Class Warfare Blog

July 28, 2020

Motivations According to Conservatives

Unemployment insurance has been, irrationally, deeply controversial. It has always faced bitter opposition from conservatives who claim that it would discourage workers from seeking jobs.

This is a part of their “those people are lazy” mindset which is joined with the belief that if “those people” didn’t have to work, they wouldn’t.

Let’s see how this belief plays out if taken to heart.

In our “pay as you go culture,” you have to pay for everything: you pay for the food you eat, for the shelter over your head, and you pay for the utilities to keep that space livable, you pay for health care. You pay for all of this by getting a job that pays “enough.”

Let’s do an experiment—one that actually has already been done any number of times, but hey, this might be the first time you thought this through. Let’s offer someone who has one of those “keeping body and soul together” jobs, one that pays just enough to be able to pay the rent, keep the TV on, and feed himself (no family), the same amount of income, but he doesn’t need to go to work to receive it.

The conservatives will immediately see this guy in a hammock sipping a mint julep. He just got his ticket punched to Easy Street! Well, we all now know what “staying home” is like during this pandemic. Does it feel like Easy Street? “Are we not entertained?” So, after lolling about for a bit, this “lazy bum” we are paying to do nothing gets the idea that he could get a good job and really expand his income. After all, the government is covering his nut, but not for vacations, cars, or a family. Do, you think this guy would settle for another boring dead end job like he had before? I tend to think he would aim higher. If he applies for 10 jobs but doesn’t get one of those, what has he lost? He still has food and shelter, so he is not desperate. I think we can count on human ambition being at least moderately high. Having that minimum income to backstop him, he is less likely to settle, not more likely.

And what does this say about the shit jobs people were doing for poor wages? What would happen if people said “Why should I break my back for little more than the basic income I get automatically?” Quite a number of those jobs would go wanting. Consequently . . . if you believe in market forces . . . those jobs are not worth doing, or if they are, higher wages are going to have to be paid to entice people to do them.

And, what would a lot of people opting out of the job market do for those seeking jobs? Hmmm . . . fewer applicants for the same number of jobs means higher employment rates. Conservatives can’t argue this is false because they have been claiming for years that Mexicans, illegally in the U.S., are taking jobs away from Americans. We have argued that there aren’t a whole lot of Anglos seeking work in the roofing business in the Texas summer or in the fields picking vegetables, but the conservatives insist that Mexican “illegals” are taking those jobs away from Americans. If so, it has to work both ways. If poor people stop applying for the shit jobs they have been doing, there will be more jobs for Americans who want them.

Now, small business owners will complain (they have little power otherwise) that if they have to pay higher wages to keep people in the jobs they have on offer, they will go out of business. Again, let’s consider a small thought experiment. So, you Mr. Small Business Owner advertise for an employee to fill one of your shit jobs, and several desperate people apply. You pick one and you train them. They perform in a lackluster manner and quit or get fired after a short stint “on the job.” And so, you are back advertising for a replacement . . . again, which you will hire, train, and . . . well, I think you see the cycle. If, on the other hand, the job pays well, and this owner tells an employee they have to pick up the pace, they are much more likely to do so, because the impact of losing a higher paying job is greater. Many people won’t want to lose such a job and so will try harder. Fewer adverts get put, less time is spent training new employees, less over time is paid covering for employees who got fired/quit, etc. Which process is less expensive to the SB owner? I don’t think the answer is obvious.

Conservatives seem to think the very best motivation for poor people is desperation (you have all seen the drug company commercials showing poor people unable to afford the medicine their dependents need, the problem is not invisible). They, of course, reserve special scorn (“lazy and shiftless”) for the racial minorities who are poor, but all of the poor are painted with their wide brush. (They work out their schemes on the Black and Brown poor, and then they always bring it home on the White poor . . . always). On the other hand, in their lives and the lives of other white, privileged Americans, their salaries are more than adequate to meet a family person’s nut for the whole family, and while it may not be enough to pay for a McMansion, or private schools for the kids, and a Porsche, it is enough for cars, vacations, a paid healthcare plan, and a few splurges, etc., and the motivation preferred by this class is greed, pure and simple. They laud hedge fund managers and other financial fat cats as examples of what you can do if you apply greed to your work life.

