According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country.
The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar report from October.
Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.
A Sears store in the Woodbridge Center.Business Insider/Sarah Jacobs
And people are now devoting bigger shares of their wallets to restaurants, travel, and technology than ever before, while spending less on apparel and accessories.
As stores close, many shopping malls will be forced to shut down as well.
When an anchor store like Sears or Macy’s closes, it often triggers a downward spiral in performance for shopping malls.
Not only do the malls lose the income and shopper traffic from that store’s business, but the closure often triggers “co-tenancy clauses” that allow the other mall tenants to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the anchor space.
To reduce losses, malls must quickly find a replacement tenant for the massive retail space that the anchor store occupied, which is difficult — especially in malls that are already financially strapped — when major department stores are reducing their retail footprints.
That can have grave consequences for shopping malls, especially in markets where it’s harder to transform vacant mall space into non-retail space like apartments, according to analysts.
The nation’s worst-performing malls — those classified in the industry as C- and D-rated — will be hit the hardest by the store closures.
The real-estate research firm Green Street Advisors estimates that about 30% of all malls fall under those classifications. That means that nearly a third of shopping malls are at risk of dying off as a result of store closures.
With intense price competition and lower cost operations due in large part to efficient automation, jobs will continue to decline and along with this decline will be the further devaluation of the worth of labor.
We need to reform the system and provide equal opportunity for EVERY child, woman and man to acquire personal, full voting and full dividend earnings payout ownership stakes in the successful corporations who are growing the economy and forming the workings of our future economy. This transition from a focus on jobs to a focus on capital ownership must begin immediately, as with every passing day, there are fewer “customers with money” to support a growing economy, and the economy will retreat even further with more job destruction and devaluation of labor’s worth.
To accomplish this transformation will require enacting the proposed Capital Homestead Act and extending equally to EVERY citizen, insured, interest-free capital credit for strictly investing in future viable capital formation projects, repayable out of the future earnings of the investments, and without any requirement for past savings or equity to secure the bank loans or the requirement to have any source of income.
We are looking at a future where there will be hordes of citizens of zero economic value. That is, unless the system can be reformed to empower EVERY citizen to acquire ownership in the wealth-creating, income-producing capital assets resulting from technological invention and innovation.
Because productive capital is increasingly the source of the world’s economic growth it should become the source of added property ownership incomes for all. The reality is if both labor and capital are independent factors of production, and if 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.
As this article is testament to, with increasing punditry, scholars and others are writing about the impact of the Second Industrial Revolution where tectonic shifts in the technologies of production are destroying and degrading jobs due to the shift from labor worker input to the non-human factor––human-intelligent machines, superautomation, robotics, digital computer operations, etc.
The question that requires an answer is now timely before us. It was first posed by binary economist Louis 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 workers) produce a major share and the vast majority (labor workers), a minor share of total goods and service,” 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?”
Yet politicians and conventional economists would rather continue to focus on Job Creation that holds back technological invention and innovation, instead of a focus on enacting economic policies that focus on wealth-creating, income-producing capital Ownership Creation.
Given that there is no question that robotic technology will continue to expand the productivity and in large measure destroy jobs and devalue the value of human labor, the question that SHOULD be urgently addressed is WHO SHOULD OWN THE FUTURE TECHNOLOGY ECONOMY? Will ownership continue to concentrate among the 1 percent wealthy ownership class who now OWNS America, or will we reform the system to provide equal opportunity for EVERY child, woman, and man to acquire personal ownership in FUTURE non-human capital assets paid for with the FUTURE earnings of the investments in our technological future?
On March 20, 2017, Guy Shrubsole writes on The Guardian:
“The ownership of land,” wrote the 19th-century radical economist Henry George, “is the great fundamental fact which ultimately determines the social, the political and … the moral condition of a people.”
Who owns land matters. Landowners get to choose how their land is used, and that has big implications for almost everything: where we build our homes, how we grow our food, how much space we set aside for nature. Owning land confers wealth, status and often political power.
Understanding who owns this country has been a utopian project for at least a century and a half. In 1872, in an effort to disprove radicals’ claims that only a tiny elite dominated the landed wealth of the nation, Lord Derby – a major landowner himself – asked the government to undertake a proper survey. The Return of Owners of Land – or “Modern Domesday”, as it became known – was the first comprehensive assessment of land ownership in Britain since William the Conqueror’s swag list after the Norman conquest. But far from dousing the demands of the radical land reformers, the survey lit a fire under the issue.
The Return showed that just 710 aristocratic individuals owned a quarter of the entire country. Popularised by the author and socialite John Bateman in a bestselling book, The Acre-Ocracy of England, who owned land suddenly became the talk of the town. But it wasn’t just the gentry keeping up with the Joneses; land reform had become the political issue du jour. After all, this was a time when you couldn’t vote unless you owned property; when tenant farmers were struggling under a severe agricultural depression; and when the urban poor were crammed into overcrowded slums, at the mercy of grasping landlords.
Into this potentially revolutionary situation walked Henry George, an American economist with a radical new solution for the ills of the world. He proposed a land value tax – a tax on rent-seeking landowners who got rich simply by owning land in valuable locations and allowing it to accrue in value. In order to levy such a tax, it would first be necessary to survey all landowners and carry out a valuation of their property.
George’s utopian ideas inspired a generation of radicals, spanning all parties – from socialists to Liberals and even radical Tories such as Theresa May’s political inspiration, Joseph Chamberlain, who ran for election on the promise to secure for all farmers “three acres and a cow”. Yet English land reform was a dream that soon faded. The Modern Domesday was forgotten, George’s land tax dismissed as too radical, and all that the land reformers achieved was some legislation to create allotments. (A later push for land reform in the Edwardian period was first defeated by the landowning interest in the House of Lords and then cut short by the first world war.)
But spool forward to the present, and there are plenty of fresh reasons for wanting to know who owns our land. We face a housing crisis of epic proportions, caused at least partly by housing developers’ “stranglehold” on land supply, as the communities secretary puts it. As Brexit looms, we need to completely overhaul our broken system of farm subsidies, which for too long has rewarded landowners simply for owning vast estates, rather than providing public goods.
Fixing all of these requires first knowing who owns our land. It’s something that should unite the most radical activist with the mildest reformer. Whether you’re a conservative aspiring to create a property-owning democracy, an anarchist who believes all property is theft, or a Georgist campaigning for land value tax, the first step is finding out who owns it all currently.
So if the answer to who owns England isn’t available from existing public data, how to find out? Well, the Victorian land reformers did leave us one other legacy: the Land Registry, whose job it is to gradually register who owns all land in England and Wales. Yet 150 years after it was founded, it’s still not completed its task – around a fifth of all land remains unregistered. And though the Land Registry has thankfully just survived a government attempt to privatise it, it remains a very closed public service: you have to pay £3 just to find out who owns a single field. Paying to find out who owns the whole country would cost a fortune.
The government’s recent housing white paper heralded some welcome steps in this direction – announcing that the Land Registry would soon make freely available its datasets on land owned by UK companies and offshore firms. But that’s only a fraction of the total. Aristocratic families, who almost certainly still own the great majority of England, will be exempt – since their huge estates are invariably registered in an individual’s name, if they’re registered at all.
“Who owns England?” is a beguilingly simple question, but finding an answer to it would be genuinely utopian. Knowledge, after all, is power: and knowing who owns our land would be a first, crucial step towards really taking back control of our country.
The English are beginning to ask Who Owns England? Likewise Americans should be asking Who Owns America?
The article cites that Margaret Thatcher’s ambition was to create a “property-owning democracy”. In the United States in July 1974 Ronald Reagan said we need an Industrial Homestead Act. Unfortunately, these were words spoken with no resulting action.
In 1864, Abraham Lincoln signed the Homestead Act. There was a wide distribution of land and they didn’t confiscate anyone’s already privately owned land. They did not take from those who owned to give to others who did not own. It set the pattern for the American system of private property ownership.
