On December 6, 2012, Jonathan Rauch writes in The Atlantic that there is no modern precedent for America’s stalled middle class––or for the double detachment from work and marriage among low-earning men. So, what do we do now?
The economy no longer reliably and consistently transmits productivity gains to workers. The result is that many millions of Americans, in particular less-skilled men, are leaving the workforce, a phenomenon the country has never seen before on the present scale.
[The economy’s] ability to deliver rising living standards across the income spectrum is in decline, and perhaps also in question. “This is a fundamental problem,” says Robert J. Shapiro, the chairman of Sonecom, an economic consultancy in Washington. “This is America’s largest economic challenge. People can no longer depend on rising wages and salaries when the economy expands.”
As other articles in this issue suggest, a number of policy responses are on the agenda already, such as creating jobs, helping more students finish college, and reducing wage-denuding health care inflation. Others, such as reforming the federal disability program, have yet to attract much notice. In truth, however, the extent of Washington’s ability to repair the economy’s gearbox is an open question, because the problem is complex. It implicates not just one slipped gear but many: disruptions in long-established connections between productivity and earnings, between labor and capital, between top earners and everyone else, between men and work, between men and marriage. Together, they are bringing the economy to a place where a large and growing group of people–indeed, whole communities–are isolated from work, marriage, and higher education. That place might look like today’s America, only with a larger welfare state. But it might just as easily bring social unrest and class resentment of a magnitude the country hasn’t known before.
This is one of the best articles I have read that defines what the impact of income inequality means to ordinary Americans. But as is the norm, no REAL solutions are offered and what is presented is based in one-factor thinking––that a JOB is the ONLY means to earning an income!
Jonathan Rauch acknowledges that productivity is rising handsomely, but compensation of workers isn’t keeping up. Rauch fails to see that 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.
Rauch sites Lawrence Mishel, President of the Economic Policy Institute, a liberal think tank in Washington. “There’s a remarkable disconnect. The problem isn’t a lack of the economy producing sufficient income to make everybody’s living standards improve–it’s that the economy is structured so that the majority don’t benefit.”
The structural component of our economy is based on the principle of private property with entitlement in accord with OWNERSHIP. The reason why the country’s majority doesn’t benefit from productivity gains is because the OWNERSHIP rights to the productivity isn’t being evenly allocated; the top ownership class is effectively disconnected from the rest of the population dependent on fewer well-paying jobs and necessitated government welfare. Rauch acknowledges that one reason, especially pronounced in the past decade or so, is that fewer of the productivity gains are flowing to workers, and more are flowing to investors. But he fails to define “investors” as what they really are: OWNERS. Growth in income should be attributed to shareholders of our business corporations, who provide physical productive capital rather than labor–and thus are entitled to the property rights and higher returns on their holdings.
Rauch correctly concludes that as a result of this shift to higher returns to owners of productive capital, less-educated workers are in trouble, and men are in trouble, and less-educated men are in deep trouble. The problem has become more serious than most people realize. “It has reached a very extreme point,” said David Autor, a labor economist at the Massachusetts Institute of Technology. Rauch points to the fact that “only a minority of Americans obtain four-year college degrees, and yet the economy offers ever-fewer well-paying jobs for men with nothing more than a high school diploma.”
The Democratic Party’s approach is vested in the idea that the ownership class should be taxed with the monies redistributed into government programs and, as well, borrow more monies, all of which is pledged to stimulate JOB CREATION through government taxpayer spending in the private and public sectors. The Republican Party’s approach is to cut spending, cut taxes, and cut “entitlements” and let the “free market economy” magically stimulate economic growth.
A better solution would be to reform the tax system as advocated by binary economist Louis O. Kelso and by the Center for Economic and Social Justice (www.cesj.org), and ForEconommicJustice.org (www.foreconomicjustice.org) to encourage both production and consumption. For example:
• Make dividends tax deductible at the corporate level, but fully taxable at the individual level unless used to make debt service payments on a loan used for capital acquisition.
• Treat all income the same, whether from wages, dividends, or inflation-indexed capital gains.
• Eliminate virtually all personal deductions, tax credits, and so on, but give each person an exemption large enough to meet ordinary living expenses, including education and healthcare.
• Impose a single rate tax on all income above this exemption, no exceptions.
• Allow a limited tax deferral, say up to $1 million over a lifetime, on income used to make debt service payments on dividend-paying capital assets.
