On November 26, 2016, Tom Streithorst writes on Evonomics:
Hillary Clinton lost to Donald Trump because she did not provide a solution to the grave economic problems facing the American middle and working class. Hillary pretended the economy was getting better, and of course in some ways it was. Unemployment is considerably lower than it was when Bush left office and in 2015 wages finally went up. But after 35 years of stagnant wages the American people are no longer trusting in elite optimism. Personal experience tells them otherwise. The median male inflation adjusted wage is lower today than it was in 1973. For a while, wives entering the workforce allowed household income to rise but that ended with the last millennium. Typical household income peaked when Bill Clinton left office.
Trump won because he acknowledged the decline of the American middle class and promised a cure. Hillary Clinton and the neoliberal Democrat establishment pretended things were fine, and a huge swath of Americans resented their sanguine attitude. Unfortunately, Trump’s solutions won’t work. Tax cuts directed to the top .01% certainly won’t help most Americans and tariffs on Chinese goods will not bring industrial jobs back to the Rust Belt. All protectionism will accomplish is higher prices at Wal-Mart. Automation, as much as globalization is responsible for the disappearance of high paying jobs. Even China is losing manufacturing jobs. Its output is increasing but robots rather than humans are getting the work.
It is tragic that the populist revolt against the neoliberal establishment should have been led by a right wing billionaire reality TV star. The left should learn one lesson from this debacle. Let no longer pretend things are all right. If the Democrats are to regain power, they must provide a solution for the growing insecurity in most working American’s lives. The old strategies no longer work. Technological progress has become a job killer.
Every year, technological progress allows us to make more goods and services with fewer inputs of labor and capital. Stagnant wages tell us we need fewer workers. Infinitesimal interest rates tell us we need less capital. And more jobs are set to disappear. The most common job in most American states is truck driver. With self-driving cars only a few years away from mass production, those jobs too will soon evaporate.
There is a solution: Universal Basic Income, a cash payment to every adult citizen.
Everyone gets it, the poor, the rich, the middle class, the deserving and the undeserving alike. You, me, Rupert Murdoch, Beyonce, and the homeless man sleeping in the gutter get exactly the same cash payment. It is nothing if not equitable and fair. UBI is not a new idea. It was mentioned in the Bible, proposed by Tom Paine, almost enacted into law by Richard Nixon in 1969.
The Bible advocated it because small Neolithic communities always took care of their own. Tom Paine favored it because it reflected the value of the land that he considered the heritage of every citizen. Richard Nixon almost made it real (how different it would have made our world, how amazing that Richard Nixon in 1969 was to the left of Barack Obama in 2016) because he wanted to provide a safety net for every American without creating a large bureaucracy.
UBI will:
- Reduce inequality.
- Help the poorest among us, by giving them what they really need, money in their pocket.
- Provide a safety net for all Americans that will allow entrepreneurs to take more risks, the young to attend university, workers to tell unreasonable bosses to “take this job and shove it”.
All good things but not why I expect it will, sooner rather than later, be enacted into law. UBI solves the fundamental problem of modern capitalism, lack of demand. We have, to an extent unimaginable to our grandparents, solved the problem of supply. We eat better, dress better, entertain ourselves more extravagantly and more cheaply than they would have dreamed possible. But they had job security and more and more of us don’t.
If things keep going the way they are, our society will divide into a small elite who own the technology and a huge army of the unemployed living in squalor. A robot can make an iPhone but it cannot purchase one. If we want to maintain demand, we must put money into people’s pockets. A Universal Basic Income stimulates demand far more effectively than any tax cut.
The problem with UBI, the reason it is not yet within the Overton window is it sounds too good to be true. How can we afford it? How can we pay people without demanding work in return? Fortunately, Donald Trump is giving us an opening.
President-elect Donald Trump is planning to propose a tax cut. Over the next decade, it is expected to cost $6.2 trillion, or $620 billion a year. The Republican Congress, deficit hawks whenever a Democrat is in office will most likely approve his giveaway to the very rich. They will argue, quite correctly, that a tax cut will be stimulative and that it will help spur economic growth.
