On July 9, 2015, Chris Hayes interviews Robert Reich on MSNBC:
CHRIS HAYES, MSNBC: This is the great paradox of the modern American economy. It was true before the great crash. It’s been particularly exacerbated after the great crash, which is that productivity and wages have completely become detached from each other. So, you used to make 60 widgets an hour for your boss, now you can make 65 widgets an hour. You’re not seeing that improvement in the money you’re taking home.
ROBERT REICH, FMR. SECRETARY OF LABOR: That’s right. People are working harder than ever and yet the money and the productivity they are generating, most of it is going to the top. And this is a big change from what we had in the first three decades after the Second World War when there was a direct relationship between what people earned and how productive they were. Then around the time Ronald Reagan was president, wages flattened out, adjusted for inflation, yet productivity continued to go up.
For Jeb Bush, it’s all the same Bushonomics, for Jeb Bush to say people need to work harder to improve productivity in order to get growth puts on its head exactly what’s going on. The real problem is you’ve had growth, you have productivity, but none of that has trickled down to average workers.
HAYES: Yeah, and I also wonder about this idea of 4% growth. It’s one of these things, sure, I’m pro 4% growth. I would love for there to be 4% growth. But the economic theory here seems to be essentially the thing restraining American growth is Americans don’t work enough. The pushing out of the productivity frontier, the frontier of the possible capacity of the economy that the thing keeping us tethered back is on the labor side as opposed to investment in capital and things like that.
REICH: Yeah, in fact it — this kind of view does not even consider the reality that one of the reasons you don’t have enough growth is the vast middle class of America doesn’t have the purchasing power to keep the economy going. All the money and all the wealth has been going to the very top. This is the great Republican blinder. They simply are unable to see the reality of what’s going on, that wages and wage stagnation is the key problem in the economy and that trickle down economics of a kind we’ve practiced since Ronald Reagan really has not worked. In fact, it’s been a huge failure. The goal is not growth per se. The goal is good jobs with good wages. And if Republicans don’t understand that and if Jeb Bush doesn’t understand that, you know, we are in trouble.
This scenario is entirely misleading. In the example given, it is ridiculous to claim that suddenly “you used to make 60 widgets an hour for your boss [the owner(s) of the enterprise], now you can make 65 widgets an hour” as if to suggest that the man or woman has now increased the ability to move their arms and hands more faster than humanly possible to turn out more widgets. In reality, our human abilities are limited by physical strength and brain power––and relatively constant, while technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged.
People are not fundamentally working harder and harder in any given job. They are, however, working longer hours as part of their agreement with their employer (e.g. salaried workers), thus doing more work over and above a normal 40-hour work week, or are working at another job or multiple jobs to earn more income.
Robert Reich is wrong when he states that “the productivity THEY are generating, most of it is going to the top.” The reality is that we, as humans are limited in our facilities to turn our work, and that the real productivity gains are due to the addition of the non-human means of production such as tools, machines, super-automation, robotics, computerized operations, etc.
Reich cites that “around the time Ronald Reagan was president, wages flattened out, adjusted for inflation, yet productivity continued to go up.” Productivity continued to go up because productive capital has increasingly become the source of the world’s economic growth, but rather than become the source of added property ownership incomes for all, it has been allowed to concentrate among a wealthy capital ownership class.
Reich concludes that: “The real problem is you’ve had growth, you have productivity, but none of that has trickled down to average workers.” Why do you think that is. Obviously, because the system is rigged to ensure that the formation of ALL new capital will be OWNED by the already wealthy capital ownership class.
Binary economist Louis Kelso, who Reich should study, 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 labor 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.”
Fundamentally, economic value is created through human and non-human contributions. NOTE, real physical productive capital isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production. Financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things. As Kelso and binary economist Patricia Hetter put it, “Money is not a part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.”
The role of physical productive capital is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal costs, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, 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. This, in turn, is devaluing the worth of labor.
To put this in context, it is important to briefly note that throughout history, man has endeavored to overpower the time constraints of physical and biological processes. It is now an accepted fact that accelerated scientific and technological innovation has directly led to a speeding up of all physical and social processes in the name of progress. The competitive drive has led to a frantic national and international chase for more efficient methods of production and distribution. In the process, humanity has pushed to develop even more powerful technologies, on the assumption that such technologies would accomplish more and more useful functions in less time. The results have been a dramatic acceleration of change and concentration of wealth ownership.
Reich blames the lack of economic growth on low wages and wage stagnation as the key problem in the economy. That’s because he is a one-factor labor thinker and can ONLY see earning an income through a job. NEVER does Reich address solutions that would empower EVERY child, woman, and man to acquire personal and joint OWNERSHIP in future wealth-creating, income-producing capital assets simultaneously with the growth of the economy. This is the REAL means to create “customers with money” and purchasing power for EVERY citizen to support what the economy is capable of producing.
Unbelievably, Reich states that: “The goal is not growth per se. The goal is good jobs with good wages.” Reich is stuck in the JOBS ONLY restraint on his thinking and completely ignores the solution to CREATE OWNERS of future wealth-creating, income-producing capital asset growth.
If Reich really wants to reform the system and provide equal opportunity to EVERY citizen to become empowered as owners to meet their own consumption needs with government more dependent on economically independent citizens, Reich would be advocating for the passage of the proposed 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/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf).