So, basically, conservatives have very low opinions of the motivations that move people and I suspect that is because they have a low opinions of people in general, other than themselves and their close associates, of course. And I wonder where they learned to have a very low opinion of people . . . religion!

June 26, 2020

Government: To Trust or Not Trust?

Filed under: Politics — Steve Ruis @ 12:27 pm
Tags: , , , ,

I have written often enough that part of the Republican political strategy over the past 40 years or so has been to shrink the reach of government. They attack Big Government, while expanding it off camera. They undermine branches of the federal government as often as they can.

In the Era of Trump this has become the wholesale business of the party. They are actively undermining the military, the security agencies (CIA, FBI, NSA, etc.), the electoral process, everything they can get their grubby little hands upon. Incompetents have been placed in charge of various departments, e.g. Betsy DeVos heading the Education Department, doing their best to dismantle those departments.

The cornerstone of these activities is the placing of judges who support their worldview in various positions. Recently, the GOP has discovered that a lifetime appointment often confers immunity to further influence over those judge’s decisions, but still, their viewpoints dominate judicial proceedings all over the country.

So, Mr. Trump appears to fit into their plans to discredit government at all levels and reduce people’s belief in it’s ability to make their lives better. Although incompetence wrapped in a GOP flag may turn around and bite them, instead of just proving that “government is not competent and you can’t trust it.”

So, why is the GOP doing this? It is simple. The plutocrats have so much wealth and power, the only institution that has the ability to stand against their dominance is government, therefore it has to be brought to heel. It has been almost a century since the New Deal was implemented, a deal in which government stopped being the tail and became the dog who wagged it. The fat cats of that time are all dead at this point, but the New Deal is still mentioned with venom by the current crop of oligarchs. They are still railing against it, and still working to dismantle the governmental power that accrued behind it.

 

May 26, 2020

Who Suffers?

We all tend to think of what is normal for us economically is the way it has always been, but today the economic deck is stacked, possibly more so than in any previous time. And it is not stacked in your favor. It is stacked in favor of those who lend capital.

For someone to lend you money, there has to be an almost iron clad guarantee that the lender will be paid back. You almost always have to put up collateral for your loan. Fail to pay the loan back and the lender takes the collateral. So, if you buy a house, the house becomes the collateral. If you fail to pay the mortgage payment for a few months and Wham! The lender forecloses on the loan and repossesses the collateral, aka your house. All of the payments you made now count as nothing. It does not have to be this way. The “collateral” could be held by a court and put up for sale and the proceeds of the sale be split  between the two actors: the lender and buyer with the split determined by how much money had been put up so far.

But that is not the way it is. In our culture, the lender has all of the cards with almost no risk.

Consider the “Great Recession” ca. 2008. The housing market collapsed due to bad behavior on the part of realtors and lenders and suddenly mortgages that could not be paid resulted in repossessions of collateral worth far, far less that the amounts owed. So lenders bore some risk, then . . . except they used a powerful Washington, D.C. lobby to get bailed out so that they did not lose any money (or at least not so much). Were the people buying the homes also bailed out? Silly person, of course, they were not.

Lenders are so used to not having any risk associated with lending that corporations are currently awash in bad debt. They know they are okay because if anything goes wrong their “friends” in Congress and the White House, Democrat or Republican, will bail them out again. This is why economists invented the term “moral hazard,” but they do not apply it to those who line their pockets.

I have been slowly working my way through Michael Hudson’s book on how debt was handled in days long gone. I will give a larger book review (I have offered tidbits before) when I finish it.

To hold you over, here are some tidbits of Michael Hudson’s research and thinking:

“The pedigree for “act-of-God” rules specifying what obligations need not be paid when serious disruptions occur goes back to the laws of Hammurabi c. 1750 BC. Their aim was to restore economic normalcy after major disruptions. §48 of Hammurabi’s laws proclaim a debt and tax amnesty for cultivators if Adad the Storm God has flooded their fields, or if their crops fail as a result of pests or drought. Crops owed as rent or fiscal payments were freed from having to be paid. So were consumer debts run up during the crop year, including tabs at the local ale house and advances or loans from individual creditors. The ale woman likewise was freed from having to pay for the ale she had received from palace or temples for sale during the crop year.

“Whoever leased an animal that died by an act of God was freed from liability to its owner (§266). A typical such amnesty occurred if the lamb, ox or ass was eaten by a lion, or if an epidemic broke out. Likewise, traveling merchants who were robbed while on commercial business were cleared of liability if they swore an oath that they were not responsible for the loss (§103).