Every Keynesian knows tax cuts will stimulate the economy but we also know that tax cuts give the least bang for the deficit buck. That is because tax cuts, like this one, generally go to the richest among us and rich people have a greater propensity to save than the average citizen. The rich can save their bonus, the rest of us spend it, which is what the economy needs.
The Trump tax cut gives the top 1% an average windfall of $215,000. The top .1% will save over $1 million. Someone at smack in the middle, on the other hand, will garner less than $1000. Those in the bottom 20% will get $100. Were we to divide the cost of the tax cut by all adult Americans, we can give each citizen $2600 a year. If we can afford a tax cut that will go disproportionately to the very rich, we can also afford a helicopter drop of cash to every adult citizen.
During the post war Golden Age of the American middle class, the benefits of technological progress were shared equitably, through wage hikes. As technology made workers more productive, their wages went up commensurately. Since Reagan, technology has continued its inexorable progress but wages stopped rising. Assets prices (homes, stocks, bonds) instead absorbed the benefits of productivity increases. The rich got richer, workers didn’t.
It would be nice if we could make wages go up but they won’t. Wages, like all prices in a capitalist economy, are set by supply and demand. During the Golden Age, wages rose because firms needed more workers. To hold them, they needed to pay them well. Today, the supply of labor far exceeds its demand. Secure high paying jobs are not likely to come back.
It would be tragic if technological progress immiserates rather than enriches the average citizen. UBI is the solution, a fair and equitable way to share the benefits of growth throughout society. Some advocates of UBI insist the payments be large enough to guarantee every one of us enough money to survive. Ultimately, I think they are right. $2600 a year certainly is not enough for subsistance. But Rome wasn’t built in a day. Let us take advantage of Trump’s deeply inequitable tax cut proposal to experiment with Universal Basic Income.
When the banks went bust, central banks printed billions to bail them out. When the economy did not recover, we printed more billions in the various quantitative easings and again, through bond purchases, gave them to the banks. Trump is proposing to give each of his super rich friends millions. We can do better. When his tax bill comes to Congress, the Democrats have a chance to propose a Universal Basic Income grant to every adult American that won’t raise the deficit any more than his give away to the very rich.
To stimulate the economy, UBI is better than any tax cut. Politically too, it is a winner. The great majority of Americans will prefer a grant of $2600 than the piddling amount they would receive under the Trump tax cut. Trump’s victory has shown Americans are tired of the neoliberal consensus. Let’s take this opportunity to introduce Universal Basic Income to the American people. It can transform our society, stimulate growth, and begin to revitalise the American middle class. It will also help the Democratic Party win elections.
This author has gotten one thing right, that “technological progress has become a job killer.” But a redistributed “cash payment” made equally to every citizen, while it sounds good, is not a solution to the continuous concentration of wealth-creating, income-producing capital asset ownership among the already wealthy ownership class and their heirs.
The author gets another thing right, that “…our society will divide into a small elite who own the technology and a huge army of the unemployed living in squalor.” And yes, “we must put money into people’s pockets.” But instead of “putting money into people’s pockets,” we should empower EVERY citizen to be individually productive and earn the money they put in their pockets, and that does not mean demanding that EVERY citizen be employed and work in return. There is a difference.
The author gets yet another think right, that while tax cuts will stimulate the economy, “tax cuts, …, generally go to the richest among us and rich people have a greater propensity to save than the average citizen.” Thus, the rich save and invest to further acquire more productive capital ownership in the corporations growing the economy.
As with all Keynesian economists, this author believes that technology makes workers more productive. That’s because they only see productivity as related to the human work force, and do not see the distinction between the non-human factor and the human factor of production, as independent factors of productions. Fundamentally, economic value is created through human and non-human contributions. And with technological invention and innovation killing jobs, it is essential that EVERY citizen become an owner of the wealth-creating, income-producing capital assets of the future.
A national basic income or universal basic income is a “welfare” scheme, which does not tie people to individual productive input, but redistributes through taxation of those in society who are productive to those who are unproductive or underproductive. Because it is not tied to new productive engagement, it will not strengthen the incentive to work, where there is no work to be had due to the economy’s stagnation resulting from poor consumption demand.
