Have You Ever Heard of Unearned Income?

How do you describe “pure” socialism? For most people it is “the government” (aka “We The People” in the US) owns the “means of production.” So, the government owns all of the businesses, factories, etc. and we all work together to benefit one another. Unfortunately, this ideal too often became totalitarian socialism, in which a political elite took over the system and it served the elite much more than it served the people as a whole. In some modern countries, the idea of democratic socialism seems to be working better.

What brought this to mind is I was reading an interview of an author on the Naked Capitalism website and the interviewer, John Siman, stated and asked the following:

John Siman: You have got me thinking about what economics—political economy—was originally supposed to be: a liberation from feudalism, from greedy rentiers and so the freedom for the common man to enjoy the fruits of his own labor and for the enterprising man to undertake great business projects. We should tax only unearned income!—that’s what the classical economists taught, right? So my deep worry: Are our academic neoclassical economists really latter-day medieval theologians, using arcane learning to uphold the privileges—specifically, to protect the unearned income—of a corrupt elite? After two or three centuries is the Enlightenment over as we enter a new feudalism? (It seems to me that we are already in a new Gilded Age.)

To unpack this (there is a lot going on) you need to know a few things. For one “rentiers” are not “renters” or even landlords per se, they are “people living on income from property or investments.” A good example of such are shareholders in a corporation. They receive dividends or profit on sales from that stock and that money was, for a very long time, referred to as “unearned income,” money earned by means other than the “sweat of one’s brow.” And, “political economy” was the original name for the study of economics, politics referring to interactions of people and economy being “involving money.”

You probably learned about feudalism in school. This was a system whereby “royals” owned the land and, basically, the people who worked it (serfs). They didn’t claim absolute ownership, but serfs were not free to pack up and leave, they were “tied to the land.” And even if they did pack up and leave, there were no “jobs” to be had in nearby locations. It strikes me that feudalism was a form of socialism. “The government” absolutely owned the means of production (including the serfs). This was not benign socialism, this was totalitarian socialism. (Not that the “rulers” didn’t ever do anything for the “ruled.” There were limits to what the “rentiers” could extract. Abuse your serfs/slaves too much, e.g. starve them by confiscating too much of the crops they raised, and they wouldn’t be able to work. And, please, do not try to convince me that having a local “central committee,” as in modern socialism, is substantially different from having a local earl or duke, the “government” in feudal times. “Remote and autocratic” describes both.)

So, as feudalism broke down, capitalism was created. And so was “economics” whose first fruits, apparently, were to craft a “liberation from feudalism, from greedy rentiers and so the freedom for the common man to enjoy the fruits of his own labor and for the enterprising man to undertake great business projects.” (Merchants were the first members of the “middle class,” that is between rich and poor, and widely despised by the elites.) And one of their first ideas was that “We should tax only unearned income!”

This practice balances the playing field, economically, between the rentiers and people who worked for a living. Selling one’s labor is a fine idea, but there is a limit: you only have so much labor to sell. But rentiers are unlimited in the amount of property or investments they can accrue. The well-to-do can become wealthy, the wealthy can become rich, millionaires can become billionaires and I assume we will soon see billionaires become trillionaires. Since wealth can be converted into political power, the scales of politics are tilted heavily in favor of the wealthy. To balance the scales, the early “political economists” established the idea of only taxing that rentier income and not taxing honest labor.

I have written recently (at least I think it was recently) on the disappearance of the term “unearned income” from public economics discourses. (Economists may still use it privately; I don’t know.) The term has basically vanished. And, out of sight, out of mind. The term is obviously connected to the core idea of those early economists, to only tax unearned income, and it flies in the face of the narrative of the wealthy that “they built it,” that they earned everything they have. My favorite example of this thinking was Mitt Romney, who claimed to have earned everything he owns, while at the same time his rich and powerful father (George Romney: chairman and president of American Motors Corporation from 1954 to 1962, the 43^rd Governor of Michigan from 1963 to 1969, and the United States Secretary of Housing and Urban Development from 1969 to 1973, etc.) gave him two $2,000,000 “to get started” and access to his influential and wealthy colleagues. (I remember this figure because during my almost 40 years of work as a teacher, I earned about $2,000,000 (both numbers are uncorrected for inflation). If I had been given $2,000,000 to “get started” I would not have had the gall to make the claim Romney does.)

The disappearance of the term “unearned income” from public discourse was no accident. And, if you use the term now, most people will be confused by it. The elites have scammed the system so well, that they have managed to get earned income taxed at a higher rate than unearned income (through the capital gains tax and others)!