The proposed Capital Homestead Act (CHA) (www.capitalhomestead.org) takes its lead from the Homestead Act of 1862. The 1864 Homestead Act offered the landless white citizens of America part-ownership of the country by giving them 160 acres of frontier land, free, if they produced on it income for themselves and their families for a period of five years.
In Lincoln’s America of 153 years ago, the problem confronting the vast majority of the citizens of our nation was that most people owned no land that they could work to sustain their livelihood. Today, the major problem for the vast majority of the people of our nation and of our world, for that matter, is that 99 percent of the people own no capital (or a viable share of the non-human means of production) in a high-tech, capital-intensive economy. The Capital Homestead Act would make it possible for every American to become a viable owner of productive capital and not just for the tiny elite who now own our corporations. The Act would establish for EVERY citizen a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. The CHA is primarily a tax-sheltered vehicle for the democratization of capital credit through local banks. It would enable every child, woman, and man to accumulate wealth and receive dividend incomes from newly issued shares in new and growing companies, without being taxed on the accumulations (including property and shares gained through inheritance, savings, and arrangements like ESOPs (Employee Stock Ownership Plans), CSOPs (Citizens Stock Ownership Plans), and CICs (Community Investment Corporations). In addition to serving as a source of capital credit for corporate workers, CHAs would also provide an ownership-building account for individuals who do not work for profit-making enterprises, such as school teachers, civil servants, military personnel, police, and health workers, and for individuals who have no remunerative employment, such as the disabled, the unemployed homemakers and children.”
Enacting The Capital Homestead Act would make it possible for every American to become a viable owner of productive capital and not just for the tiny elite who now own our corporations.
Marshall Brain speculates on how robots will change the economy and replace human workers. At Singularity Summit 2008.
address what Marshall Brain is talking about with solutions to empower EVERY citizen to contribute productivity to the economy by owning the “technology.” See “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058
On March 19, 2017, Charlie Young writes on Economics:
Universal Basic Income(UBI) is either absolutely bonkers pie-in-the-sky thinking or an ingenious idea whose time has come – depending on whom you ask. A litanyofrecentarticles argue for and against the idea of giving every resident of a society or economy a guaranteed income stream, usually sufficient to live above the poverty line, regularly and into perpetuity. Those arguing for say that it offers a potential new awakening of cultural expression, as well as dismantling the disincentives to work associated with means-tested benefits, while supporting us through an age of automation, and also creating space for reimagining ownership of the commons. Those against say that there’s no such thing as free money, that people would simply stop working, that layabouts get enough as it is, and that it could lead to either the dismantling of capitalism or of the welfare state. Both sides of the argument – each including those from the political left and right – accuse the other of ‘not understanding economics.’ But the fact that people are arguing over whether or not UBI as a whole is a good idea means there’s something very wrong with the narrative. The debate we have today is rooted in a false dichotomy. It should be very difficult to be for or against something as broad and diverse as the ideas parceled up in UBI.
UBI is in fact not a single proposal. It’s a field of proposals that’s perhaps better thought of as a philosophical intervention, a new conception of macro-economic and political structure. It’s unusual to argue wholeheartedly against representative government, taxation or universal suffrage, while it is common to disagree on which party should govern, whether taxes should be raised or cut, and particular elements of voting procedure. In the same way, we shouldn’t argue all-out for or against UBI but instead inspect the make-up of each approach to it – that’s where we can find not only meaningful debate, but also possibilities for working out what we might actually want.
UBI has appeared to make some strange bedfellows; its supporters include anarchists, libertarians, liberal lefties and Republicans (including Richard Nixon). But on closer inspection it is clear that different groups are proposing fundamentally different things. UK think-tank Compass, for example, suggests replacing key elements of the current means-tested benefits system with a basic payment to all citizens, padded by slightly raising the top rate of tax. Economist Charles Murray, on the other hand, advocates paying all US citizens over the age of 21 a sum of $10,000 per year to serve as, in his words, ‘a replacement for the welfare state’. Then there is Dr Thomas Pogge, who suggests a global resources dividend (GRD) whereby current and historical injustices against the global poor are counteracted through the modest taxation of global natural resources – including fossil fuels, land used for farming, mining and destroyed habitats – and redistributing the levy amongst those involuntarily excluded from their use. All of these proposals (and dozens more) fall under the umbrella of UBI.
The most important distinguishing feature between the different iterations of UBI is where the funding comes from. Wrapped up in this are ancillary questions: what would a UBI replace, compensate for, or complement in the rest of the economy? What would the knock-on effects be for social welfare and the government’s responsibility to its citizens? Who gets the money is another question worth looking at (just how ‘universal’ is the income?), as is its amount and regularity. With these distinctions in mind and after reviewing relevant literature, I suggest an initial distilling of UBI into the following three categories:
A. Recalibrating existing tax and benefit systems
B. Replacing the Welfare State, aka ‘Voucherisation’
C. Communalising common assets
Recalibrating existing tax and benefit systems
According to advocates of [A], for UBI to be politically feasible it must be achieved using the existing infrastructure of taxation and spending. UBI is an immense ideological intervention – or so the argument goes – and as such should be funded without radical changes or additions to taxation but instead through restructuring the existing ‘inefficient’ and ‘unfair’ benefit systems.
Advocates tend to offer here what is referred to as a ‘no-frills’ UBI: subsistence or sub-subsistence levels of income to be supplemented by earnings from employment and/or disability, housing or child benefits.
Proposals found in [A] often set out to combat inequality and poverty, including through the dismantling of poverty traps such as the sudden removal of benefits as low-earners incomes rise (which can in some cases mean marginal deductions for the poor of 80%). They also often look to alleviate the pains of unemployment resulting from automation, which is projected to affect the poor most dramatically , as well as helping the projected expansion of the caring economy (especially important in ageing nations).
The savings from restructuring existing benefits are likely to be very large. Malcolm Torry of the Citizen’s Income Trust claims the administrative savings from dismantling the means-tested benefit system are in the range of £8-10bn. Put simply, it’s very expensive to decipher who is and isn’t deserving of government support, especially when recipients must prove their worthiness. Restructuring benefits to look more like a UBI could not only save money, proponents claim, but also be fairer.
What they all have in common is a shared belief that a politically feasible UBI must be small-scale, sometimes include transitional proposals, and be based on funding from existing tax structures.
Replacing the Welfare State aka ‘Voucherisation’
Economists and political theorists on the right, especially those identifying as libertarian, see UBI as a vehicle through which to reduce government intervention in public and private life at large. From this perspective, a guaranteed UBI would legitimize the dismantling of other forms of welfare provision, as it levels the economic and social playing field. Similar to [A], proponents of [B] argue that means-tested welfare is seen as unnecessarily costly, ineffectual, and fundamentally unjust in that it is an economically and socially distorting form of state charity.
Prof. Matt Zwolinski of the Cato Institute enumerates four libertarian arguments for a UBI. He places them under the banners of: i) reduced bureaucracy, ii) reduced cost, iii) reduced rent-seeking (i.e. under a universal program there is less space for political exploitation or benefit fraud), and iv) a reduction in the state’s ‘invasive/paternalistic’ tendencies, as there is no longer a need to categorise beneficiaries as the deserving poor.
Examples include a proposal from one of the founding fathers of neoliberalism, Milton Friedman, a litany of publications from conservative think tanks including the Cato Institute, and the proposal of Charles Murray’s mentioned above.
One clear difference between the literature making up [A] and [B] is that the former focuses on macro-level indicators of say, inequality, and potential effects of redistribution on such indicators, while the latter focuses instead on changes in individual behaviour resulting from a UBI. The proposals that make up the [B] category put faith in individuals to, given more adequate means, make the world around them in a more effective way than the state can do on their behalf. The poor, in this view, are likely to make intelligent choices about how to spend cash grants, an argument backed up by empirical economic evidence from Uganda to Mexico. Thus, the two kinds of proposals differ in intention, assumed problem, and predicted outcome.
