Prof. Raj Sisodia: Conscious Capitalism (Demo)

By Gary Reber Uncategorized January 19, 2013

Bentley University Professor Raj Sisodia discovers the concept of Conscious Capitalism, a new approach to business that applies values and actions beyond the profit motive.

What is missing from the concept of Conscious Capitalism is OWNERSHIP CREATION and the values and income source resulting from broadened ownership among employees and non-employees who are not capitalized and owning no productive capital assets or under-capitalized. This is the issue that needs to be addressed which is at the core of social and economic justice.

Starting with the business corporation, a legal entity created and sanctioned by state and federal government and judicial law, the government should provide tax incentives for full-dividend payouts to its stockholders, or alternatively dictate that from now on 100 percent of all profits be paid out fully as dividend payments to stockholders (thus, eliminating the corporate income tax), and be subject to progressive individual taxation rates during the short term. This would effectively prohibit retained earnings financing of new productive capital formation (reinvesting the corporate earnings already earned). The government could also limit debt financing by imposing some ratio formula to annual revenue under which a corporation could debt finance new productive capital formation with borrowed monies. Both retained earnings and debt financing only enhance the ownership holding value of the existing corporate ownership class and do nothing to create new owners. Thus, the rich get richer systematically and capital ownership concentration is furthered, facilitated by financing further productive capital acquisition out of the earnings of existing productive capital.

In place of retained earnings and debt financing, the government should require business corporations to issue and sell full-voting, full-dividend payout stock to more people 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. 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 to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

Criteria must be created to qualify the corporations 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, the new capital formation will continue to produce income for existing and future owners.

The fundamental issue that is not addressed is why is there income inequality, and the resulting decline in America’s economic growth to sub-2 percent levels, which is causing our annual deficits and long-term national debt to increase?

The reality is rooted in the timeless, exponential expansion of job-displacing technology caused by tectonic shifts in the technologies of production. Such technological unemployment is ignored with the notion that somehow those replaced by productive capital means will find work provide by the new technologies. This, however, is a fallacy, as the extent of technological innovation and invention has become so advanced that over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

While this paradigm shift continues economists such as Sisodia and our leaders continue to focus on JOB CREATION rather than OWNERSHIP CREATION of the productive capital assets that are constantly being created and applied to produce the products and services that society needs and wants. They ONLY see income distribution through job creation. Yet full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profit for the owners of the companies whose assets are increasingly physical productive capital. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

As productive capital is increasingly the source of the world’s economic growth should it not become the source of added property ownership incomes for all? Logic dictates that if both labor and capital are interdependent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive. This is because they view the economic world through the lens of one-factor labor thinking.

The focus should be to create an economic democracy in which the ownership of capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. As a result, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, also benefiting the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will in turn promote economic growth.

Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy 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. 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 workers (productive capital owners) 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.

We have become a society in which 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.

The master plan to put us back on a path to prosperity, opportunity, and economic justice is ready to be adopted and implemented. It is the Capital Homestead Act. Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

http://www.youtube.com/watch?v=IBj8viciVzc&feature=youtu.be

Prof. Raj Sisodia: Conscious Capitalism (Demo)

Leave a comment Cancel reply