So, capitalism was created to protect us from “feudal socialism.” What now can we get to protect us from capitalism and its captive economists? (Economists aren’t evil people, but their field has been captured by the rich. Oppose the rich strongly enough and you will no longer have either a reputation or a college professorship. Economists do know which side of the bread the butter is on.)

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The Effing Elites, Part . . . I’ve Lost Track . . .

I am reading a lot of history of the Biblical era and I ran across one very interesting take on the elites we refer to as “royals” today. It is from the Book of Samuel in the OT/Hebrew Bible. (I know the two are not identical, the HB being hijacked and edited by Christians to make the OT, but close enough here.)

⁴ So all the elders of Israel gathered together and came to Samuel at Ramah. ⁵ They said to him, “You are old, and your sons do not follow your ways; now appoint a king to lead^[b] us, such as all the other nations have.”

6 But when they said, “Give us a king to lead us,” this displeased Samuel; so he prayed to the Lord. 7 And the Lord told him: “Listen to all that the people are saying to you; it is not you they have rejected, but they have rejected me as their king. 8 As they have done from the day I brought them up out of Egypt until this day, forsaking me and serving other gods, so they are doing to you. 9 Now listen to them; but warn them solemnly and let them know what the king who will reign over them will claim as his rights.”

10 Samuel told all the words of the Lord to the people who were asking him for a king. 11 He said, “This is what the king who will reign over you will claim as his rights: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. 12 Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. 13 He will take your daughters to be perfumers and cooks and bakers. 14 He will take the best of your fields and vineyards and olive groves and give them to his attendants. 15 He will take a tenth of your grain and of your vintage and give it to his officials and attendants. 16 Your male and female servants and the best of your cattle[c] and donkeys he will take for his own use. 17 He will take a tenth of your flocks, and you yourselves will become his slaves. 18 When that day comes, you will cry out for relief from the king you have chosen, but the Lord will not answer you in that day.” 19 But the people refused to listen to Samuel. “No!” they said. “We want a king over us. 20 Then we will be like all the other nations, with a king to lead us and to go out before us and fight our battles.” 21 When Samuel heard all that the people said, he repeated it before the Lord. 22 The Lord answered, “Listen to them and give them a king.”

So, ole Samuel understood rightly that kings were bad news, but was overruled by Ole Yahweh. Yahweh certainly is in favor of totalitarianism, so why would he have an opposition to kings? And in this case, Yahweh is clearly issuing a punishment on his people for being disobedient to their true king, himself. And, as an exercise, consider what would have happened had Yahweh thundered “Absolutely Not!” At least a human king gives a bit of cover to a totalitarian theocracy (aka someone to blame other than Yahweh).

Any way, my point is this: royals are a pain in the ass and should be dispensed with. They are relic elites at best. Think about how they came about. (Really!)

Typically, some local bully accrues enough muscle to confiscate anything he desired. Part of the crops were confiscated. The most attractive mates were confiscated. The best property was confiscated. And if anyone complained they got hit in the mouth if not worse.

Over time, one or more of these bullies became ambitious and gathered together a war band and took over the other bullies in their neighborhood. Not wanting to actually stay in place and do the work of oppressing the locals, the resident bully was sworn to fealty to the overbully, or if his fealty was suspect, his head was lopped off and another promoted to that office, with the fear of that happening to him supporting his fealty. The local bully then paid tribute to the overbully.

Now, I am not saying that these overlords served no purpose. They did, on occasion, defend the people under their oppression from invading other bullies, but their record in doing this was mixed at best. And, over time, the divine rights of bullies got amplified. The bullies claimed to own all of the land, without purchasing it or establishing ownership by working the land, or . . . just “Mine!” And if anyone complained they got hit in the mouth if not worse. Many also claimed to own the people residing on the land, who became de facto slaves, again by no other expedient than “Mine!”

Collusion between the religious elites and the secular elites gave ordinary people no place to go for alternatives.

Effing elites.

Today’s elites are money enabled. Their power is not divine, although they bribe religious elites to support their secular notions. They bribe politicians to make sure that governmental power is theirs and not “the people’s.” The jigger the rules of wealth acquisition so that their money/power ever increases. For example, Trump’s tax cut for the wealthy and businesses? Capital investment has dipped to a new low just recently. So much for the argument that businesses would invest that money in expanded productivity, jobs, etc. Oh, yeah, jobs were eliminated by those businesses, too. Those businesses did exactly what was predicted: stock by-backs to enrich their shareholders and executives, and more money injected into politics to improve their lot even more.