What we really need is monetary and tax reform, by which an annual Capital Homestead Account in the form of insured, interest-free capital credit is extended equally to EVERY citizen, without any requirement for past savings, a job, or education. The capital credit loans would strictly be used to invest in new wealth-creating, income-producing capital assets formed by qualified, successful corporations growing the economy. The capital credit loans would be repayable out of the future earnings of the investments, and once paid would continue to produce income for the new productive owners, who would use the income to satisfy their needs and wants, thus resulting in spiraling green economic growth.
The problem is that technological invention and innovation––change––makes the non-human means of producing––tools, machines, structures, and computerized processes––ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). This means that fewer and fewer people are necessary to produce the products and services needed and wanted by society. But when a job is one’s ONLY way to be productive and earn an income and jobs are disappearing and the worth of labor is being devalued, we have a problem. The problem is magnified by the fact that upward of 95 percent of the products and services are produced by physical productive capital––the non-human factor–– owned by less than 10 percent of the population and highly concentrated among less than 1 percent of the population. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
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 equal opportunity to produce, full production and broader capital ownership accumulation. This is manifested in the myth 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. Physical capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When the “tools” of 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, such as a proposed universal basic income.
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” owner 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 is not representative of 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 made possible by “customers with money.” 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, not to a hand-out derived from government coercion that takes from those who make productive contributions as workers and capital owners and gives to those who are unable to earn a minimum sustainable income.
Binary economist Louis Kelso postulated: “When consumer earning power is systematically acquired in the course of the normal operations of the economy by people who need and want more consumer goods and services, the production of goods and services should rise to unprecedented levels; the quality and craftsmanship of goods and services, freed of the corner-cutting imposed by the chronic shortage of consumer purchasing power, should return to their former high levels; competition should be brisk; and the purchasing power of money should remain stable year after year.”
As we build general affluence for EVERY American, only then can we successfully alter the choices people must make between choosing alternative, more costly greener choices that do not threaten the environment and their very livelihood. This challenge is particularly a challenge for the property-less struggling middle class and the poor who must deal daily with livelihood issues, due to the precarious situation and loss of employment and the devaluing of the worth of labor as a result of tectonic shifts in the technologies of production resulting in less need for human worker input. Thus, realistically most people cannot be expected to sacrifice what little wealth and income they have to support more costly greener choices.
To see the change that so many Americans would like to see with respect to the support for greener choices will require that American lifestyles and tastes adopt more costly processes, products, and activities that are the greener substitute.
But the reality is that none of these changes can be practically achieved unless enough people can afford them.
Without this necessary balance hopeless poverty, social alienation, and economic breakdown will persist, even though the American economy is ripe with the physical, technical, managerial, and engineering prerequisites for improving the lives of the 99 percent majority. Why? Because there is a crippling organizational malfunction that prevents making full use of the technological prowess that we have developed. The system does not fully facilitate connecting the majority of citizens, who have unsatisfied needs and wants, to the productive capital assets enabling productive efficiency and responsible economic growth.
America has tried the Republican “cut spending, cut taxes, and cut ‘entitlements,’ eliminate government dependency and shift to private individual responsibility” and the Democrat “protect ‘entitlements,’ provide tax-payer supported stimulus, lower middle and working class taxes, tax the rich and redistribute” through government brands of economic policy, as well as a mixture of both. Republican ideology aims to revive hard-nosed laissez-faire appeals to hard-core conservatives but ignores the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor.
Some conservative thinkers have acknowledged the damaging results of a laissez-faire ideology, which furthers the concentration of productive capital ownership. They are floundering in search of alternative thinking as they acknowledge the negative economic and social realities resulting from greed capitalism. This acknowledgment encompasses the realization that the troubling economic and social trends (global capitalism, free-trade doctrine, tectonic shifts in the technologies of production and the steady off-loading of American manufacturing and jobs) caused by continued concentrated ownership of productive capital will threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood.
Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.
