On June 27, 2017, Catherine Clifford writs on CNBC Make It:
Warren Buffett says people like him are the problem with the U.S. economy.
With a net worth of more than $75 billion, Buffett is currently the second richest man alive, according to Forbes. As the CEO of investing house Berkshire Hathaway, he is hallowed as the Oracle of Omaha. But for all his personal success, Buffett says the issue really is the 1 percent.
“The real problem, in my view, is — this has been — the prosperity has been unbelievable for the extremely rich people,” says Buffett on PBS Newshour.
“If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion. They now have $2.4 trillion, [a multiple of] 25 for one,” he says. “This has been a prosperity that’s been disproportionately rewarding to the people on top.”
“THE REAL PROBLEM, IN MY VIEW, IS … THE PROSPERITY HAS BEEN UNBELIEVABLE FOR THE EXTREMELY RICH PEOPLE.”
The stock market has been trending upwards since the crash in March 2009 and the U.S. economy is growing at roughly 2 percent, says Buffett on Newshour. That growth rate (while a third less than the 3 percent rate President Donald Trump has been touting) is a healthy number for the economy and will improve the quality of life of many Americans.
It will add “$19,000 of GDP per person, family of four, $76,000 in one generation,” says Buffett. “So, your children and your children’s children and all that, they will live far, far, far better than we live with 2 percent growth.”
And yet, many individuals are stuck. “The economy is doing well, but all Americans aren’t doing well,” says Buffett.
Part of the reason some are struggling, says the octogenarian investor, is that the automation and digitization of the U.S. labor force is happening faster than employees can be retrained.
“We always see shifts in employment. If you think about it, if you go back to 1800, it took 80 percent of the labor force to produce enough food for the country. Now it takes less than 3 percent. Well, the truth is that market systems move people around,” says Buffett.
“There’s always a mismatch. I mean, you know, as the economy evolves, it reallocates resources.”
As employees fall out of the labor force because their skills are no longer utilized, Buffett says it ought to be the responsibility of society to take care of them as they are retrained to re-enter the workforce.
The evolving economy “doesn’t benefit the steelworker maybe in Ohio,” says Buffett on Newshour. “And that’s the problem that has to be addressed, because when you have something that’s good for society, but terribly harmful for given individuals, we have got to make sure those individuals are taken care of.”
Buffett made his extreme wealth by investing in the stock market, an interest that took hold young. Buffett bought his first stock when he was 11 and has been in the market for 75 years. He recommends others do the same.
“They should just keep buying and buying and buying a little bit of America as they go along. And 30 or 40 years from now, they will have a lot of money,” he says.
In an effort to compensate for the wealth inequality that he himself has benefited from, Buffett and his billionaire buddy Microsoft co-founder Bill Gates co-founded the Giving Pledge, a voluntary commitment by the richest people in the world to give away at least half of their wealth. The goal of the Giving Pledge is not only to help those in need but to encourage others to do the same.
Buffett says to the solution is simple:”They [people] should just keep buying and buying and buying a little bit of America as they go along. And 30 or 40 years from now, they will have a lot of money.” Yet the reality is the vast majority of Americans on either in poverty, near-poverty, afloat due to consumer credit and living week-to-week or month-to-month. They are in situations that prevent them from saving and speculating, as Buffet says he has since he was 11.
With all his wealth tied to his personal OWNERSHIP of wealth-creating, income-producing productive capital assets held by him in the business corporations that he has an ownership interest, you would think that he would be educating himself to and advocating financial mechanism that, with NO requirement of past savings (equity worth), would empower EVERY child, woman, and man to acquire ownership interest in new, productive and viable capital asset formation simultaneously with the growth of the economy, on the basis that the investments will generate their own earnings sufficient to repay the insure, interest-free capital credit and then go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.
At the top of the order of Buffett’s and fellow billionaires’ philanthropy is a plan to use at least half of their their wealth to support causes focused on “poverty alleviation” and “education.”
I think the most good can result if the focus of their wealth is on reforming the monetary and financial system to eliminate the requirement of “past savings” to qualify for capital credit to finance viable capital asset formation projects and provide for EVERY citizen to acquire ownership stakes in future viable capital asset formation simultaneously with the growth of the economy, without taking from those who already own.
A study of billionaires would certainly result in either inheritance of large sums of capital asset ownership stakes or savings accumulated to invest in wealth-creating, income-producing capital assets, on the basis that the investments paid for themselves. In either case, the key operative is “past savings,” which the vast majority of people do not have as they are dependent on jobs in which they earn insufficient income to meet their personal and family consumption needs. And because they are trapped in poverty or near poverty, or even in middle-class status, they cannot earn the income to satisfy their wants above their consumption necessities, and even then they carry high consumer debt.
If only these billionaires would support education to enlightened all Americans and politicians to reform the monetary and financial system and enact legislation to provide an annual allocation into the capital credit account of EVERY child, woman, and man strictly for investment in new viable capital asset formation projects tied to the growth of the economy, which generate their own revenue stream to initially pay off the loan and following produce a full-earnings dividend for consumption (creating further demand for the economy’s growth).
Of course, there needs to be a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital — the rich. This is because “poor” people have no security or collateral, or sufficient income resulting in savings to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.
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, the question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan. The answer is capital credit loan security (collateral) requirement can be replaced with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).
Criteria must be created to qualify the corporations, both new start-ups and established ones, subject to this policy and those corporations that qualify overseen so as to insure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back to the lending entity, the new capital formation will continue to produce income for existing and future owners.
The non-profit Center for Economic and Social Justice (www.cesj.org) is dedicated to such education to alleviate poverty and educate on the financial mechanisms and legislation necessary to put American on a path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.
At the CESJ Web site are volumes of articles and proposed legislation focused on broadening individual capital asset wealth and income simultaneously with the growth of the economy, without redistribution by empowering EVERY citizen to be productive through their capital asset and their labor contributions to the economy.
The end result is 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.
Support the Agenda of The JUST Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.