Effing elites.

My fear is that the only option left to ordinary people involves torches and pitchforks. We seem to be closer and closer to such responses.

Even that old troglodyte Henry Ford knew that enriching his workers just a bit gave him more customers, but the modern elites aren’t willing to share any of their ill gotten gain. They believe they earned it. The divine right of the rich is to believe that they are rich because they are better than you or me. They even have a prosperity gospel now. Effing religious elites.

 

 

 

 

Jail Birds Fly Free … Well Some Do

One of the parents who conspired to get their kid into an elite college the old fashioned way (cheating, bribery, influence, etc.) has been on trial and that trial is in the sentencing phase. The prosecution wants something a little less than a year in prison and the defense wants something closer to a month in prison.

So, this is the justice system we have. People go to jail for cheating on college admissions requirements, for possession of small amounts of marijuana, etc. but if you do something really big, like bring down the financial system of the U.S. and the world, or defy the orders of a federal judge, you get swept under the rug as being “too big to fail” or, gosh, you get a presidential pardon. I understand that some banks might be too big to fail but are they too big to be broken up and sold off? Are the executives too big to go to jail? Do we need bigger jail cells? We used to send bankers to jail and did so as recently as the savings and loan debacle in the 1980’s. But now, gosh, it would be just so sad to do that, so let’s just give those executives a bonus and let them retire or, heck, just let them keep doing what they have been doing.

Obviously justice in this country has always been predicated upon the color of your skin and your socioeconomic status. If Bernie Maddoff had bilked a bunch of poor people or a bunch of people of color, would he have gone to jail? He had the bad taste to bilk white people who had been rich, so his fate was sealed.

This is sad.

Are We Violating the First Amendment?

The first amendment to the Constitution begins with the words “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof …” and then changes the subject. This “law” has been declared to apply also to state governments.

Currently, the IRS and state taxing authorities generally exempt churches from paying taxes. As a consequence, I must pay more in taxes to make up that shortfall. Therefore, I am being forced by the government to support those churches (even Scientology!). This seems like a violation of the spirit of the First Amendment at the very least and the letter of Constitutional law at the most.

I know some will object and say that churches are charitable organizations and qualify for tax-exempt status thereby. A study I read indicated that just a few percent of most churches incomes (<5%) goes to charity (most going to costs such as utilities, employee salaries, etc.), so that doesn’t hold water. Others claim that churches are non-profits and that doesn’t hold water, either. How is a church, an institution that gives out advice (some for fee, some pro bono) any different from a tax accountant or financial advisor? Granted they may not make much profit to be taxed but they could not sustain continuing losses, so they must make some profit, and some of the large property owning churches make scads of money. And taxes on profits are not the only taxes. Dentists are taxed upon their dental chairs and offices if they own them (property taxes). Financial advisors are taxed likewise. Churches? Not so much.

(And don’t get me started on prosperity churches and their jet plane owning pastors.)

Finding Meaning in Life

Many theists argue that without their god(s) life would have no meaning. This, of course, belies the efforts of many to establish their bona fides in their lives for themselves.

The current era of plutocracy in the U.S. shows the wealthy over and over acting upon the belief that they are rich for a reason, that their wealth makes them worthy, worthy of providing guidance (by funding philanthropic endeavors … of their choice, of course), and in funding political movements, e.g. the Koch brothers, because they know what is best for us.

All of these efforts bring to mind a quotation from a giant of social commentary: “The fortunate man is seldom satisfied with the fact of being fortunate. Beyond this, he needs to know that he has a right to his good fortune. He wants to be convinced that he ‘deserves’ it, and above all, that he deserves it in comparison with others … good fortune thus wants to be legitimate fortune.” (Max Weber, 1915)

In this I am reminded that for those “fortunate” enough to make over one billion dollars per year (there have been as many as over a dozen in recent years) that making a billion dollars of income in one year equates to making $532,000 per hour for every working hour of the year. This means one of these “worthies” made more in one afternoon than I did in almost 40 years as a college professor. I do not think of this as compensated labor as no one’s labor is worth that much. The only way one can “make” such an income is by scamming the system. If we need a name, we could call it “legitimized theft.”