Communalising common assets
The communalising of common assets can be global natural resources, the carrying capacity of the biosphere, atmospheric carbon, fisheries and forests, unearned income, or even the productive capacity of automation and technological change. The fundamental assumption here is that such assets – be they physical, biological or cultural – should be respected as the common property of all, rather than be the source of exploitative disparities from unequal access and power. This set of proposals is more systemically transformative than [A] or [B] as it is predicated on the realisation of new economic institutions and drivers. This category is also more diverse in scope than either [A] or [B], differing not only in terms of funding source but also in geographical distribution – some propose a global UBI.
Peter Barnes and James Boyce outline this range of proposals as charges placed on the access and use of ‘communally inherited assets’ and the redistribution of the resulting revenue. Charges could be placed, for example, on polluting the scarce resource that is the carrying capacity of our atmosphere, or on trades of stocks, bonds and derivatives (the latter of which could raise $300bn per year). Barnes and Boyce claim that charges on a ‘portfolio of universal assets’ could grant US citizens a UBI of $200 a month.
Iterations of wealth tax that could fund UBI include those suggested by Thomas Piketty like progressive capital taxation, and the Georgist land value tax (LVT) as proposed in the UK context by Martin Farley. Farley suggests land ownership be taxed and the raised revenue, coupled with that raised by what he calls Commons Licenses (a version of Barnes and Boyles’ common asset proposals), could fund a £4,500 annual UBI.
Economist Yannis Varoufakis and futurist Kartik Gada, on the other hand, have each suggested that the labour savings from automation could (and should) pay for UBI. Varoufakis’ proposal is one-part wealth tax and one-part ownership restructuring: a small tax is levied on shares from every initial public offering put into a Commons Capital Depository that in effect grants citizens property rights over new technologies that yield financial returns. The Commons Capital Depository would then pay out a UBI to all citizens. Varoufakis sees this as potentially alleviating “irreconcilable political blocs, while […] reinvigorating the notion of shared prosperity,” largely due to reframing understandings of when wealth is a result of hard work vs. context and luck especially in the face of technological unemployment.
Similar ideas have been touted by SiliconValleyentrepreneurs and tech-firms. Y Combinator has even launched its own UBI pilot programme (though this is arguably closer in essence to [A] than [C]).
While some proposals focus on addressing inequality and poverty traps [A], others focus on increasing individual freedoms and reducing government interference [B], and still others attempt to introduce new feedback loops into the economy and restructure the polity of ownership [C]. It is important to note that these are not necessarily mutually exclusive, given that the ideological foundations and value frames associated with each often overlap. However, the ontological differences are worth bearing in mind when speaking of UBI more generally.
Its time we treat UBI as the messy fabric that it is. Only by teasing apart the strands of the various arguments can we have a coherent discussion about whether and how best to implement its specific iterations. It’s especially important that we know what we’re looking at, especially given the recent upsurge in interest. Even if you consider yourself “pro” Universal Basic Income, a UBI by any other name may not smell as sweet.
While a Universal Basic Income sounds appealing to those solely dependent on a job or welfare, there is a far better way for EVERY child, woman and man to EARN more income by providing equal opportunity to acquire personal ownership in future wealth-creating, income-producing capital formation using insured (lending protection) capital credit, repayable out of the future earnings of the investments. This would not require anyone to pledge as collateral (past savings/equity as security for repayment).
Using such new owner-creation financial mechanisms would enable EVERY citizen to contribute productivity to the economy, create demand for a higher standard of living, while not taking from those who already are capital owners through taxation to support otherwise non-productive citizens.
We should be looking at how “the rich are getting richer,” not on how we can take and redistribute the earnings of the rich and middle class. Obviously, the distinction between the rich and the non-rich is that the rich OWN wealth-creating, income-producing capital assets, the very essence of technological progress, and the poor only have their labor to sell to the wealthy capital ownership class.
The fact that the core function of technological invention and innovation is to invent “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive, should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime.
The urgency is to figure out means for people to earn an income without dependency on jobs. The focus should not be on a pro-job growth future but an alternative to wage dependency as economists across the board predict further losses as AI, robotics, and other technologies continue to be ushered in.
Such future invention and innovation should be financed using mechanisms that create new owners simultaneously with the growth of the economy, while respecting the private property rights who now own, and ensuring that any further concentrated capital ownership acquisition will be abated.
The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today’s wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through stock ownership dividends so they can afford to purchase the products and services produced by the technology economy.
A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.
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 capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access 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?”
There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.
The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the “machines” that are replacing them or devaluing their labor value.
The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America’s future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.
The end result is that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government.
On April 26, 2015, Gerald Huff writes on Medium.com:
Those who argue against the risk of technological unemployment due to the coming wave of robotics, AI, and other disruptive technologies often point to what is known as the Luddite or Lump of Labor Fallacy. Their reasoning is as follows: “You Luddites believe that there is a fixed amount of labor to be done in any given economy at any point in time. When technology substitutes for labor in some industry, you think all of the displaced people must therefore become unemployed. But the reality is that when costs are lowered in that industry due to increased productivity, the savings are passed onto consumers, who spend those savings in other business sectors, which create jobs to meet the demand. Human desires are infinite, so there will always be new demand creating new jobs as automation lowers costs. Of course, there is disruption, and displaced employees will need to retrain for the new jobs, but it has always worked out this way and always will.”
Historically, this has, in fact, always been true. Outside of agriculture and large scale manufacturing, each incremental unit of a good or service (especially a service) has required significant incremental human labor. The amount of labor varies by product or service, but until very recently there was essentially nothing you could buy that would not require additional human labor hours, either in its production, distribution, sale, or delivery.
We are at the very beginning stages, however, of a new era. Those who argue the Lump of Labor Fallacy are becoming guilty of a different kind of fallacy, the Labor Content Fallacy. There is no law of economics that states that producing a good or service must require human labor. It’s just been that way so far because machines were incapable of performing the most basic of human tasks — communicating in natural language, sensing emotions, moving and operating in unstructured environments, processing information and making decisions, and manipulating wide varieties of objects large and small. Every business that wanted to innovate and deliver a valuable service or product had to hire humans, because there was simply no alternative.
In this new era, we can already see that machines and AI are steadily gaining these skills. IBM’s Watson, Google’s driverless car, Microsoft’s real-time translation, Narrative Science’s Quill, Cynthia Breazeal’s Jibo, Rethink Robotics Baxter and Sawyer, and DARPA’s Atlas are the initial versions of systems that have the potential to replace people in jobs that were historically safe from automation. Over the next few decades, as new disruptive businesses emerge employing these technologies, they will provide goods and services with minimal human labor content. The historical connection between consumption and job creation will be broken.
This phenomenon is most obvious with digital goods, which exhibit essentially zero marginal cost of production. Imagine 100 million consumers who save money due to automation in some industry buying 100 million downloads of Taylor Swift’s latest hit. How many new jobs are created by that $100 million of spending? Basically, zero. What if those 100 million people paid a dollar for a year of the WhatsApp messaging service? How many new employees would WhatsApp need to hire? Since they handled 450 million customers with a staff of less than 50, the answer is — not many.
This is a remarkable new development. Most businesses throughout history have had labor as their largest single cost and their front line employee costs scaled with their number of customers. Of course there are service businesses today where this remains true. If the 100 million people all decided to get more frequent haircuts, there is no doubt we would need a lot more stylists. The critical question is this: what direction do we think our economy and technology are headed? As more and more of our products and services are digitized and machines can handle more and more of once human-only tasks, I believe we are headed into a new kind of economy with vastly reduced labor content and therefore, far fewer jobs.
