services. And as companies expand to meet demand with investment in new productive capital, new owners would participate and through their income dividend payout create more demand.
Such a system can be created that rewards labor workers with skills that are in demand, while at the same time provide capital dividend income to them and to those not needed for the production of products and services. Such a creation would embrace productive capital as a replacement for labor as the principal factor in the production with continued productivity growth. Thus, the future economy would generate material wealth for ALL Americans created by technological invention embodied in superautomation, automate factories, intelligent machines, and sophisticated computerization.
