On December 8, 2012, economist Paul Krugman writes in The New York Times:

Robots mean that labor costs don’t matter much, so you might as well locate in advanced countries with large markets and good infrastructure (which may soon not include us, but that’s another issue). On the other hand, it’s not good news for workers!

This is an old concern in economics; it’s “capital-biased technological change”, which tends to shift the distribution of income away from workers to the owners of capital.

Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias”, supposedly explaining the rising college premium.

But the college premium hasn’t risen for a while. What has happened, on the other hand, is a notable shift in income away from labor:

If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society”, or whatever it is the likes of Paul Ryan etc. are selling this week, won’t do much if the most important asset you can have in life is, well, lots of assets inherited from your parents. And so on.

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.

But I think we’d better start paying attention to those implications.

Paul Krugman, as with ALL of the conventional Keynesian has subscribed to the thinking of economist John Maynard Keynes, whose Keynesian model is widely taught and falsely presumes that the only way to balance mass productive power with mass purchasing power is through a wage system––ignoring the possibility of democratizing future ownership of labor-displacing productive capital technologies and rising ownership incomes as a market-generated means of eliminating wage slavery, welfare slavery, debt slavery and charity slavery for the 99 percent of humanity. Binary economist Louis Kelso argued that the Keynesian model fails to recognize that “when capital workers [owners] replace labor workers as the major suppliers of goods and services, labor employment alone becomes inadequate because labor’s share of the income arising from production cannot provide the progressively better standard of living that technology is making possible. Labor produces subsistence at best. Capital can produce affluence. To enjoy affluence, all households must engage to an increasing extent in capital work”

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 ownership is. Therefore, by ignoring such issues of economic justice and ownership, our leaders are ignoring the concentration of power through ownership of productive capital, with the result of denying the 99 percenters 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 workers) produce a major share and the vast majority (labor workers), a minor share of total goods and service,” 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?”

One of my favorite Kelso quotes is: “The low credibility of government and of all lesser institutions in America today is a consequence of our own increasingly hollow democracy. It is reflected in the rising domestic crime rate and the social and political alienation of people in all walks of life, except for the rich and their sycophants. The real collapse of American ideological leadership in the world can best be seen in the feebleness and confusion that characterizes American foreign policy. The handwriting on the wall is clear: America must rethink the meaning of democracy and set about within its borders to rationalize its economic policy into one that synchronizes the shift from labor intensive to capital intensive production, with universal capital ownership and the payment of the full wages of capital to capital owners, so to restore economic democracy to our economy. We should democratize our plutocratic capitalist economy before we preach democracy to others.”

With increasing punditry, scholars are now starting to write about the impact of the Second Industrial Revolution where tectonic shifts in the technologies of production are destroying and degrading jobs due to the shift from labor worker input to the non-human factor––human-intelligent machines, superautomation, robotics, digital computer operations, etc. Krugman would benefit immensely by paying attention to the volumes of writings now being generated, especially beginning with Louis O. Kelso. Kelso was the author of The Capitalist Manifesto (Random House 1958), The New Capitalists (Random House 1961), Two-Factor Theory: The Economics Of Reality (Random House, 1967), and later Democracy And Economic Power: Extending The ESOP Revolution Through Binary Economics (Ballinger Publishing Company, Cambridge, Massachusetts, 1986; reprinted University Press of America, Lanham Maryland, 1991). The first two books were co-authored with Mortimer J. Adler, President of the Institute for Philosophical Research, former professor of the Philosophy of Law at the University of Chicago, and author of The Idea Of Freedom. Kelso’s latter two books were co-authored by Patricia Hetter Kelso, his collaborator and wife since 1963. The four books present Kelso’s theory of binary economics (or the economics of reality), which describes labor and capital as interdependently productive and the financial tools for democratizing capital ownership in a private property, market economy where most products are exponentially made by physical capital. The first two books can be downloaded at no charge at http://www.cesj.org/cesjsitemap.html. For more reading visit www.kelsoinstitute.com.

Two recent articles that I have written pertaining to the necessity to broaden private, individual ownership of new FUTURE productive capital formation are  “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy”  (http://foreconomicjustice.org/11/economic-justice/) and “The Absent Conversation: Who Should Own America? (http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html).

Krugman and others should also follow the Center for Economic and Social Justice at www.cesj.org and http://capitalhomestead.org/ support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk

http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robots/