How A Failing Capitalist System Is Allowing Amazon To Cripple America (Demo)

I do not think that it is fair to put the cause and blame on the economy’s breakdown on the owners in control of Amazon, as their success is due to American consumers pursuing the lowest prices on products they need and want. Without that demand, Amazon would not be as dominant as a for-profit competitor in the economy. A prime reason American consumers have shifted their spending to Amazon is that for years, as with other online Internet sales companies, there were no state sales taxes. Yet brick-and-mortar businesses were required to collect state sales taxes, which added to the prices they charged. Also, American consumers have adopted the habit of searching the Internet for the lowest price on products they want and desire, and when possible visiting a brick-and-mortar store just to evaluate the actual physical products that they can assess for quality as well as how the products perform.

And yes, Amazon’s owners, as well as all those with Internet businesses, have benefited from the Internet, and, in fact, owe their success to our tax money that funded the development of the Internet. Taxpayer funding for other advanced research projects have also benefited other industries. And yet, there are no requirements for corporations accessing these technologies to be employee-owned.

The reality is that the price of goods, products and services are extremely competitive as consumers, as well as businesses requiring parts, will always seek the lowest cost/quality/performance alternative, no matter where the country of origin, 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 goods, products or services in order to generate increased sales and profits, and thus return on investment (ROI).

But we must not blame the role of competition, which is to produce more efficiently (at less cost) than one’s competitor(s) as well as seek other competitive advantages. Competition should be brisk in our economy, but no corporation should be allowed to become a monopoly.

Monopolies drive out any competitors and discourage and prevent would-be competitors.

Should corporations pay taxes?

As for not paying taxes, Amazon, as a for-profit corporation, has taken advantage of all the tax loopholes in the tax code. It is our fault that we have not elected representatives who are pledged to eliminating tax loopholes and subsidies, as well as reforming the corporate tax code. I believe we need to raise the corporate tax rate to at least 90 percent with full-earnings dividend payouts to the actual owners tax-deductible, allowing corporations to completely eliminate paying taxes. Right now there is double taxation. Under this proposal, the actual owners would then be subject to personal income tax rates, just like workers. By incentivizing or requiring corporations to finance their growth by issuing and selling new stock and thereby create new owners using Capital Homestead Account (CHA) financing instead of retained earnings and corporate debt financing, neither of which create any new owners but further concentrate ownership among those who already own, the market would become more competitive as existing corporations and new corporations with viable capital formation projects would have a source of raising monies representing the asset value of the projects and not have their profits subject to corporate taxation. Thus, the new money creation would be directly tied to the asset value of growth projects, and not inflationary. 

This is a win-win for corporations at they can simultaneously create new owners and thus “customers with money,” whose income is generated from the full-earnings payout of the corporation. This new source of income will enable owner-Americans to purchase what they produce and be further enriched as the economy takes off and grows substantially to double digit percents annually with every citizen contributing productively through their capital assets and becoming a better “customer with money” to support what is being produced. As growth occurs, there also would be created new employment opportunities.

Such a corporation ownership-broadening approaches would go a long way to reform an otherwise unjust system whereby the rich get richer systematically and capital ownership concentration is furthered, facilitated by financing future productive capital acquisition out of the earnings of existing productive capital (past savings).

As an alternative, a forced judicial law approach would be a government reform, under the terms of incorporation, requiring for-profit business corporations to issue and sell full-voting, full-dividend payout stock to the general public when they launch an Initial Public Offering (IPO) and thereafter to underwrite new productive capital formation, with the purpose of providing opportunity for new owners, both employees of corporations and non-employees, to participate in a growing economy by purchasing the newly issued stock using insured, interest-free  “pure” capital credit, repayable out of the full earnings generated by the earnings produced by the actual future capital assets, and without any requirement for past savings to pledge as loan collateral security.

Of course with either means, there needs to be a financial mechanism put in place that will guarantee loan risks associated with the commercial banks making the “pure” capital credit loans; 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 and the majority of Americans have no security or collateral, or sufficient income resulting in savings to pledge against loans as security in the event full repayment does not occur, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

Criteria must be created to qualify the corporations wanting to form new capital projects, 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. Of course, the number one criteria would be that any proposed capital project be determined to be viable. 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.

Yes, the current system allows for the exploitation of workers, who are essentially wage slaves totally dependent on employers for earning wages, and who have nothing to fall back on and no retirement security.

As for corporations headquartered in foreign countries and operating in the United States (such as Amazon), why are we not treating such corporations more stiffly as regards taxation?