Some might argue that digital goods are too obvious an example of zero marginal labor content. What about physical goods? We will continue to crave physical objects after all, not just songs and movies and games that can be downloaded. So let’s project Amazon ten years from now, just based on the initiatives they have already undertaken. Our 100 million consumers take their savings and buy products online thru Amazon, no salesperson involved. The products themselves are made at highly automated facilities with very low marginal labor content. In ten years, Amazon warehouses will be completely automated. They are already testing prototypes of robots to replace the human “pickers” who stand for hours as a parade of Kiva robots bring shelving units to them and a computer points a laser at the item they should retrieve. Customer orders will be loaded into self-driving trucks that navigate their way into neighborhoods, where drones or ambulatory robots complete the deliveries. The trucks, drones and robots will of course themselves be built in highly automated factories. Increased demand from consumers, increased economic activity, no increase in jobs for humans.
Of course, if you extend the timeline out further, that entire process could be disrupted by future generations of 3D printing. Drop a glass on the floor and shatter it? Talk to your smartphone for a few seconds and a new one will be printed within minutes. You pay for the design (unless it was open source) and $1 per pound for the raw feed stocks. That’s it. No marginal human labor required.
What about the most labor-intensive sectors of the economy? In the US the highest growth in employment recently has been in food service, retail, education, and health care. With rising minimum wages, automation may very soon come to restaurants (Momentum Machines already has a self-contained burger making robot). Technology is poised to revolutionize education, with movements like micro-credentialing reducing the need for large faculties and administrations at big expensive institutions. Despite huge regulatory barriers, we are also starting to see innovations in health care, where within ten to twenty years we may very well be managing chronic diseases without the need for nurses and doctors.
Some will argue that the money flowing to these low or zero labor content businesses finds its way into the hands of the owners of capital or shareholders, who then invest it in new businesses — the so-called “job creators.” But if their investments are in Facebook and WhatsApp, there are meager numbers of jobs created (despite many billions in returns). Even the unusual part-time employment offered to many by Uber is slated within decades to disappear as the Uber CEO has already indicated he prefers (and has begun investing in) fleets of self-driving cars.
People who discount the possibility of technological unemployment are guilty of believing the Labor Content Fallacy. We need to begin preparing for a different kind of economy. In an age of ubiquitous smart machines, we need to shift our mindset away from the goal of “full employment”, as that will simply not be possible. While there will be infinite human wants and ever expanding amounts of work to be done, we just won’t need humans to do the work when machines can do it better and cheaper. Humans Need Not Apply.
This is an excellent article that corresponds with much of what I and others in the Just Third Way movement have been saying since the 1960s.
Author Gerald Huff asks the critical question: what direction do we think our economy and technology are headed? As more and more of our products and services are digitized and machines can handle more and more of once human-only tasks, […] we are headed into a new kind of economy with vastly reduced labor content and therefore, far fewer jobs.
The other critical question that requires an answer is also now timely before us. It was first posed by binary economist Louis 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 capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital (“technology”), with the result of denying the 99 percenters equal opportunity and access 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?”
To solve today’s big problems, including technological displacement of labor, systemic poverty, achieving sustainable and environmentally sound growth, and closing the growing wealth and power gap, our leaders need to enact a legislative package called the “Capital Homestead Act.” Starting in the United States, it would change Federal Reserve and tax policies to extend equal opportunity and the monetary means for every citizen of the world, as a fundamental human right, to become empowered and earn a living both as a capital owner and as a worker.
A New Role for Money and Credit
By democratizing capital credit through local banks all citizens, from the poorest to the richest, could acquire ownership shares in feasible projects (that earn enough to repay the capital credit) involving newly created capital and transfers of existing productive capital assets. The credit would be repaid from the full stream of projected future profits (“future savings”), thus not violating private property rights of existing owners.
A key element of the proposed monetary system — an essential component of a more just free market system — is how it would finance life-enhancing growth in ways that enable every person (as an individual) to gain equal access to the means of acquiring ownership of income-producing wealth, without the need for government redistribution and subsidies.
A National Economic Agenda for Uniting America
The proposed reforms behind the Capital Homestead Act are based on the system principles of economic justice, particularly as they relate to global money, credit, taxation and ownership systems.
The aim needs to be to build a broad base of leadership influence and people power organizing as part of a political strategy to gain bipartisan support leading to the enactment of the Capital Homestead Act.
On March 15, 2017, Dom Galeon and Christianna Reedy write on Futurism:
Ray Kurzweil, Google’s Director of Engineering, is a well-known futurist with a high-hitting track record for accurate predictions. Of his 147 predictions since the 1990s, Kurzweil claims an 86 percent accuracy rate. Earlier this week, at the SXSW Conference in Austin, Texas, Kurzweil made yet another prediction: the technological singularity will happen sometime in the next 12 years.
“By 2029, computers will have human-level intelligence,” Kurzweil said in an interview with SXSW.
The singularity is that point in time when all the advances in technology, particularly in artificial intelligence (AI), will lead to machines that are smarter than human beings. Kurzweil’s timetable for the singularity is earlier by around two decades compared to other predictions, notably those of Softbank CEO Masayoshi Son, who predicts that the dawn of superintelligent machines will happen by 2047. But for Kurzweil, the process towards this singularity has already begun.
“That leads to computers having human intelligence, our putting them inside our brains, connecting them to the cloud, expanding who we are. Today, that’s not just a future scenario,” Kurzweil said. “It’s here, in part, and it’s going to accelerate.”
To Fear or Not to Fear?
We all know it is coming sooner or later, but the question in the minds of almost everyone is: should humanity fear the singularity? Everyone knows that when machines become smarter than human beings, they tend to take over the world. Right? Many of the world’s science and technology bigwigs — like Stephen Hawking, Elon Musk, and even Bill Gates — warn about this kind of future.
Well, Kurzweil doesn’t think so. In fact, he isn’t particularly worried about the singularity. It would be more accurate to say that he’s been looking forward to it. What science fiction depicts as the singularity — at which point a single brilliant AI enslaves humanity — is just that: fiction.
“That’s not realistic,” Kurzweil said during his interview with SXSW. “We don’t have one or two AIs in the world. Today we have billions.”
For Kurzweil, the singularity is an opportunity for humankind to improve. He envisions the same technology that will make AIs more intelligent giving humans a boost as well.
“What’s actually happening is [machines] are powering all of us,” Kurzweil said during the SXSW interview. “They’re making us smarter. They may not yet be inside our bodies, but, by the 2030s, we will connect our neocortex, the part of our brain where we do our thinking, to the cloud.”
“We’re going to get more neocortex, we’re going to be funnier, we’re going to be better at music. We’re going to be sexier,” Kurzweil said during the SXSW interview. “We’re really going to exemplify all the things that we value in humans to a greater degree.”
To those who view this cybernetic society as more fantasy than future, Kurzweil pointing out that there are people with computers in their brains today — Parkinson’s patients. That’s how cybernetics is just getting its foot in the door, Kurzweil said. And, because it’s the nature of technology to improve, Kurzweil predicts that during the 2030s some technology will be invented that can go inside your brain and help your memory.
So, instead of the machines-taking-over-the-world vision of the singularity, Kurzweil thinks it’ll be a future of unparalleled human-machine synthesis.
“Ultimately, it will affect everything,” Kurzweil said during the SXSW interview. “We’re going to be able to meet the physical needs of all humans. We’re going to expand our minds and exemplify these artistic qualities that we value.”
It is imperative that we citizens, as individuals (children, women and men) need to attain equal opportunity to OWN future technologies––the non-human means of production, and acquire such OWNERSHIP using financial mechanism such as insured, interest-free capital credit, repayable out of the future earnings of the investments in our future economy, without the requirement of past savings, with the investments paying for themselves.
On March 15, 2017, Mike Whitney writes on Counterpunch:
“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals…. And we will put millions of our people to work as we rebuild it.”
