http://money.cnn.com/video/news/2012/05/09/n-robert-reich-inequality.cnnmoney/
Former Labor Secretary and Professor of Public Policy at the University of California, Berkeley, Robert Reich appeared May 12, 2012 on CNN Ali Velshi’s “Your Money” on May to discuss income inequality. Reich says that “I’m trying to make the case for why the top 1 percent should pay more taxes as succinctly as I can. Any suggestions for how to make the case better?”
I agree with Reich’s assessment that the growth in income for the top 1 percent has limited purchasing power for the rest. But Reich continues to present the one-factor economic case for increases in productivity in terms of labor productivity while questioning the unfairness of the bulk of the income benefiting the 1 percent. He never diagnoses why this happens. The answer is that most changes in the productive capacity of the world since the beginning of the Industrial Revolution is the result of technological improvements in our productive capital assets, and a relatively diminishing proportion to human labor. Productive capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, binary economist Louis Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.” The earnings produced by the productivity gains of productive capital are not due to labor but to the OWNERS of the productive capital, which are termed assets of corporations whose ownership is concentrated in the top 1 to 5 percent of the population.
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 resulting impact of our current approaches has been plutocratic government and concentration of capital ownership, which denies every citizen his or her pursuit of economic happiness (property). Market-sourced income (through concentrated capital ownership) has concentrated in individuals and families who will not recycle it back through the market as payment for consumer products and services. They already have most of what they want and need so they invest their excess in new productive power, making them richer and richer through greater capital ownership. This is the source of the distributional bottleneck that makes the private property, market economy ever more dysfunctional. The symptoms of dysfunction are capital ownership concentration and inadequate consumer demand, the effects of which translate into poverty and economic insecurity for the 99 percent majority of people who depend entirely on wages from their labor or welfare and cannot survive more than a week or two without a paycheck. The production side of the economy is under-nourished and hobbled as a result.
Unfortunately, Reich offers no solutions. The solution is to engage in policies and programs that empower ordinary Americans to acquire private, individual ownership in new productive capital investment in the American economy and pay for their acquisition out of the future earnings of the investments. This will really rev up the economy’s growth and over time result in a more just and fairer (not absolutely equal) distribution of income to ALL citizens who are empowered to acquire and own a viable capital asset estate.
Once the national economic policy bases policy decisions on two-factor binary economics, productive capital acquisition would take place through commercially insured capital credit, resulting in a quiet revolution in which economic plutocracy will transform to economic democracy.
