On March 8, 2014, Carl Gibson writes on Nation Of Change:
In my previous article, I explained how all of the economic problems we currently face are natural results of capitalism. From rising poverty in the midst of record-high corporate profits, polluted air and dwindling water, private prison systems that rely on mass incarceration, students going deep into debt while the government books student loan profits, foreclosures, stagnant wages, all of these economic problems can be addressed once we acknowledge our seriously flawed economic system and vow to fix it.
Now that we’re having a serious conversation about capitalism, we can also have a conversation about solutions. Along with calling out flaws of capitalism, I’m proposing four solutions that would fix the most glaring problems in capitalism and blaze a new path forward for the next generation.
1. Break Corporate Monopolies and “Free Trade” Agreements
There’s nothing wrong with starting a business to make and sell goods that people want to buy. But the problem begins when large corporate giants force local small businesses to shutter their operations. This peer-reviewed study looked at data from 3,000 counties and found that, on average, each new Walmart that opens kills approximately 150 retail jobs in the county. This means that for every job created by a new Walmart, 1.4 jobs on average are lost.
The explosion of corporate giants swallowing up small business competition and killing jobs is a consequence of “free trade” entities like the North Atlantic Free Trade Agreement (NAFTA), the World Trade Organization (WTO) and the Trans-Pacific Partnership (TPP), which is currently being negotiated behind closed doors.
At the time NAFTA was signed, there was no trade deficit between the United States and Mexico. As of 2012, that trade deficit has ballooned to $276 billion in lost jobs and wages as a result of skyrocketing imports and stagnant exports. While the Clinton administration promised 1,000,000 new jobs because of NAFTA, over 1,000,000 jobs had been lost by 2004.
The trade deficit between the US and China reached a record $30.1 billion as of July 2013. In the ten years that passed between China joining the WTO in 2001 and 2011, the US lost $37 billion in wages, mostly in the manufacturing sector. As manufacturing workers who lost jobs were re-employed in other sectors, an average of $13,504 in wages was lost for each displaced worker.
One main argument used by defenders of capitalism is that consumer spending dictates the market, so bad corporate actors will be punished by more consumers buying from their competitors. Advocates of capitalism also argue that if pay or work conditions are insufficient, workers will logically quit their jobs and seek employment elsewhere.
But when the new Walmart shuts down the local grocery, hardware, and auto parts stores, workers who are upset with being paid poverty wages have nowhere else to work if they want to quit. When the local auto manufacturing plant gets outsourced to Mexico, those auto workers have no other choice than to work at a place like Walmart. And when consumers have nowhere else to spend their money but at places like Walmart, then Walmart gets all the business.
While defenders of capitalism oppose almost any regulation of business, such regulations were largely responsible for the long period of economic prosperity that followed World War II. During FDR’s administration, there was full employment in the United States, and everyone had an income.
Increased public investment meant Americans all had jobs that provided them with steady income. As a result of direct government involvement in the economy, FDR inadvertently created the middle class just a decade after the Great Depression robbed most Americans of their jobs, homes, and savings. When more people had more money to spend, local businesses thrived on the extra demand, and more jobs were created to meet the increased demand.
Jobs that were created as a result of public investment, like FDR’s New Deal, injected new money into the economy as programs like the Works Progress Administration put 3 million people to work rebuilding critical infrastructure. Congressional obstruction of New Deal programs and neoliberal economic advisers convinced FDR to scale back government spending, sending the country intorecession in 1937-38. The US only bounced back from that recession due to tight economic controls in place during the war effort.
The government became the prime buyer of half the goods manufactured in the US. When ALCOA’s monopoly on the aluminum market became a threat, the government subsidized Reynolds aluminum to force ALCOA to compete fairly, and also got into the aluminum manufacturing business to make sure raw materials were in steady supply. When Ford refused to abide by the National Labor Relations Act that gave private sector workers the right to organize unions, FDR cancelled a top-dollar contract. A wartime tax on windfall profits prevented corporations from becoming large enough to absorb competitors.
While President Eisenhower didn’t regulate business as tightly as FDR did during World War II, he did make huge investments in public infrastructure. In building the 46,000-mile interstate highway system, creating NASA, and expanding national parks, the government put 3.5 million people to work during the Eisenhower years. The interstate highway system alone cost $114 billion then, which would be roughly $450 billion in new government spending today. Such projects were made possible by keeping the top tax rate on the richest households and corporations at a 90 percent rate – the interstate highway was made possible by drivers paying an extra penny per gallon in gas taxes. The tax code was also much simpler in the Eisenhower years, without any of the special exemptions, loopholes, credits, subsidies, and other giveaways that corporate lobbyists have inserted in the tax code today.