— President Donald Trump
Donald Trump’s $1 trillion infrastructure plan is not an infrastructure plan and it won’t put $1 trillion of fiscal stimulus into the economy. It’s basically a scheme for handing over public assets to private corporations that will extract maximum profits via user fees and tolls. Because the plan is essentially a boondoggle, it will not lift the economy out of the doldrums, increase activity or boost growth. Quite the contrary. When the details of how the program is going to be implemented are announced, public confidence in the Trump administration is going to wither and stock prices are going to plunge. This scenario cannot be avoided because the penny-pinching conservatives in the House and Senate have already said that they won’t support any plan that is not “revenue neutral” which means that any real $1 trillion spending package is a dead letter. Thus, it’s only a matter of time before the Trump’s plan is exposed as a fraud and the sh** hits the fan.
Here are more of the details from an article at Slate:
“Under Trump’s plan…the federal government would offer tax credits to private investors interested in funding large infrastructure projects, who would put down some of their own money up front, then borrow the rest on the private bond markets. They would eventually earn their profits on the back end from usage fees, such as highway and bridge tolls (if they built a highway or bridge) or higher water rates (if they fixed up some water mains). So instead of paying for their new roads at tax time, Americans would pay for them during their daily commute. And of course, all these private developers would earn a nice return at the end of the day.” (“Donald Trump’s Plan to Privatize America’s Roads and Bridges”, Slate)
Normally, fiscal stimulus is financed by increasing the budget deficits, but Maestro Trump has something else up his sleeve. He wants the big construction companies and private equity firms to stump up the seed money and start the work with the understanding that they’ll be able to impose user fees and tolls on roads and bridges when the work is completed. For every dollar that corporations spend on rebuilding US infrastructure, they’ll get a dollar back via tax credits, which means that they’ll end up controlling valuable, revenue-generating assets for nothing. The whole thing is a flagrant ripoff that stinks to high heaven. The corporations rake in hefty profits on sweetheart deals, while the American people get bupkis. Welcome to Trumpworld. Here’s more background from Trump’s campaign website:
“American Energy and Infrastructure Act Leverages public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over ten years. It is revenue neutral.” (Donald Trump’s Contract with the American Voter”)
In practical terms, ‘revenue neutral’ means that every dollar of new spending has to be matched by cuts to other government programs. So, if there are hidden costs to Trump’s plan, then they’ll have to be paid for by slashing funds for Medicare, Medicaid, Social Security, food stamps etc. But, keep in mind, these other programs are much more effective sources of stimulus since the money goes directly to the people who spend it immediately and help grow the economy. Trump’s infrastructure plan doesn’t work like that. A lot of the money will go towards management fees and operational costs leaving fewer dollars to trickle down to low-paid construction workers whose personal consumption drives the economy. Less money for workers means less spending, less activity and weaker growth. Here’s more on the topic from the Washington Post:
“Trump’s plan is not really an infrastructure plan. It’s a tax-cut plan for utility-industry and construction-sector investors, and a massive corporate welfare plan for contractors. The Trump plan doesn’t directly fund new roads, bridges, water systems or airports…. Instead, Trump’s plan provides tax breaks to private-sector investors who back profitable construction projects. … There’s no requirement that the tax breaks be used for … expanded construction efforts; they could all go just to fatten the pockets of investors in previously planned projects…
“Second, as a result of the above, Trump’s plan isn’t really a jobs plan, either. Because the plan subsidizes investors, not projects; because it funds tax breaks, not bridges; because there’s no requirement that the projects be otherwise unfunded, there is simply no guarantee that the plan will produce any net new hiring. …
“Buried inside the plan will be provisions to weaken prevailing wage protections on construction projects, undermining unions and ultimately eroding workers’ earnings. Environmental rules are almost certain to be gutted in the name of accelerating projects.”
(Trump’s big infrastructure plan? It’s a trap. Washington Post)
Let’s summarize: “Trump’s plan” is “massive corporate welfare plan for contractors” and the “tax breaks”…”could all go just to fatten the pockets of investors in previously planned projects.”
“Trump’s plan isn’t really a jobs plan, either”…. (and) “there is simply no guarantee that the plan will produce any net new hiring.”
Trump’s plan will probably “weaken prevailing wage protections… undermining unions and ultimately eroding workers’ earnings.”
What part of this plan looks like it will have a positive impact on the economy?
None. If Trump was serious about raising GDP to 4 percent, (another one of his promises) he’d increase Social Security payments, beef up the food stamps program, or hire more government workers. Any one of these would trigger an immediate uptick in activity spurring more growth and a stronger economy. And while America’s ramshackle bridges and roads may be in dire need of a facelift, infrastructure is actually a poor way to inject fiscal stimulus which can be more easily distributed by simply hiring government agents to stand on streetcorners and hand out 100 dollar bills to passersby. That might not fill the pothole-strewn streets in downtown Duluth, but it would sure as hell would light a fire under GDP.
So what’s the gameplan here? What’s Trump really up to? If his infrastructure plan isn’t going to work, then what’s the real objective?
The objective is to allow wealthy corporations to buy public assets at firesale prices so they can turn them into profit-generating enterprises. That’s it in a nutshell. That’s why the emphasis is on “unconventional financing programs”, “public-private partnerships”, and “Build America Bonds” instead of plain-old fiscal stimulus, jobs programs and deficit spending. Trump is signaling to his pirate friends in Corporate America that he’ll use his power as executive to find new outlets for profitable investment so they have some place to stick their mountain of money.
Of course, none of this has anything to do with rebuilding America’s dilapidated infrastructure or even revving up GDP. That’s just public relations bunkum. What’s really going on is a massive looting operation organized and executed under the watchful eye of Donald Trump, Robber Baron-in-Chief.
And Infrastructure is just the tip of the iceberg. Once these kleptomaniacs hit their stride, they’re going to cut through Washington like locusts through a corn field. Bet on it.
I think what is important to understand is that in the case of infrastructure, the actual physical assets are under the legal structures of utilities, authorities, or commissions, with ownership or control held by a wealthy ownership class or the politicians in power. Otherwise such assets are controlled by states and federal government, who rely on taxpayers to fund and maintain such assets.
In most cases the entities that own the utilities and other non-taxpayer-direct supported assets are individuals who have concentrated the ownership of the assets, and thus profits return to those who own. A solution that should be explored is to implement Citizens Land Banks (CLB), that are owned by the individuals they serve, thus broadening private ownership of income-producing power plants, utilities, toll roads and bridges and other infrastructure.
A CLB is a for-profit, professionally-managed, citizen-owned-and-governed community land planning and development enterprise, designed to enable every citizen of a community of any size to acquire a direct ownership stake in local land, natural resources and basic infrastructure.
A CLB is a social vehicle for every man, woman and child to gain, as a fundamental right of citizenship, a single lifetime, non-transferable ownership interest in all the Bank’s assets, share equally in property incomes from rentals and user fees from leases or use of the Bank’s assets, accumulate appreciated equity values from enhanced land values, and gain an owner’s voice in the governance of future land development.
A CLB is an innovative legal and financing tool empowered to borrow on behalf of all citizen-shareholders and service the debt with pre-tax dollars to meet the land acquisition, capitalization and operational needs of the Bank. The CLB shelters from taxation the equity accumulations of citizen-shareholders and protects the outside assets of the citizens in the event of loan default or if the enterprise fails.
A CLB is a social tool designed to encourage a just, free and non-monopolistic market economy. It applies the democratic principles of equal opportunity and equal access to the means to participate as an owner as well as a worker. It demonstrates that anything that can be owned by government can and should be owned, individually and jointly, by the citizens.
A CLB is a major feature in a proposed national economic agenda known as “Capital Homesteading for Every Citizen,” which is designed to reform existing monetary, credit and tax barriers to provide every American an equal opportunity to share in the governing powers and profits from new entrepreneurial ventures, new technologies, new structures, and new rentable space built upon the land. Capital Homesteading offers a “Just Third Way” of reversing unsustainable federal deficits and debt, and revitalizing and growing the American free enterprise system in a sustainable and environmentally sound way.