“It was realized that hardship was so inevitable that debts tended to accrue even under normal conditions. Every ruler of Hammurabi’s dynasty proclaimed a Clean Slate cancelling personal agrarian debts (but not normal commercial business loans) upon taking the throne, and when military or other disruptions occurred during their reign. Hammurabi did this on four occasions.

“In an epoch when labor was the scarcest resource, a precondition for survival was to prevent rising indebtedness from enabling creditors to use debt leverage to obtain the labor of debtors and appropriate their land. Early communities could not afford to let bondage become chronic, or creditors to become a wealthy class rivaling the power of palace rulers and seeking gains by impoverishing their debtors.

“Yet that is precisely what is occurring as today’s economy polarizes between creditors and debtors.”

I think you will find that some of this applies to our current situation, no?

May 23, 2020

GOP Thinking—Fast and Slow

Maybe it is a fluke, but I think not, that some part-time workers who are now able to apply for unemployment insurance whereas before they were not and so are making more on unemployment than they were working.

Republicans are worried, deathly worried, that we are encouraging sloth. They are worried that people will not want to go back to work. Such are the moral hazards in the Republiverse.

These same people don’t seem to worry about the moral hazards when we bail out banks or shaky corporations, like Boeing. They don’t seem to worry that those companies would rather suck off the government teat than make good products. They also love to bail out stockholders who are elevating rent extraction above honest work as a profession.

Okay, I can solve this problem for my Republifriends. I start with a fable, maybe even a parable . . .

Let’s say that a friend, a good friend, of yours tells you about a job offer. “Dude, there is this job I think you ought to apply for. It is right up your alley . . . except, well, you will be working harder and get paid less than you are now. What do you think?” I know what you would think: “Are you effing crazy?”

If the GOP is worried that people are making more money off of unemployment insurance than working, the solution is obvious—pay better wages! Pay workers more than they can make off of unemployment payments (which are effing temporary in any case!).

If people were losing significant money while on unemployment, they would be dying to get back to their regular job. In fact, many, many problems would be solved if wages were to go up substantially. There would be less need of food stamps, other forms of welfare, charity, food banks, etc. People would pay more in taxes, lowering the annual budget deficit we always seem to run.

See, it is simple. Except there is this teeny-tiny bias the GOP has. It worries about moral hazards only when they involve the poor or middle class. That the billionaire class and corporations are raking in huge windfall profits from the government’s efforts to ameliorate the pandemic are just something that does not interest them, at least not after the scheme to funnel all of that wealth toward the billionaire class has been accomplished.

Mission accomplished! GOP!

May 7, 2020

We Need to Unleash Businesses!

In the never ending battle with industry stifling red tape, only the GOP is seen as a stalwart in the effort to deregulate our industries. In the latest wave of deregulation by the GOP, they have decided the rules on where and how to dispose of radioactive waste are choking the nuclear industry.

What the flaming fuck?

Right, if it weren’t for those pesky regulations, our nuclear industry would be surging ahead. Forget about the Colorado corporation which disposed of tons of radioactive waste by just spreading it out on the ground instead of following those pesky regulations. That was clearly an example of why those regulations aren’t needed, because people aren’t obeying them. The fact that that corporation went belly up before their novel disposal techniques were discovered, leaving us with the cleanup bill, is irrelevant. In this day and age, corporations wouldn’t do something like that because it would damage their good reputation.

The GOP has given us so much. By demonizing young black males (thank you Dick Nixon, Ronald Reagan, etc.) we now apparently have an open season to hunt and kill young, male black joggers.

By demonizing regulations of all kinds, we now have the GOP lifting child labor laws and now radioactive waste disposal regulations. “Uh, regulation . . . bad,” one GOP politician was quoted as saying.

By demonizing taxes, the GOP has ballooned the budget deficit and therefore the national debt hugely, biggly even. This followed, of course, several efforts of the GOP to shut the federal government down because the deficit/debt was getting too high. That that was not a moral or even a principled stand has now been laid bare.

No one is in favor of unnecessary regulation of our society. That the GOP has declared that all regulation is unnecessary should chill you to the bone.

Oh, and you thought this would be about loosening pandemic business restrictions. Well, ’tis not.