3. Wage War on Climate Change, Poverty, Inequality and Greed
FDR and Eisenhower’s economic controls were the result of war; FDR wanted to create national solidarity around the war effort, and Eisenhower wanted the interstate highway system built to better move troops and supplies during war. By drastically changing what we value in society and fostering the political will to change it, we can also change our economic circumstances through a new war effort – call it the war on climate change, the war on poverty, the war on inequality, and the war on greed.
In a winner-take-all system like capitalism, in which the biggest and baddest reap all the rewards, there must be strict regulations and high taxation on multinational corporations, and numerous subsidies and tax benefits for small businesses. This has to also be combined with the complete reinstatement of tariffs on foreign exports to the US that were eliminated in free trade agreements, uninhibited rights for all workers to organize unions, and strict penalties for companies who attempt to crush those unions.
In waging a war on climate change and poverty, we can create millions of new jobs by making heavy public investments in creating a widespread sustainable energy grid, powered by wind turbines and solar farms. A side effect of that will be lower greenhouse gas emissions, and decreased consumption of the planet’s finite resources. A new Works Progress Administration could stay in business permanently, providing a never-ending supply of jobs repairing not just schools, roads and bridges, but building and maintaining broadband internet infrastructure, high-speed rail, city parks, bike paths, community gardens, housing cooperatives, and other projects. These jobs can never be outsourced.
We can win the war on inequality and greed by instituting a maximum wage for executives of all companies that get any tax credits or do any business with the government, making sure that no CEO makes more than 50 times what their lowest-paid worker makes. We could also double the tax rates of those who make more than $5,000,000 a year, those who inherit their wealth from previous generations, and those who make money from having money (capital gains). However, merely taxing income isn’t sufficient enough to melt the glacier of wealth that the wealthiest 0.1 percent have amassed. When such a small number of people have accumulated such a vast amount of resources, such one-sided distribution has to be corrected.
While some defenders of capitalism would call this unwarranted class warfare, the only ones affected by such a tax increase would be, in 2007 numbers, just 46,000 taxpayers who collectively had over $670 billion in taxable income. Since over 96 million people filed taxes that year, that amounts to just one-half of the top one percent of taxpayers. And out of those 46,000 taxpayers, less than 14,000 estate tax returns were filed in 2008. That means only one-sixth of the top one percent of taxpayers would be affected by this tax increase. Daily Kos diarist “clammyc” originally proposed this idea, and called it the “fat cat,” “rich brat,” and “trust fund baby” tax. Over $100 billion could be generated each year with these new taxes, which would go a long way in paying for the aforementioned public investments.
4. Build a New Populist Political Party
Several readers responded to my previous article about capitalism by asking me if I favored socialism or communism. I honestly don’t know what -ism I would use to describe the economic system described above, and I don’t personally believe in communicating values and goals through -isms.
And while this may look to some like pie-in-the-sky utopianism, it can be achieved if we start building populist political power now. My anarchist friends advocate living off the grid, generating their own solar powered-electricity, hunting and gathering their own food, and self-governing through tribal principles. While I don’t oppose that, I also recognize that there are those of us who want to see truly systemic change in our lifetimes.
Both Democrats and Republicans have become captive to the same industries and oligarchs responsible for the rampant climate change, poverty, inequality, and greed destroying our economy. And the only alternative parties that currently exist don’t propose any real challenge to the Democratic/Republican stranglehold on our politics. These parties are usually led by a figurehead who runs as a perennial candidate in presidential elections, meaning none of these parties really exist outside of presidential elections. These figureheads are almost always white males, and come from positions of privilege, widening the disconnect between themselves and the rest of the population. The currently existing alternative parties also have to battle with being branded as perennial losers, steering people away before their candidates even have a chance to make their case.
However, a new party that actively opposes capitalism and unites people around the basic ideas of meeting human needs would be widely respected and immediately acknowledged. This new party could stand apart from the two corporate-owned parties by refusing to take campaign donations from corporations, banks and developers, standing up for the rights of immigrants and indigenous people, calling for sustainable energy and development, making education for all a top priority, and believing in universal access to healthcare as a human right. While it would take time, focusing on building power first at the local and county level is the surest way to make lasting change.
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” owner 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.
Binary economist Louis 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.”
In Kelso’s words, “a democratic capitalist economy is a private-property, free-market economy in which goods and services are produced through the voluntary and universal cooperation of concurrent labor workers and capital workers [owners] under a politically democratic government.” At present the United States economy, nor for that matter any other economy does not operate as a private-property democratic-capitalist, free-market economy. What needs to transpire is an understanding of binary economics along with instituting credit mechanisms that will implement the goal of broadening productive capital ownership in ways wholly compatible with the U.S. Constitution and the protection of private property.
Download free “The Capitalist Manifesto” and “The New Capitalists” and other writings on the subject of capitalism reform and the Agenda of the JUST Third Way at http://www.cesj.org/resources/free-downloads/ and http://foreconomicjustice.org/?p=5797
http://www.nationofchange.org/four-ways-evolve-beyond-capitalism-1394289705
