Trickle Down Economics Has Failed: Stiglitz (Demo)

On April 22, 2015, Tom DiChristopher writes on CNBC:

Trickle down economics isn’t working, so the U.S. should reform the tax structure and offer more effective incentives to companies that create jobs for Americans, Nobel-winning economist Joseph Stiglitz said Wednesday.

“Right now we have some perverted incentives, the way our tax structure actually encourages people to invest abroad,” the Columbia University professor said on CNBC’s “Squawk Box.” “If you’re investing in America, yes you should get lower rates.”

The key is not only providing incentives for companies that invest in the United States, but creating a big tax differential between those that contribute to U.S. growth and those that do not, Stiglitz said.

The middle class is worse off after 35 years of the supply-side economics experiment, he said. The policy’s mix of lower taxes at the top and less regulation has failed to deliver on its promise of giving middle- and low-income Americans a bigger piece of the pie as the entire economy grows, he said.

“The results are in. A third of a century, and what do we find? Growth was slower than before we tried that experiment, and the middle … it was right that they were going to get a smaller share, but the slice of their pie … has gone down.”

In his new book, “The Great Divide: Unequal Societies and What We Can Do About Them,” Stiglitz argues that capitalism does not have to produce inequality. Instead, he says inequality is the result of choices capitalist countries make.

http://www.cnbc.com/id/102608655

Gary Reber Comments:

Joseph Stiglitz makes some good points about “growing the pie” but his focus is on providing incentives for corporations to create jobs. This is a failure of logic and reasoning as tectonic shifts in the technologies of production will continue to destroy jobs and further eliminate the necessity for labor input in an environment where sophicated “tools” and “machines” substitute for human workers and are able to “manufacturer” products and services at far higher quality and efficiency. Another factor is continuing population growth which will further put pressure on devaluing the worth of labor as American workers will be forced to compete with “cheap” labor globally.

“Job creation” as an end result in-and-of-itself is a dead end. Instead Stieglitz and other conventional economist, who are presently stuck in one factor thinking––namely human labor–should be advocating for incentives that broaden personal ownership of wealth-creating, income-producing capital assets––the non-human factor. They need to realize the significance that fundamentally, economic value is created through human and non-human contributions. And that labor and capital are independent factors of production.

They also need to realize that if non-human technologies of production are eliminating the necessity for masses of labor, and if physical capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive and ignore that concentrated capital ownership is accelerating and benefiting a tiny wealthy ownership class who now OWNS America and will, unless our monetary policies are reformed, will OWN the FUTURE. They ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the American economy.

What is needed is a concerted effort to implement policies that create new capital owners facilitated by financial mechanisms that empower EVERY child, woman, and man to acquire capital ownership stakes in the corporations growing the economy using insured, interest-free credit repayable out of the FUTURE earnings of the capital investments to grow the economy, without the necessity of “past savings,” equity pledges, or any reduction in wages or employment benefits, if one is also employed.

The Capital Homestead Act is a proposal to free economic growth from the slavery of “past” savings and empower EVERY American citizen to acquire an ownership portfolio of multiple-company diversification in the corporations growing the economy, without taking anything away from those who already own.

The CHA recognizes that conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers and the pledge of past savings. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer through their continuous accumulation of capital asset ownership, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

Thus, as binary economist Louis Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”

The goal into the future is for all Americans to be capital workers (applying the “tools” they OWN to produce) and not be labor workers dependent on labor earnings too much of our lives. We should all be productive and produce products and services in a way in which the current state of technology permits. Not only is our right to life denied if we don’t have effective access to the ownership of capital, our liberty is denied because without economic power our political power is useless. Thus, the national economic policy should be universal participation in the ownership of productive capital, alongside full employment of the labor workforce as a direct result.

At present, there is a brewing power struggle going on in the United States between individual human beings (citizens) and the plutocratic powers who manipulate our government and the would-be plutocratic powers (top corporate executive managers and financial barons). What the 99 percent movement is really all about is returning America to economic democracy. If we do not achieve economic democracy, then plutocracy will lead to fascism—the ownership of productive capital by the rich and by their institutions.

Today’s techniques of finance are designed to make the rich richer. None are designed to make the poor richer. That’s why the poor are poor. The reason they are poor is because they do not have viable capital ownership. Thus, we need to focus on revising today’s techniques of finance to broaden capital ownership.

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 owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” 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?”