On May 22, 2012, Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Secretary of Labor in the Clinton administration, writes:
“I wish President Obama would draw the obvious connection between Bain Capital and JPMorgan Chase.
“That way his so-called “attack” on private equity is neither a personal attack on Mitt Romney nor a generalized attack on American business.
“It’s an attack on a particular kind of capitalism that Romney and JPMorgan both practice: Using other peoples’ money to make big bets which, if they go wrong, can wreak havoc on the economy.
“It’s the substitution of casino capitalism for real capitalism, the dominance of the betting parlor over the real business of America, financial innovation rather than product innovation.
“It’s been terrible for the American economy and for our democracy.”
Professor Reich calls for “product innovation” to create real business growth. But for real business growth to occur the private, individual ownership of the non-human productive capital instruments of production must be broadened simultaneously with the economy’s growth. 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. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production.
In a democratic growth economy, based on binary economics, the ownership of productive capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, also benefiting the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.