On March 15, 2017, Chris Hedges speaks on TruthDog:
In a recent speech titled “After Trump and Pussy Hats” delivered in Vancouver, British Columbia, Truthdig columnist Chris Hedges tells the audience that “resistance must also be accompanied by an alternative vision of a socialist, anti-capitalist society.”
After a fierce indictment of what he calls the kleptocracy that rules the United States, Hedges urges organizing “with lightning speed” because this is our “last chance” to do so.
“This resistance must also be accompanied by an alternative vision of a socialist, anti-capitalist society. Because the enemy in the end is not Trump or Bannon—it is corporate power,” Hedges says. “And if we do not stop corporate power, we will never dismantle fascism’s seduction of the white working class and unemployed.”
“Hope comes from the numerous protests that have been mounted in the streets, in town halls,” he continues. “We must engage in these battles on a local and on a national level … we will have to build new radical movements and most importantly, new parallel institutions that challenge the hegemony of corporate power. It will not be easy; it will take time.”
The problem is not the organizational entity, a corporation, which enables an assemblage of individuals to own shared interests in corporations that produces goods, products or services, but the CONCENTRATED OWNERSHIP nature of corporate organization that has been allowed to occur. The concentrated ownership of corporate entities does not have to be our reality. We can reform the system so that EVERY citizen, as an individual, can acquire ownership participation in the future capital asset growth of America’s major corporations, thus diffusing their ownership by the 1 percent and fewer to the 99 percent, wherein EVERY citizens is an owner in a diversified network of corporations producing wealth and income for the owners.
“Empire” means to have power, that is, control over others, and control over property is the surest way to control people. “Power,” as Daniel Webster noted, “naturally and necessarily follows property.”
The greatest crisis facing our country today is the obscene level of wealth and income economic inequality we now see, which has come about due to concentrated ownership of the productive assets employed in the production of products and services in our economy. This is a moral issue, an economic issue, and a political issue.
Binary economist Louis Kelso wrote extensively about the economic inequality caused by concentrated capital ownership. As well our Founding Fathers envisioned an America in which productive capital ownership would be widely held and never concentrated.
Binary economics and economic democracy, or what could be termed economic personalism, is founded on the principal that economic power has to be universally distributed amongst individual citizens and never allowed to concentrate. It is a value system based on the importance and dignity of every human person. The “pursuit of happiness” phrase in the Declaration of Independence was interchangeable in those times with the word “property.” The original phrasing was “the right to life, liberty and property.” “The pursuit of happiness” phrase was a substitute for the “property” phrase. In the forerunner of the Declaration of Independence and Bill of Rights, the 1776 Virginia Declaration of Rights declared that securing “Life, Liberty, with the means of acquiring and possessing Property” is the highest purpose for which any just government is formed. Democratizing economic power will return us to the pristine innocence and economic power diffusion we had in a pre-industrial society where labor was the principal factor in the creation of wealth.
Every person should have the equal opportunity and access to the means to be productive, for that is the most effective way of securing the natural rights of life and liberty. Since labor, land, and technology are all productive, every individual has the natural right to be an owner of labor, land, and technology.
This, in turn, requires that every individual have the equal opportunity and means to own whichever one or all of the factor(s) of production can produce most efficiently and effectively, both with respect to one’s self and in conformity with the demands of the common good.
On the other hand, in socialism rights are no longer believed to be inherent in each human person by nature. Instead, the theory is that rights are vested in humanity in general, and delegated to actual people as deemed necessary or expedient by those in power.
In socialism, no individual has a right to life, liberty, or private property, except as permitted by the collective, whatever form it takes, and whatever it is called. Ultimately, the State owns everything and everybody.
As Lord Acton noted, power tends to corrupt, and absolute power tends to corrupt absolutely.
On November 20, less than two weeks after Donald Trump’s upset win, Bernie Sanders strode onto a stage at Boston’s Berklee Performance Center to give the sold-out audience his thoughts on what had gone so disastrously wrong for the Democratic Party.
Sanders had a simple answer. Democrats, he said, needed to field candidates who would unapologetically promise that they would be willing “to stand up with the working class of this country and … take on big-money interests.”
Democrats, in other words, would only be able to defeat Trump and others like him if they adopted an anti-corporate, unabashedly left-wing policy agenda. The answer to Trump’s right-wing populism, Sanders argued, was for the left to develop a populism of its own.
That’s a belief widely shared among progressives around the world. A legion of commentators and politicians, most prominently in the United States but also in Europe, have argued that center-left parties must shift further to the left in order to fight off right-wing populists such as Trump and France’s Marine Le Pen. Supporters of these leaders, they argue, are motivated by a sense of economic insecurity in an increasingly unequal world; promise them a stronger welfare state, one better equipped to address their fundamental needs, and they will flock to the left.
“[It’s] a kind of liberal myth,” Pippa Norris, a Harvard political scientist who studies populism in the United States and Europe, says of the Sanders analysis. “[Liberals] want to have a reason why people are supporting populist parties when their values are so clearly against progressive values in terms of misogyny, sexism, racism.”
The problem is that a lot of data suggests that countries with more robust welfare states tend to have stronger far-right movements. Providing white voters with higher levels of economic security does not tamp down their anxieties about race and immigration — or, more precisely, it doesn’t do it powerfully enough. For some, it frees them to worry less about what it’s in their wallet and more about who may be moving into their neighborhoods or competing with them for jobs.
Take Britain’s Labour Party, which swung to the populist left by electing Jeremy Corbyn, a socialist who has proposed renationalizing Britain’s rail system, as its leader in 2015. The results have been disastrous: the Brexit vote in favor of leaving the European Union, plummeting poll numbers for both Corbyn and his party, and a British political scene that is shifting notably to the right on issues of immigration and multiculturalism.
The US faces even sharper pressures, as much of the public sees social spending in highly racialized terms — a phenomenon without parallel in the rest of the Western world. A more populist Democratic platform might rally more voters to Trump, as many whites will see it as a giveaway to undeserving minorities.
“Illegal immigrant households receive far more in federal welfare benefits than native American households,” Trump wrote in a 2016 Facebook post. “I will fix it.”
The puzzle of social democracy
Since World War II, Western European politics has been structured by the ideals of social democracy. From Germany to France to Sweden to Italy, every nation adopted some version of the basic social democratic vision — a mixed-market economy defined by both private property and deep government involvement, with high levels of taxation and sometimes stifling government regulation of the private sector, in exchange for a generous social welfare system that offers things like universal health care and free or heavily subsidized education.
Different countries had different ways of going about it, of course: France’s political economy is not the same as Britain’s is not the same as Norway’s. But the basic model was the same everywhere. Even “conservative” leaders, like France’s Charles de Gaulle and West Germany’s Konrad Adenauer, developed socioeconomic programs that serve as the backbone of their welfare states today.
The social democratic project, by the numbers, has worked pretty well. The 10 countries with the lowest poverty rates in the world are all in Europe (the US ranks 34 out of 35 total countries in the OECD, an organization of wealthy countries). Researchers have also found clear correlations between the size of a country’s welfare state and social mobility, indicating that countries that provide citizens with extensive benefits, like Norway and Denmark, can help them better provide for themselves down the road.
Indeed, the countries that score highest on surveys of national happiness aren’t the richest or the ones with the nicest weather — they’re ones located in frigid Scandinavia, a region defined principally by its exceedingly generous welfare states.
This isn’t to say that there aren’t drawbacks to European welfare states. There’s real evidence that excessive regulation can stymie innovation and make it harder to start new firms, and that some welfare state labor protections (like the notorious French laws limiting corporations’ ability to fire employees) can make doing business maddeningly difficult.
By most measures, though, Europe’s social and economic programs provide their citizens with better standards of living than can be found in the US. That, however, hasn’t kept the parties that advocate and defend those policies most vigorously from steadily losing votes.
The chart below, from the London School of Economics’ Simon Hix and the University of London’s Giacomo Benedetto, show how those parties have done in elections in 18 Western European countries between 1945 and 2016.