Tax forgiveness and subsidies sponsored by communities seeking to attract corporations in the name of job creation is not the solution to the growing shift in the technologies of production that will not require masses of workers. Yet, such subsidies are routinely approved as a way to create employment for the residents of the community. Of course, as labor-saving, non-human means of production replace the necessity for human labor, there will be less and less need for workers — Americans able and willing to work — with the result that there will be less and less “customers with money” to create demand.

That brings up the issue regarding paying workers more for the same work (or less work). As technological innovation and invention replaces the necessity for mass human labor input, more Americans will be willing to take any job, even the lowest paying job and necessarily, under the current broken system, rely on government “welfare” assistance (in the open or disguised).

Will increasing the minimum wage to $15.00 per hour solve the problem. No. Unfortunately the effects of minimum wage hikes are not short term. They are an endless cycle. The call is to raise the minimum wage to increase purchasing power. What happens when the same “minimum wage” is declared in say, San Fransisco and rural Alabama? It is irrelevant in one place, and is the standard starting wage in another. But in neither place is it truly a “living wage” or enough to maintain a decent standard of living. The reality is $15.00 per hour(for full-time or part-time work) is not enough to provide a living wage for most American families.

The other reality is corporations and businesses do not pay expenses, they merely roll them into their prices to cover them. Once that has been done, increased prices consume the increased minimum wage and consumers that were impacted are right back in the same economic position.

The argument that corporations are exceedingly profitable and they are paying their upper management enormous salaries and stock options and should share their wealth with their workers solely by setting a minimum wage is weak as a solution that will work long term. Why, because the minimum wage would be applied to all businesses — the very profitable and the very small businesses that are barely surviving. This would hurt them tremendously, causing not all, but many to close. Then what?

There are ONLY five ways to deal with forcing a 2X minimum wage increase: 1) raise prices on the products and services offered by the employer/owner(s) of the business impacted, which are passed onto the business’ customers, 2) further reduce non-human marginal costs of producing such as the cost of materials, etc. 3) save labor by reducing the number of people employed or employ part time labor to avoid paying benefit costs, 4) replace human workers with non-human workers such as machines, robotics, artificial intelligence, computerization, etc. and 5) reduce profitability of the business.

Paying people less than the market wage rate is unjust. That’s obvious. It’s practically the definition of injustice, to pay people less than the market rate, or to withhold pay. Stop and think about it. An employer is buying someone’s labor. If labor is worth X per day at the market rate, but an employer is forced to pay 2X per day, isn’t the employer being disadvantaged? People tend to want to do things in the most efficient way possible, and get as much as possible for the least amount of effort or cost. If labor costs are increased then one or more of the five actions, sighted above, will occur.

Plus, there is the probability that workers who already earn more than the minimum wage will demand that their wages increase to reflect the increase in the minimum wage.

Doing more with less comes naturally if you work for yourself, or you own whatever is doing the work, e.g., productive capital tools. You want as much as you can get for as little cost or effort as possible. No one is harmed, because you bear the cost, whether high or low. You benefit, because you pay.

The wage system distorts this natural tendency, a virtue, into something vicious, that is, a vice. A worker who has only his or her labor to sell is going to want as much as he or she possibly can get for it. Naturally, he or she are also going to want to give as little (work) as he or she can get away with.

If he or she was the only one involved, there would be no problem. Unfortunately, there is the person who is buying the labor, and the people who are buying the good, product or service that the labor, in part, is being used to produce. If the worker has power, the employer pays more. If the worker does not have power, the employer will pay less. Wages will be just only in the rare instance in which the propertied employer and propertyless worker have equal power.

The only way out is to give workers a stake in keeping costs low so that the natural tendency to do more with less works in favor of everybody, not against them. An aggressive program of expanded capital ownership, such as proposed in the Capital Homestead Act (see http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/), is therefore not only consistent with nature, it is in everybody’s best interest, morally and economically.

Workers should form a new union movement. The labor union movement should transform to a producers’ ownership union movement and embrace and fight for this new democratic capitalism. They should play the part that they have always aspired to — that is, a better and easier life through participation in the nation’s economic growth and progress. As a result, labor unions will be able to broaden their functions, revitalize their constituency, and reverse their decline.

Historically and in its present form, the labor movement is destructive in that it agrees with the idea that propertyless people should exist to serve those who own property. The labor movement doesn’t seek to end wage slavery; it merely seeks to improve the condition of the wage slave. If it actually cared about human rights and freedom, it wouldn’t call itself the “labor movement.”