We also need to change how we finance economic growth, i.e., shift from financing using past reductions in consumption (savings), to using future increases in production (earnings). Businesses can then expand by issuing new shares or other means of sharing ownership, which people could purchase by monetizing the present value of the shares they are buying, i.e., buy a share in a business on credit, and pay for it out of the future earnings attributable to the share itself.
With respect of ANY government spending in the private sector we need to stipulate that the end result of the spending first assures that private, individual ownership of the assets underlying the new economic growth is broadened, followed by REAL job creation to the extent that that can result.
We need, as a nation, to embrace and educate our people to understand and fully participate in the building of an OWNERSHIP CULTURE as the foundation for what University of California, Berkeley Professor Robert Reich terms “widening the circle of prosperity,” and thereby increasing the taxable base and monies to the treasury to eliminate deficits and pay off our national debt.
We can no longer tolerate the further OWNERSHIP CONCENTRATION of business corporations, who structurally own the productive assets of our future growth. We must implement financial mechanisms that will enable ordinary Americans, and EVERY child, woman and man to acquire ownership of NEW, productive capital assets (without taking anything aways from those who own current assets) and pay for their acquisition out of the future earnings of their investments. Thus, we will begin to put the emphasis on economic growth propelled by science, engineering, innovation, and invention that results in new non-human productive means to produce products and services while simultaneously empowering EVERY American to participate as a share owner in the new wealth that will be created and be entitled to the income streams generated by the investments in our future.
Economic growth will always be stalled when there are high levels of economic inequality because there will be an imbalance between production and consumption.
The problem is routed in the financial system, which must be reformed.
As with countless other articles on the subject of JOB DETERIORATION and DESTRUCTION, Rauch fails to offer ANY REAL solutions and never addresses the obvious solution to the tectonic shifts in the technologies of production that are destroying the opportunities for labor workers to be employed in future economic growth––that is, broadened OWNERSHIP CREATION to empower EVERY American to no longer be dependent on their labor but to accumulate a viable income-producing capital estate to become financially independent.
Otherwise, if we fail to address the issue of OWNERSHIP CONCENTRATION and Who Should Own America, the trend will worsen: “Even as payroll employment has been growing since early 2010, many of the new jobs are low-paying. And while those added jobs are helping lift some people out of poverty, for those who once had higher incomes, those jobs are all that they can find in a weak labor market.”
America is blinded by limiting policies to CREATE JOBS rather than the inclusive policy objective of broadened OWNERSHIP CREATION, which will result in REAL job growth. We need to focus on OWNERSHIP CREATION paid for out of the earnings of productive capital investment, the primary source of income for the wealthy. Instead we continue to focus on JOB CREATION, which is the opposite objective of technological innovation and invention as tectonic shifts in the technologies of production destroy jobs and degrade jobs. Thus, the earnings necessary to become self-sufficient and pay for one’s advanced education and to support a family in relative affluence are just not there for the American majority. Those seeking higher education and to purchase higher ticket consumer items within that majority have had to pursue such with borrowed moneys. And the reality is that with the human-intelligent “machine age” exponentially destroying good jobs, even for those with engineering and science degrees, the pay back will be decades if at all, and we will simply end up with a society of millions of educated unemployed, if not bankrupted, dependent on government welfare, open and concealed.
As a technological growth society, we must consciously and purposely broaden private, individual ownership in future income-producing productive capital assets simultaneously with the growth of the economy.
The labor union movement should transform to a producers’ ownership union movement and embrace and fight for this new economic democracy. 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. This is their ONLY salvation.
Kelso stated: “The myth of the ‘rising productivity’ of labor is used to conceal the increasing productiveness of capital and the decreasing productiveness of labor, and to disguise income redistribution by making it seem morally acceptable.” Kelso argued that unions “must adopt a sound strategy that conforms to the economic facts of life. If under free-market conditions, 90 percent of the goods and services are produced by capital input, then 90 percent of the earnings of working people must flow to them as wages of their capital [ownership] and the remainder as wages of their labor work…If there are in reality two ways for people to participate in production and earn income, then tomorrow’s producers’ union must take cognizance of both…The question is only whether the labor union will help lead this movement or, refusing to learn, to change, and to innovate, become irrelevant.”
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, as well as commit the nation to unsustainable debt. 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 products and services are actually produced.