March 22, 2020

Killed by Greed

I was looking up the career stats of baseball immortal (at least in Japan if not here) Ichiro Suzuki. (Don’t ask.) And baseball-reference.com provided something unexpected, Ichiro’s cumulative salaries. Now Ichiro played in Japan and didn’t come to MLB until he was 27 and still had a Hall of Fame career. He was a spectacular four tool player, who will end up in the Hall of Fame, I am sure.

So, even playing in Japan until he was 27, in his 19 seasons in American professional baseball, Ichiro accumulated $167,181,483 in salary. These are contract numbers and not corrected for inflation, so if they were that number would even be greater.

Even though that is a mind-boggling amount of money, it is not extreme. Alex Rodriguez, then of the Texas Rangers, had a single contract (for 10 years which as very long then and very, very long now) for $252 million. Of course you cannot just settle for old money so he had a later contract for $275 million. The top MLB contract, so far, is a 13-year $325 million contract of Giancarlo Stanton, an oft injured “star.”

Now, in comparison, I was a college professor and I totaled up my salaries over a roughly 40 year career and it came to around $2 million dollars. If adjusted for inflation, it is about $4 million. Now, Ichiro played in 2653 MLB games, so he made $6302 per game. So, he made as much as I did in my entire career in 317 games, or a just a little under two seasons.

All of this is just chump change, of course.

As I have mentioned before dozens of people have reported more than one billion dollars in earnings for a single tax year, some over two billion in a single year. And as I have also mentioned before, if you assume eight hour workdays, two weeks of paid vacation, and the normal federal holidays, those making one billion dollars per year were making $532,000 per hour. Those making two billion dollars per year made $1,064,000 per hour. These people “made” as much as my career earnings in one afternoon of “work.” And they made as much as Ichiro in his MLB career in about 157 hours or 20 work days, basically in a little less than one month.

Now, I don’t think of being a college professor is in any way an exalted job, but it wasn’t a shabby one either. These comparisons show there is something seriously out of whack in our capitalist economy. I am sure the capitalism defenders will rush to say, but they earned that money legitimately! And, I agree that that is true, but what is “legitimate” is determined by the system. Is it legitimate that the hedge fund manager making that two billion dollars in a single year paid a lower tax rate than I did? Why was that? I will tell you. It is because the “system” is rigged by the people benefiting the most from the system. So what is legitimate or legal isn’t really a justification.

The problem with capitalism is that greed has no controls over it. The countries currently making capitalism work better for their entire populations are social democratic countries with high taxes and large benefits associated with those taxes. We had a similar system for a short period after World War II. Taxes were sufficiently high that CEOs, movie stars, athletes, and the like were dissuaded from making obscene amounts of money. And, still, there were still plenty of rich people walking around. Rich working people had to settle for perks (aka perquisites) to show off their value to their employers (large offices, corner offices for lawyers working in skyscrapers, large desks, artwork in the waiting rooms, corporate cars, etc.). Now, status is determined by earnings, earnings, earnings and little else. In fact, the system now encourages greed.

So, if you were wondering why it costs over $200 for two of you to attend a MLB baseball game, now you know. To create large pools of wealth, “small” amounts from the many must be funneled to the few. And there is, of course, a limit to how many want an entertainment product, so the “how much” each of the many has to transfer to the few keeps going up, reducing the number of the many who can or are willing to afford those purchases. (I have stopped attending my beloved baseball games, for example.) A number of sports in the US are finding those limits: baseball for sure and surprisingly NFL football, too.

Our current electoral process seems hell bent in excluding any candidate for high office who would challenge the legitimacy of our economic system, which is quite predictable. Our plutocrats went to a lot of work and paid a lot of money to create a system to their liking, so why should they even consider any candidate who might upset their apple cart.

Why indeed?

We seem to have democracy only in being able to select from a small set of candidates acceptable to the plutocrats actually running the country. The American Experiment in democracy is definitely past its peak and now heading downhill. On its gravestone, its epitaph will surely include the phrase “killed by greed.”

Now if we only had a goose that laid golden eggs to use as a moral focus of a story. . . .

March 15, 2020

The Triumph of the Anti-Collectivists

A Robert Reich column on the Coronavirus pandemic contained this little nugget.

While we’re at it, let’s admit something more basic. The system would be failing even under a halfway competent president. The dirty little secret, which will soon become apparent to all, is that there is no real public health system in the United States.”