So, if the theists are right and the meaning of our lives is granted by their god, why are these plutocrats scurrying around “cementing their legacies” or “managing their brand” or all of the myriad things they are doing to legitimize their wealth? These legitimized businessmen all claim that capitalism is based upon competition, but have acted to reduce the amount of competition in their area of business like beavers (think Bill Gates and all of his European monopoly law suits). I guess saying one thing while doing the opposite comes easy to those “of wealth” which is what they seem to have in common with the theists who support them.

The Rich, They Are Not Like Us

The Republicans like to frame the rich as “job creators.” Well, one of the very rich, Alice Walton, reclaimed the crown as the richest woman in the world, as her fortune leapt from $33.8 billion to $46 billion over the past year. In September 2016, she was reported to own over US $11 billion in WalMart shares alone.

So, did she earn that money? Did she make that money? What did she contribute to society that so much money came to her? Is she creating jobs?

Owning stocks and investing in stocks has been shown to be the sham it really is. We are taught in school that selling stock is a way for businesses to finance their growth. This is clearly poppycock. Stocks are purely speculative instruments. The Apple corporation acquired $95 million in its initial stock offering. It hasn’t issued stock or gotten money from a new sale since. It has paid out billions to its stock holders in dividends. Imagine a bank load for $95 million that required billions of dollars to be paid back and the loan is still out!

Alice’s father, Sam Walton (founder of WalMart) made the money, she has simply played money games to expand the quantity.

The Founding Fathers comment often and long, as have many other prominent Americans since, that allowing accumulated wealth to accumulate by inheritance is un-American and counter to democratic principles. Yet, our inheritance taxes have been reduced to pure vapor under the guidance of bribes from rich people to Republican and Democrat politicians. This is what the rich like to call a “good investment.” They offer bribes of a few hundred thousand dollars here and there and they benefit by the many millions, if not billions.

Did you notice that Alice Walton’s net worth went up $12.2 billion in just one year? The Republican tax cuts played a big part in that. And, in case you are wondering, to spend that additional $12,200,000,000 in one year, she would have to spend $6,500,000 every hour of every work day of the year! How much money is enough? Apparently in a capitalist system there is no upper limit.

Our Great Response to the Great Recession

Note The title I wanted and could not create is “Our Great Awful Response to the Great Recession” (mostly due to all of the recent “pat on the back” looks back at our response to the financial collapse).

On the Naked Capitalism website there is a great interview of Michael Hudson in which he simply and clearly points out that our economy is currently still in the tank because of decisions made to bail out political donors and screw average Americans, mostly by President Obama (a corporate Democrat), which were unnecessary and counter to what has worked in the past.

Check it out:

Michael Hudson: 10 Years Since Lehman Brothers Bankruptcy – Did the Economy Really Recover?

 

Ethics and Morality without God

In a recent post on Daily Kos I read the following:

“I once said to a Native American friend that I thought that the Golden Rule was a perfect expression of social ethics, and before I could put the period on my sentence, he shot back, ‘No, it’s not … because if you’re a misanthrope who hates people and just wants to be left alone, you can behave that way in clear conscience. In my tribe, I have responsibilities to widows, orphans, and the ill. I have to hunt for those who can’t. That’s mutuality.’” (sfzendog)

This attitude toward the collective responsibility we all have, as well as individual responsibility, might be summed up in “love thy neighbor as thyself” but it isn’t made at all explicit in Christian ethics/morality.

Many people do not know that the “tithe” which has morphed into a fundraiser to support the church building fund and minister’s and staff’s salaries, was originally a tax. The Jews had a theocracy. Even when outsiders came in and established a new ruling structure, the Temple kept its own governing structure and the tithe/tax was a way to support widows, orphans, and the afflicted. That is what it was for, explicitly. The Jews had a structure in place regarding the collective responsibility of all to support those in need.

Christian ethics/morality on the other hand stops at “love they neighbor” and “turn the other cheek,” with little parsing of those instructions. There are clear signs that early Christians were communal (that means communists, Comrade). As Christianity was rewritten by pagans, that collectivism was written out. The Republicans are doing their damndest to wipe out collectivism in the U.S. right now, so this “battle” is quite longstanding.

We still haven’t answered the question “Am I my brother’s keeper?” We are still trying to address mutuality.

Many studies on democratic socialist states show that as they collectively (through government) care for those less fortunate or less capable and just ordinary citizens, the less the need for religion in their population. It therefore seems that religion has a vested interest in opposing government providing basic support for their people. The widespread evangelical support for the current administration therefore is less perplexing looked at in this light.

