On June 6, 2013, David Cay Johnston writes on TheNationalMemo.com that government policies drive down wages and inflate profits (the economic story of our time that my colleagues in news cover oh so little and so cautiously).
Powerful new data shows just how badly American workers are faring in the 21st Century, as corporate profits soar ever higher.
Labor and capital share in the nation’s economic output, but an awful trend line for working people appears in data released Wednesday night by the Federal Reserve Bank in St. Louis.
Dean Baker, the liberal economist who studies income at the Center for Economic and Policy Research, told me this “redistribution from workers to capital, on this scale, has never happened before in the post-World War II era.”
The chart showing a falling share for labor is the “flip side of record profits,” Baker added. “With unemployment still at extraordinarily high levels, workers have little bargaining power. This means that employers are able to take almost all of the gains from the economy’s productivity growth.”
Here is the Fed chart showing the rise of corporate profits for the same period beginning in 1950, with only that one steep but deep drop during the Great Recession:
These two charts show that 1980, when Ronald Reagan won election, and 2001, when George W. Bush became president, marked major downward shifts in labor’s share and large increases in corporate after-tax profits. America has six million corporations, but just 2,600 of them own more than 80 percent of all business assets.
Johnston is among those who unfortunately have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. 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 productive capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When capital owners use their physical productive assets to 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.
As binary economist Louis Kelso asserted, “the government continues to discharge its responsibility for the health and prosperity of the economy through coerced trickle-down; in other words, through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed.”
Kelso once wrote: “It doesn’t make any difference what’s going on in the scientific world or the business world or the industrial world, we still believe full employment will solve our income distribution problems. This is what major political figures have always maintained.”
Kelso also 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.”
The capitalism practiced today is what, for a long time, I have termed “Hoggism,” propelled by greed and the sheer love of power over others. “Hoggism” institutionalizes greed (creating concentrated capital ownership, monopolies, and special privileges). “Hoggism” is about the ability of greedy rich people to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital worker more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is 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.
Kelso postulated: “When consumer earning power is systematically acquired in the course of the normal operations of the economy by people who need and want more consumer goods and services, the production of goods and services should rise to unprecedented levels; the quality and craftsmanship of goods and services, freed of the cornercutting imposed by the chronic shortage of consumer purchasing power, should return to their former high levels; competition should be brisk; and the purchasing power of money should remain stable year after year.”
Without this necessary balance hopeless poverty, social alienation, and economic breakdown will persist, even though the American economy is ripe with the physical, technical, managerial, and engineering prerequisites for improving the lives of the 99 percent majority. Why? Because there is a crippling organizational malfunction that prevents making full use of the technological prowess that we have developed. The system does not fully facilitate connecting the majority of citizens, who have unsatisfied needs and wants, to the productive capital assets enabling productive efficiency and economic growth.
Kelso said, “We are a nation of industrial sharecroppers who work for somebody else and have no other source of income. If a man owns something that will produce a second income, he’ll be a better customer for the things that American industry produces. But the problem is how to get the working man [and woman] that second income.”
The solutions can be found in the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, Monetary Justice reform at http://capitalhomestead.org/page/monetary-justice and the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
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