And Robert Reich is no one’s apologist for the Trump administration.

I have never felt that our public health system here in the U.S. was particularly robust. And I am old enough to remember standing in line on our high school football field as we were to receive the polo vaccine, along with everyone else in the country. And I do perceive that we have slid a bit during my life, more so in the last few decades.

This is hardly a surprise when one of our two, count ‘em just two, major political parties is adamantly anti-collectivist. The Republican Party, so you don’t have to guess which one, is against any and all collective actions of our people and especially our governments, except in a few small areas: national defense, police, and courts of law (primarily on contract law, property rights, criminal law, etc.). They are against all other collective actions. So far, they want Social Security, Medicare, and Medicaid to be privatized. They want the postal service to be privatized, they want the health care system to be entirely private, they want our public education system to be privatized, etc.

They want to do away with environmental protections, all regulation of businesses, everything they consider to be “red tape” limiting the actions of men of commerce. No minority protection laws, no legal social reforms, no labor laws, etc.

The motivation for this is simple. If people can bond together to form, say, labor unions, then many weaker people can become as strong or stronger than a few powerful people. If such collective actions be not allowed, then the strong can lord it over the weak, forever and ever, amen.

Remember President Obama’s “You didn’t build that (alone)” comment, alluding to the vast public contribution to all businesses in this country? (The public provides the roads, the power grid, sewers, water on demand, and other infrastructure, the court system, the permitting systems, etc.) Do you remember the scorn that comment was received with by GOP stalwarts. They immediately responded with incredulity because they believe in the “special man of history” theory, that history is created by special individuals, individuals like Napoleon, George Washington, and Hitler. Likewise, all business would not exist except for some, obviously smaller in scale, special person, the “Job Creator” who started the business up. No one was trying to deny that those people were key people in those efforts, but imagine what kind of businesses those would be if the owners had to train all of their workers in basic literacy, because the public schools didn’t exist. Imagine if they had to train even the most basic skills (typing, using hand tools, etc.) because workers did not come to them already prepared for such work. You do not have to imagine these situation because we can learn all about how workers were treated by studying labor history. Oh, you didn’t learn labor history in school? Hmm, could it be that efforts to include labor history in state school curricula have been blocked for at least half of a century? (It be.) I wonder who would do such a thing? Oh, and if you haven’t studied any labor history, it wasn’t pretty. (For a short course, just listen to Tennessee Ernie Ford’s rendition of the song “16 Tons,” the 16 tons alluding to a daily quantity of coal needed to be dug by a single coal miner to get paid.)

The GOP is against any expansion of collective action of private citizens and certainly government and is actively working to contract the rights to so act, because in a one-on-one battle between a rich man and a poor man, the rich man wins every time.

The GOP is a political party bought and paid for by the wealthy. The sad thing is that the Democratic Party, which used to be only partially bought by the wealthy, isn’t really far behind. If you want evidence for this, look to the recent rallying of support for Joe Biden against Bernie Sanders in the current presidential race. Which one of those two candidates threatens the status and power of the wealthy more (or at all)? Are you surprised that so many Democratic candidates cut and ran away all of a sudden, endorsing Biden as they exited the stage? I’m not. Threatening the wealthy is not an easy path to power. Sucking up to them is.

December 29, 2019

The Fly in the Ointment

I read recently an article about how Amazon.com is creating many, many small businesses to deliver their goods. Amazon originally used USPS, UPS, and FedEx and the like as their delivery agents and negotiated their prices down, down, down but reached a limit of those services which pay their employees fairly well and treat them fairly well. (Trust me, I had a brother in law who worked for UPS and UPS is not a saintly organization. It is just that their jobs weren’t “shit jobs.” Their employees had pension plans, healthcare, decent wages, unions, etc.)

Amazon is creating little entrepreneurs to Uberize the delivery business.

Amazon also squeezes its own employees terrifically for better performance but not for higher wages. For example, Whole Foods, an Amazon subsidiary, announced it would be cutting medical benefits for its entire part-time workforce. The annual saving to Amazon from this cost-cutting move is roughly what Bezos – whose net worth is $110 billion – makes in two hours.

Does the man deliberately cultivate the aura of a Bond villain?

Amazon’s commercials aside about how wonderful some of its employees think the company is, the number of stories of employee abuse hasn’t declined much. And, Amazon raised the wages of its base employees only under considerable pressure from outside.