Artificial Intelligence—The Promise

I am a big fan of digital technology and someone who is hopeful of the future. It is harder and harder for me to maintain that stance, however.

Currently there seems to be a widespread debate regarding the development of Artificial Intelligence (AI). Since we know so little the positions staked out are quite broad. At one end is a new future where machines take over dangerous and boring jobs and human beings have more leisure. At the other end, autonomous drones are the first step toward Skynet (the “bad guy” in the Terminator movies) and the extermination of human beings by intelligent killing machines.

There seems also to be many opinions in between the two extremes.

Something I do know is that it will not be the machines that determine the outcome. In every case of new technology impactful enough to change the course of history, the tech has been used to coerce and oppress the labor of the masses to serve the interests of the elites.

Consider the following photograph.

This is an Amazon warehouse. Amazon is a tech company. So, how do those who work in Amazon’s warehouses fare? Amazon uses personal monitoring algorithms to make sure that its employees do not waste time taking short breaks to catch their breath or go to the bathroom. They are to stay on task as long as Amazon wants them to … or else.

Jeff Bezos, creator of Amazon, makes huge profits by paying his warehouse employees wages that are so inadequate that many of them need public assistance just to get by. Thousands of Amazon workers are forced to rely on food stamps, Medicaid, and public housing because they can’t survive on the wages they receive. Meanwhile, Jeff Bezos is now worth $158 billion, and his wealth increases by leaps and bounds. (And who pays for the public assistance subsidizing Mr. Bezos’ wealth? You and I do, of course.)

If you think back to the first powered looms to make cloth, it was the workers who had to get along with the machinery, not the other way around. Same was true with the assembly line to make automobiles, etc.

I do not argue that there were no benefits from technology that actually accrue to ordinary people. Henry Ford, no friend of workers, paid more than anyone else as a daily wage to pursue his dominance of the auto market. But that was then and now, wage suppression is the favorite tool of the captains of industry. Much of the advanced tech of today is not available to us because, well it is very simple, we cannot afford to pay for it. We don’t make enough money.

As much as people will squander $1000 on a new iPhone, the really impactful tech, such as a liver transplant, is not available to you … unless you can afford to pay for health insurance and many, many people cannot.

So, AI in and of itself will not necessary oppress ordinary people, coercing our labor for the benefit of the elites, but if rich people have any say in the future, my bet is that a sizable amount of AI will be used for just that purpose. (Jeff Bezos has already begun the application.)

CEO Pay Growing Faster than Yours … Still

A recent report of CEO pay shows that the gulf between CEO pay and the pay of average workers in their companies has grown wider. I am shocked, shocked I tell you!

Articles are asking “How could this have happened?” As I have said over and over, this did not “just happen,” it was managed by the CEO’s. These people sit on each others boards of trustees to make sure that their pay increases will never be threatened. They have lobbied Congress and state houses to get tax cuts and tax provisions that favor them. We call such tax regulations “loopholes,” but loopholes are laws meant for one purpose that are used for another. These laws were passed for the purpose of increasing CEO power and wealth, period.

Take for example, Bill Clinton’s legislation to rein in the growth of “executive pay.” The situation was CEOs, through “golden parachutes” and other nonsense, were getting extravagant compensation for lackluster, even terrible, performances. So, the Clinton administration decided that CEO pay should be tied to CEO performance, an idea not so bad. But instead of tying CEO pay to some standard measure of business performance (income, profit, 5-year profit average, average wages in the company, customer satisfaction, etc.), they tied it to the value of the company’s stock, and therefore to the stock market. CEO’s rapidly took advantage of this and began getting more and more of their compensation in the form of stock options. They also started manipulating their own company’s stock price for their own gain. (I’m shocked, shocked I tell you!)

The most recent iteration of this practice is having the company borrowing money to “buy back” stock in the company. This has the effect of raising the price of the stock that remains and burdening the company with debt. The only people who benefit are stockholders and, oh, CEOs and other execs. This practice (stock buy backs) used to be illegal but as part of the package deal, it was made legal in the same era that started this binge of stock manipulation.

Who in a company is better positioned to manipulate the price of the company’s stock? Gosh, I believe it would be the CEO.

Can you spell insider trading, boys and girls? And it is legal. And it is making CEOs rich beyond their wildest dreams. And that wealth is being applied to our legislative and court processes to make them even wealthier and more powerful.

And, it all “just happened.” If you believe that, I have some lovely prime building land in Florida you may be interested in … but you might have to drain the swamp first.