Unions are the only group of people in the whole world who can demand workers become owners in the corporations who employee them (e.g, using a justice-managed Employee Stock Ownership Plan or ESOP), who can demand the right to participate in the expansion of their employer by asserting their constitutional preferential rights to become capital owners, be productive, and succeed. The ESOP can give employees access to capital credit so that they can purchase the employer’s stock, pay for it in pre-tax dollars out of the earnings generated by the new assets that underlie that stock, and after the stock is paid for earn and collect the capital earnings income from it, and accumulate it in a tax haven until they retire, whereby they continue to be productive capital earners receiving income from their capital asset ownership stakes. This is a viable route to individual self-sufficiency needing significantly less or no government redistributive assistance.

The unions should reassess their role of bargaining for more and more income for the same work or less and less work, and embrace a cooperative approach to survival, whereby they redefine “more” income for their workers in terms of the combined wages of labor and capital on the part of the workforce. They should continue to represent the workers as labor workers in all the aspects that are represented today — wages, hours, and working conditions — and, in addition, represent workers as full voting stockowners as capital ownership is built into the workforce. What is needed is leadership to define “more” as two ways to earn income.

If we continue with the past’s unworkable trickle-down economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that goods, products, and services are actually produced.

When labor unions transform to producers’ ownership unions, opportunity will be created for the unions to reach out to all shareholders (stock owners) who are not adequately represented on corporate boards, and eventually all labor workers will want to join an ownership union in order to be effectively represented as an aspiring capital owner. The overall strategy should assure that the labor compensation of the union’s members does not exceed the labor costs of the employer’s competitors, and that capital earnings of its members are built up to a level that optimizes their combined labor-capital worker earnings. A producers’ ownership union would work collaboratively with management to secure financing of advanced technologies and other new capital investments and broaden ownership. This will enable American companies to become more cost-competitive in global markets and to reduce the outsourcing of jobs to workers willing or forced to take lower wages.

Louis Kelso, the binary economist, book author, corporate tax attorney, investment banker, and my mentor and partner in the “own the future” advocacy firm Agenda 2000 Incorporated, once stated: “Working conditions for the labor force have, of course, improved over the years. But the economic quality of life for the majority of Americans has trailed far behind the technical capabilities of the economy to produce creature comforts, and even further behind the desires of consumers to live economically better lives. The missing link is that most of those un-produced goods and services can be produced only through capital, and the people who need them have no opportunity to earn income from capital ownership.”

The union movement should also expand beyond representing corporate employees and represent capital ownership empowerment for all propertyless citizens.

Some would argue that the rich are not greedy and yet there is plenty of evidence that the wealthiest refuse to share their secrets to acquire productive capital with the self-financing earnings of capital, and without the requirement of past savings (or past reductions in consumption). While the rich, innately, are not any greedier as a group than other people, however much they have better and more opportunities to indulge that vice, they have failed to focus any discussion on what policies and system reforms are necessary to create inclusive prosperity by universally broadening the ability to generate income through personal ownership of productive capital and the inclusive opportunity to become a capital owner.

Sadly, academia, the wealthy capital ownership class, and politicians have failed to educate the American people through our schools, even university levels, and the national media dialogue to teach effective financial means to acquire productive capital with the earnings of capital, simultaneously with economic growth. As a result, the vast majority of readers of this lengthly coment will not initially understand and comprehend the free-market, private property rights concepts and financial mechanisms proposed as related to an understanding of money, credit, banking and finance.  

Unfortunately, the vast American majority only understand earning an income via employment and are unable to make reductions in consumption to accumulate savings. Those that do, largely speculate via purchasing existing stocks (legalized gambling), hoping for a financial gain when they sell the stock. They are excluded from purchasing new stock issues, representing new capital asset formation, with the earnings generated by the investment, without the requirement of past savings.

While the national focus is always on job creation instead of ownership creation, 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 is not the people who do the overwhelming consuming — they are people who will reinvest it instead of spending it on consumption. The result is the consumer populous is not able to get the money to buy the goods, products, and services produced as a result of substituting “machines” for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” 

The question that requires an answer is now timely before us. It was first posed by Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through concentrated ownership of productive capital, with the result of denying the 99 percent equal opportunity to become capital owners.

The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor — physical capital — is owned by a handful of people, to a world where the same factor is owned by a majority — and ultimately 100 percent — of the consumers, while respecting all the constitutional rights of present capital owners?”

I am sorry that this comment has begun to look like a chapter in a book, but the solutions to these complex issues cannot be addresses with a few sentences. For a more in-depth exploration of what is wrong with our current system and the solutions necessary to achieve inclusive prosperity, inclusive opportunity, and inclusive economic justice, read my article Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11 and follow my blog site at www.foreconomicjustice.org.