We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies to redistribute income or not to redistribute income. If Americans do not demand that the contenders for the office of the presidency of the United States, the Senate, and the Congress address these issues, we will have wasted the opportunity to steer the American economy in a direction that will broaden affluence. We have adequate resources, adequate knowhow, and adequate manpower to produce general affluence, but we need as a society to properly and efficiently manage these resources while protecting and enhancing the environment so that our productive capital capability is sustainable and renewable. Such issues are the proper concern of government because of the human damage inflicted on our social fabric as well as to economic growth in which every citizen is fairly included in the American dream.
Our current system is rigged to continually concentrate the ownership of capital in the 1 to 5 percent of the population. The current system is presently propelled by greed in our society, which creates dire moral implications. A new system that would ensure equal opportunity for every child, woman, and man to acquire productive capital with the earnings of capital and broaden its ownership universally does not require people to be any better than they presently are, but it does enable our society to leverage both greed and generosity in a way that honestly recognizes and harnesses productive capital as the factor that exponentially produces the wealth in a technologically advanced society.
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.
While Americans believe in political democracy, political democracy will not work without a property-based free market system of economic democracy. The system is the problem, but it can and must be overhauled. The two prerequisites are political power, which is the power to make, interpret, administer, and enforce laws, and economic power, the power to produce products and services, whether through labor power or productive capital.
Kelso wrote: “In the distribution of social power, whether it be political power or economic power, all things are relative. The essence of economic democracy lies in the elimination of differences of earning power resulting from denial of equality of economic opportunity, particularly equal access to capital credit. Differences of economic status resulting from differences in advantages taken and uses made of differences based on inequality of economic opportunity, particularly those that give access to capital credit to the already capitalized and deny it to the non- or -undercapitalized, are flagrant violations of the constitutional rights of citizens in a democracy.”
We need a recognition in America that we should deliberately begin to broaden the capital ownership base in a way that is consistent with the laws of property and the Constitutional safeguards of the rights of men and women to own property and be productive.
What needs to be adjusted is the opportunity to produce, not the redistribution of income after it is produced.
The government should acknowledge its obligation to make productive capital ownership economically purchasable by capital-less Americans using insured, interest-free capital credit, and, as Kelso stated, “substantially assume financial responsibility for the economy through establishing and supervising the implementation of an economic, labor and business policy of democratized economic power.” Historically, capital has been the primary engine of industrialization. But as used, as Kelso has argued, has, as well, “been the chief cause of the institutional deformities that have created and maintained two incompatible classes: the overcapitalized and the undercapitalized.”
We cannot balance the budget without cutting out coerced taxpayer-dependent redistribution of the earnings of capital workers, which if we did at this juncture would collapse the economy and ruin lives, resulting in social strife, personal suffering and degradation, the erosion of freedom, and ultimately anarchy, which will bring on totalitarian government. While welfare, private charity, boondoggle employment and other redistribution measures are now seen as necessary, they do not have to be sustained indefinitely. There are policies that can be adopted and executed to reverse the ultimate direction of collapse of the American market economy system. Such policies are based on the recognition that as the production of products and services changes from labor intensive to capital intensive, the way in which every human being––not just a few, but every person––earns his or her income must change in the same way. At the core of this quiet revolution is the understanding and commitment to broadening the ownership of productive capital.
We need new justice-committed leaders, especially those who want to end the corruption built into our exclusionary system of monopoly capitalism––the main source of corruption of any political system, democratic or otherwise. We need to advocate the need to radically overhaul the Federal tax system and monetary policies and institute proposals to get money power to the 99 percent of American citizens who now only rely on their labor worker earnings. Under the Just Third Way’s (http://foreconomicjustice.org/?p=5797) more just and simple tax system, access to ownership of the means of production in the future would by provided to every child, woman and man by requiring the government to lift all existing legal and institutional barriers to private property stakes as a fundamental human right. The system was made by people and can be changed by people. Guided by the right principles of economic justice, “we the people” can organize and demand that the system be reorganized to make true economic democracy the new foundation for true political democracy. The result of this movement of new justice-committed leaders and activists will be inclusive prosperity, inclusive opportunity, and inclusive economic justice.