This creates a puzzle: Why did voters who by and large benefit from social democracy turn against the parties that most strongly support it?
It’s a hard question to answer if you believe people cast their ballots principally on the basis of their perceived economic interests. European social democrats have been proposing ideas that more objectively speak to the material interests of voters, particularly in the working class, for decades. In virtually every country in Western Europe, however, it hasn’t been enough to help the parties maintain their historic levels of public support.
Ironically, that could be because the European left is the victim of its own success. Ronald Inglehart, an eminent political scientist at the University of Michigan, argues that the combination of rapid economic growth and a robust welfare state have provided voters with enough economic security that they could start prioritizing issues beyond the distribution of wealth — issues like abortion, same-sex marriage, and, most crucially, immigration.
So it’s not that European social democrats failed to sell their economic message, or that economic redistribution became unpopular. It’s that economic issues receded in importance at the same time as Europe was experiencing a massive, unprecedented wave of nonwhite, non-Christian immigration.
That, in turn, brought some of the most politically potent nonmaterial issues — race, identity, and nationalism — to the forefront of Western voters’ mind. How comfortable were they, really, with multicultural, multifaith societies?
The traditional social democratic message didn’t really speak to these cultural anxieties. But the right’s did.
Social democracy failed to stop the far right
In 1972, right around when Europe’s social democrats were reaching their continent-wide apex, French firebrand Jean-Marie Le Pen founded a new political party called the Front National (FN). It was a populist party, one that argued that ordinary people were being exploited by a corrupt class of cosmopolitan elites. They were also authoritarian, constantly warning of the dangers of crime and the need for a harsh state response.
In 1984, the FN had an electoral breakthrough, winning about 11 percent of the French national vote in the European Parliament elections. It had done so through a pioneering strategy of attacking nonwhite immigration without overtly making arguments for white Christian superiority — a kind of racism-without-racism — that appealed to voters’ fears about cultural change (and, later, terrorism) without making the kind of nakedly racist arguments that had been delegitimized by the Nazis.
This was the birth of the modern far right — a continent-wide political movement that reinvented white identity politics for the post-Hitler age.
In 1986, Jörg Haider — a firebrand who once praised Hitler for having a “proper employment policy” — took over Austria’s Freedom Party (FPÖ), transforming it into a xenophobic party along the FN’s lines. In 1999, the FPÖ came in second in Austria’s parliamentary elections, joining a government led by the center-right People’s Party.
In 2001, a Dutch sociology professor named Pim Fortuyn launched a new political movement oriented entirely around opposition to Muslim immigration. By 2002, Fortuyn’s new party, the Pim Fortuyn List, was second in the national polls — momentum halted only by Fortuyn’s assassination at the hands of a left-wing extremist.
These parties had no unified economic message. Some, like the FN, developed something called “welfare chauvinism” — an economic platform fairly similar to that of social democrats, but paired with an idea that immigrants should be excluded from receiving these benefits. Others, like the FPÖ, took a line more similar to Europe’s conservatives, arguing for cuts to government spending and taxes.
This difference on economics didn’t really seem to affect their successes. Research by Elisabeth Ivarsflaten, a professor at the University of Bergen, finds European voters’ views on immigration policy were a “near-perfect” predictor of their likelihood of supporting their country’s far-right party. Views on the welfare state, by contrast, weren’t especially correlated with likelihood of supporting the far right, as you can see on the below chart:
What this suggests, then, is that a party’s stance on economics isn’t very important to right-wing populist voters. People choose to back those parties because they want someone to shut down immigration and restrict the rights of Muslims, not because of those parties’ stances on trade or welfare spending.
Kai Arzheimer, a professor at Germany’s University of Mainz, studied data on working-class voters, the traditional base of social democratic parties, between 1980 and 2002. He found that the stronger the welfare state, the bigger the gains for far-right parties among the working class. The top third of countries — that is, the ones with the largest welfare states — saw roughly four times the rate of far-right support among the working class as the countries in the bottom third did.
You see a similar sort of pattern inside countries. Right-wing populists typically have gotten their best results in wealthier areas of countries — that is, with voters who experience the least amounts of economic insecurity.
It’s important to bear in mind that the rise of the far right isn’t solely, or even mostly, the result of social democratic decline. The far right has pulled in some working-class voters, butmost of its supporters are petty bourgeoisie (like shopkeepers) or low-educated, fairly high-income people (like successful plumbers). Swaying these voters through economic proposals will be difficult.
“They [social democrats] shouldn’t be purely focused on winning back the voters who went to the radical right, because when push comes to shove, a significant part of that electorate is deeply nativist,” Cas Mudde, a scholar of the European far right at the University of Georgia, tells me. “They want a party that is nativist; the only way to win them back is pretty much by becoming radical right or radical right-light.”
Or, as Arzheimer put it in an interview: “I can’t really believe that it is possible to beat the populists in terms of populism.”
If social democrats see their future as a competition for votes with right-wing populists, then they have two choices: Lose the election, or lose their progressive identity.
The British Labour Party tried tacking left on the economy — and it is flailing
European social democratic parties have not responded especially well to the far right’s rise. Some haven’t really adjusted their approach, while others have tried Mudde’s “radical right light” option, tacking right on issues of immigration and racial identity. It has not worked out well.
Take the Social Democrats in Denmark, a country that has historically been relatively tough on immigration. In the country’s 2015 parliamentary election, party leader and incumbent Prime Minister Helle Thorning-Schmidt promised to deny benefits to asylum seekers if they were unemployed. The right-wing bloc won the election, and went on to pass a law that allowed Danish police to seize assets worth more than $1,450 from asylum seekers who enter the country. The far-right People’s Party went from 13 seats in parliament to 21, making them the second-most-popular party. Thorning-Schmidt promptly lost her job.
One social democratic party took a different tack, moving hard to the left on economic policy. That’d be Britain’s Labour Party, whose move grew out of a result of a fight inside the party that goes back decades.
In the 1970s and ’80s, Labour was more or less an unabashed socialist party, an approach that, at the time, was being trounced by Margaret Thatcher and her unapologetically right-wing Conservatives. Two Labour Party leaders — Tony Blair and Gordon Brown — blamed their party’s left-wing platform for its losses, and became the leaders of a movement called New Labour. Under their leadership, Labour became one of the most pro-market social democratic parties in Europe, supporting privatization of government-controlled industries and using market-friendlier policies, like tax credits, to address poverty.
Substantively, New Labour’s record was mixed — but politically, it succeeded for a long time. Labour won its first parliamentary election in the New Labour era in 1997, and then controlled the premiership for 13 uninterrupted years under Blair and, subsequently, Brown. But a combination of the Great Recession, public exhaustion with Labour control of the government, and left-wing anger at New Labour’s retreat from socialism and participation in the Iraq War led to its defeat in 2010 parliamentary elections.
After the 2010 defeat, Labour swung back to the left. The next leader after Brown, Ed Miliband, won his leadership on the back of union support — announcing, in a post-victory speech, that “New Labour is dead.” After Miliband’s Labour Party lost badly in a May 2015 election, Miliband resigned. Labour replaced him with a relatively unknown member of Parliament named Jeremy Corbyn — a move some British observers have compared to the Democrats nominating Jill Stein for president.
Corbyn’s platform was a return to the Labour ideals of the 1970s and ’80s. The BBC has an excellent rundown of his policy proposals, which included, among other things, renationalizing Britain’s railroads, abolishing tuition for British universities, and imposing rent controls to deal with Britain’s affordable housing problem. He’s even suggested reopening the coal mines that used to be a big part of Britain’s economy.
“The reason we are losing ground to the right today is because the message of what socialism is and what it can achieve in people’s daily lives has been steadily diluted,” Corbyn said in a March 2016 speech. “Unless progressive parties and movements break with that failed economic and political establishment it is the siren voices of the populist far-right that will fill the gap.”