Now, as Americans, we believe that businesses should be “free” to run their businesses any way they want (within some rough standards of practice, outlined in the law) but the question I am asking here is “To what end?”

I ask, “Why does Amazon need to lower its employee costs, lower its shipping costs?” The “old Amazon” made Jeff Bezos the richest man in the world. He can’t move any higher on that list. So, why are these practices necessary? So Mr. Bezos can make even more money when he cannot possibly spend the wealth he has accumulated so far? Please recall that to spend one billion dollars ($1,000,000,000) one has to spend $532,000 per hour of every business day for an entire year. In just one morning or afternoon, this amounts to as much money as I earned in just under 40 years of working as a college chemistry professor. And Mr. Bezos has in excess of a hundred times that much accumulated wealth at this point.

This is the core problem of capitalism. There are no limits placed upon greed.

Mr. Bezos, like Costco, could settle in and provide high quality jobs for his employees (and reap the loyalty that invokes) and provide quality goods for his customers and make money hand over fist for decades if not longer. But he is not, he is squeezing the system so that more and more money oozes out of the top and into his pockets.

I have come to agree with Bernie Sanders in that a democratic republic such as ours cannot tolerate billionaires. Wealth taxes (such as inheritance taxes and new ones) need to reduce the fortunes of these greedy SOBs. I know this is intolerable to the greedy class but I can’t feel pity for someone whose wealth is limited to the mere hundreds of millions.

Oh, and the right to do this? The right is called self-protection. In this country money is power. People like Bezos and Bill Gates have acquired way too much power for the good of the system. We all have to concede some of our individual rights for the good of the collective whole. This is one of those.

And if you think such a thing is antithetical to capitalism . . . you are just wrong. Consider the case of the capitalist state of . . . Finland.

September 11, 2019

Socialism Bad, Capitalism Good

I am not going to state anything novel here but will reinforce things already said. Currently there is an aspect of our political discourse that is summed up by the title of this post. It is, of course, false. What the “defenders of capitalism” are arguing for is the status quo in which we have a quasi-capitalist system, but one that protects the rich and screws the poor.

Think back on the Great Recession of 2008. If you are a pure capitalist, then a great many financiers, bankers, investors, and brokers should have lost all their money (everything but the bare minimums allowed in bankruptcy proceedings). Through greed they backed the wrong horses.

But the word “bailout” then comes to mind. To coin a phrase “there are no bailouts in capitalism” just as “there is no crying in baseball.” If you have taken college-level courses in capitalism, nowhere will you find governmental bailouts as a structural part of capitalism. These sweet deals are brokered by rich people with the people who serve them to protect their wealth.

It was argued that “we couldn’t let such-and-such a bank or insurance company fail.” Wha? Failures is what capitalists brag about. It is what keeps them sharp. It is the leading edge of “competition.” Without failure, just what is capitalism? All of those people should have failed and learned from the experience . . . or not. So, what did they learn instead? A sucker is born every minute?

So, when you hear anti-socialist rhetoric realize that it is from the wealthy, or paid for by the wealthy, to protect the good deal they have going, nothing more and nothing less. And this is actually rebounding upon the rich. Younger Americans hear the anti-socialism rhetoric and they think “Ah, this is what we need to counter those greedy ass hats.” The young are embracing socialism more and more as the rhetoric against it is ramped up. And the harder the rich squeeze the poor and middle class, the more these younger Americans are embracing some form of democratic socialism.

They also aren’t stupid. They see countries like Sweden which are capitalist, just not capitalist as we are. They have a form of democratic socialism, in which the inherent negatives associated with capitalism are suppressed. The government acts on behalf of the people and offers basic services that seem to be the norm in civilized countries. They recognize, as do all thinking people except captured economists and bought politicians, that capitalism is self-destructive unless it is controlled significantly. In this country, the wealthy have turned phrases such as “government regulation” and “unearned income” into either non-terms or epithets. Why would they want there to be no controls on capitalism? Because in this country, when things go well, they profit enormously, and when the crashes inevitably happen, their paid-for politicians step in and the “public” bails them out. This heads I win, tails you lose system benefits only the wealthy, so their support of it is no surprise. The actual surprise is the support existing in the general population for this robber baron mentality.

August 13, 2019

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 43rd 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.)

Next Page »

Blog at WordPress.com.