Thus, those who command the spotlight in the national media need to put forth a call for a national debate on how to achieve BROADENED CAPITAL OWNERSHIP and free economic growth from the slavery of “past” savings. This will put us on the path to sustainable prosperity, opportunity, and economic justice.
Unless we reverse course, income inequality is on a projectory to get far worse with tens of millions of Americans facing unemployment and underemployment due to cheap global labor and tectonic shifts in the technologies of production that are destroying jobs and degrading jobs in terms of wage and salary levels, forcing American to subsist at poverty or near-poverty levels.
Soon, industrial monopoly capitalism will reach its twin goals: concentration of productive capital ownership among the elite ownership class (with temporary low taxable capital earnings at 15 percent made permanent, thus preserving exactly those provisions of the tax code most responsible for millionaires paying tax rates considerably lower than those with a fraction of the income) and work performed with as few labor workers and the lowest possible wages and salaries. The question to be answered is “Then what?”
Of course, to reach this twin goal will require “investment.” The term “invest” sounds good on paper or in speeches, especially when justified on the basis that investment will create JOBS. But the reality is that no one is addressing the CONCENTRATED OWNERSHIP of the income-producing assets that result from investments under the current financial system. Such assets created by investment are the result of tectonic shifts in the technologies of production, which is the real reason, as well as outsourcing, that jobs are being destroyed and degraded in terms of wage and salary levels. Until President Obama, the Democrats and Republicns address this BIG ISSUE, unemployment and welfare roles will dramatically expand. It is only through future investment with the stipulation of simultaneously broadening private, individual ownership of income-producing productive capital––the non-human means of production embodied in human-intelligent machines, superautomation, robotics, digital computerized operations, etc.––that we will be able to enrich EVERY American’s life.
As a nation, we continue to ignore 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. Kelso argued that the Keynesian model fails to recognize that “when capital workers 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”
For decades employment opportunity in the United States was such that the majority of people could obtain a job that could support their livelihood, though in most cases related to a family, it required the father and mother to both work, if they aspired to live a “middle class” lifestyle. With “Free Trade” those opportunities began to disintegrate as corporations sought to seek lower cost production taking advantage of global cheap labor rates and non-regulation, as well as lower tax rates abroad. This resulted in a chain reaction forcing more and more companies to out-source in order to stay competitive (thus the rise of China, Indiana Mexico, and other third-world nations economies).
At the same time tectonic shifts in the technologies of production were exponentially occurring (and continue to do so), which resulted in less job opportunities as production was shifted from people making things to “machines” of technology making things, The combination of cheap global labor costs and lower long-term invested “machine” costs has forced the value of labor downward and this will continue to be the reality. Our only way to far greater prosperity, opportunity, and economic justice is to embrace technological innovation and invention and the resulting human-intelligent machines, superautomation, robotics, digital computerized operations, etc as the primary economic engine of growth.
But significantly, unless we reform our system to empower EVERY American to acquire, via insured capital loans, viable full-ownership holdings (and thus entitlement to full-dividend earnings) in the companies growing the economy with the future earnings of the investments paying for the initial loan debt to acquire ownership, then the concentration of ownership of ALL future productive capital will continue to be amassed by a wealthy minority. Companies will continue to globalize in search of “customers” with money or simply fail as exponentially there will be fewer and fewer customers to support their businesses worldwide. Why, because the majority will be disconnected from the income derived from the non-human means of production that is replacing the need for labor workers.
Education is not the solution, though it is critical for our future societal development. But except for a relative few, the majority of the population, no matter how well educated, will not be able to find a job that pays sufficient wages or salaries to support a family or to prevent a lifestyle which is gradually being crippled by near poverty or poverty earnings.
Already, at a puny 2 percent, GDP growth is at a near standstill. Lowering taxes on the wealthy ownership class will not much impact this reality because they will not invest unless their are customers to create demand. This will continue to be the reality unless we reform the system to connect the majority of people to the property rights of the non-human production of products and services while simultaneously spurring economic growth, and entitle them to the earnings of capital (dividends, interest and rent) as a second income source to supplement their earnings from their labor in the short-term, with the long-term lifetime goal of earnings from capital ownership being the primary source of their income. This is the ONLY way to strengthen individuals and empower them to become personally responsible for their lives and not depended on taxpayer redistribution and national debt to sustain welfare support, open or concealed.
For further consideration, please see my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at 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).
Rauch 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 athttp://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