Corbyn’s year-plus of Labour leadership has been something of a test case for this theory. So far, it has failed utterly.
When Corbyn took control of Labour leadership last September, UKIP — Britain’s far-right, anti-EU party — had been in decline, netting around 10 percent in the Britain Elects poll aggregator. By the June 2016 Brexit vote over whether to leave the EU, UKIP’s numbers had risen to a little over 15 percent.
Corbyn and Labour publicly supported staying in the EU, but didn’t campaign for it particularly hard. It may not have mattered: Eric Kaufmann, a professor at the University of London who studies populism, looked at what Brexit voters said were the “most important” issues facing the UK. More than 40 percent said immigration; a scant 5 percent said “poverty and inequality.”
According to Kaufmann, this reflects an uncomfortable truth: The kind of voter who’s attracted to the far right just doesn’t care a whole lot about inequality and redistribution, Corbyn’s signature issues. Tacking left to win them over, as Corbyn has, is “a bad idea,” he told me in a phone conversation.
Tacking left has definitely been bad for Labour, which has stunningly low levels of public support. Only 24 percent of Britons approve of Corbyn’s performance, according to the pollster Ipsos MORI, while 62 percent disapprove. This leaves him with net approval rating of -38, the worst any UK opposition leader from any party has recorded at this point in their tenure in the past 35 years of Ipsos polling. Another poll, from YouGov, found that 24 percent of Britons backed Labour — its lowest numbers in YouGov polling since the party was in government in 2009.
Let that sink in for a second. Corbyn’s Labour Party is polling as badly today as it was when it was in power during a global economic meltdown. It is polling substantially worse than it was in 2005, when British troops were dying in Iraq as part of a war known to be waged on false pretenses. In fact, Labour won a parliamentary election held that year.
Britain Elect’s projections say that if an election had been held in early March, the Conservatives would have won by a whopping 13.9 percent. That would be a 4.6-point improvement on their already-large 2015 victory, while Labour would fall from an already weak position by 2.2 percentage points.
“I think it is a serious possibility that Labour has come to the end of its existence,” Matt Williams, a scholar of British politics at Oxford University, says. “Socialism, of some variety, is either not considered viable or is deeply unpopular, and in some cases is both.”
One can dispute Williams’s judgment here, but several facts are undeniable. During Corbyn’s leadership, the far right has gained influence on UK politics, not lost it. Corbyn’s policy platform hasn’t stemmed the spread of anti-immigrant populism, and the Tories have made restricting immigration a central part of their agenda. Corbyn himself is now pandering to the right wing; he ordered Labour MPs to vote to begin the Brexit process in Parliament. And his numbers keep falling and falling.
Left-wing politicians and writers insist that populist policies would win back disenchanted voters. In Britain, the exact opposite has happened.
The differences between America and Europe make the strategy even less promising in the US
You might expect things to be a bit different in the United States.
The American welfare state has always been weaker than its counterparts around the West. Correspondingly, you see the highest rates of inequality in the developed world, with 3 million American children living on less than $2 a day and a health care system that ranksdead last in the respected Commonwealth Fund’s measures of performance among 11 developed countries. It’s a level of material suffering that, you might think, should be to be fertile ground for left-wing populism.
“The working class of this country is being decimated. That’s why Donald Trump won,” Bernie Sanders said in his Boston speech. “We need all of those candidates and public officials to have the guts to stand up to the oligarchy. That is the fight of today.”
There’s at least suggestive evidence, as my colleague Andrew Prokop writes, that Sanders misread the election results — that embracing left-wing populism won’t, in fact, win over Trump voters.
Take a look at results from several pivotal Senate races. In two Midwestern states, Wisconsin and Ohio, Democrats ran Sanders-esque populists — former Sen. Russ Feingold and Gov. Ted Strickland, respectively. Both lost by a wider margin than Hillary Clinton did in their state. By contrast, the Democratic candidates who most outperformed Clinton’s statewide results — Missouri’s Jason Kander and Indiana’s Evan Bayh — ran as economic centrists.
The bigger issue is that America’s welfare state is weak for the same fundamental reason that Donald Trump captured the Republican nomination in the first place: racial and cultural resentment. That profoundly complicates efforts to make left-wing populism successful in America.
In 2001, three scholars at Harvard and Dartmouth — Alberto Alesina, Edward Glaeser, and Bruce Sacerdote — found that the higher the percentage of black residents in a state, the less its government spent on welfare payments.
This, they hypothesized, was not an accident. People are only willing to support redistribution if they believe their tax dollars are going to people they can sympathize with. White voters, in other words, don’t want to spend their tax dollars on programs that they think will benefit black or Hispanic people.
The United States is marked by far more racial division than its European peers. Poverty, in the minds of many white Americans, is associated with blackness. Redistribution is seen through a racial lens as a result. The debate over welfare and taxes isn’t just about money, for these voters, but rather whether white money should be spent on nonwhites. “Hostility between races limits support for welfare,” Alesina, Glaeser, and Sacerdote conclude flatly in the paper.
Now, it’s been a decade and a half since this paper was published, so it’s possible the evidence has shifted. I called up Sacerdote to ask him whether any subsequent research has caused him to change his mind. His answer was firmly negative. “It’s almost sad that it’s held up so well,” he told me.
Another study, by Korea University’s Woojin Lee and Yale’s John Roemer, used data from the American National Election Studies (ANES) to identify the percentage of white voters who express high levels of racial antagonism in the United States. They then use this to build a statistical model of American elections that, roughly, attempts to measure what percentage of the Republican and Democratic vote can be attributable to the parties’ differing opinions on racial, economic, and other issues — and to what extent racial attitudes negatively impact white voters’ views of economic redistribution.
Lee and Roemer found that if racism played no role in determining whom Americans voted for, and people voted only on the basis of other cultural and economic preferences, the Democratic vote share between 1976 and 1992 would have increased dramatically. The average national income tax rate, they estimate, would be 11 to 18 points higher, as voters would be more willing to use taxes to finance a European-style welfare state.
“Voter racism,” they conclude, “pushes both parties in the United States significantly to the right on economic issues.”
The upshot is that a significant shift to the left on economic policy issues might fail to attract white Trump supporters, even in the working class. It could even plausibly hurt the Democrats politically by reminding whites just how little they want their dollars to go to “those people.” One can only imagine what Trump would tweet.
Indeed, this kind of politics — not-so-subtly manipulating racial grievances to undercut support for social spending — has been practiced by Republicans and conservative Democrats for decades. Ronald Reagan, for example, famously used the specter of the “welfare queen” — an (implied) black woman who lived lavishly by manipulating the welfare system — as a rationale for his budget cuts.
“What Reagan had succeeded in doing was tarnishing liberalism as a giveaway to people of color,” Ian Haney López, a professor at UC Berkeley who studies race and American politics, says. “Investment in our cities, investment in our schools, investment in social welfare programs, all of that was branded as giveaway to undeserving minorities.”
The uncomfortable truth is that America’s lack of a European-style welfare state hurts a lot of white Americans. But a large number of white voters believe that social spending programs mostly benefit nonwhites. As such, they oppose them with far more fervor than any similar voting bloc in Europe.
In this context, tacking to the left on economics won’t give Democrats a silver bullet to use against the racial resentment powering Trump’s success. It could actually wind up giving Trump an even bigger gun. If Democrats really want to stop right-wing populists like Trump, they need a strategy that blunts the true drivers of their appeal — and that means focusing on more than economics.
The solution is not to create a stronger welfare state, which would result in the eventual dependency of citizens for their economic well-being on the State and whatever elite controls the coercive powers of government. Instead we should be empowering EVERY citizen to contribute productively to the future economy, through their labor and/or their ownership of wealth-creating, income-producing productive capital so that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends of State dependency.
We need to reevaluate our tax and central banking institutions, as well as, labor and welfare laws. We need to innovate in such ways that we lower the barriers to equal economic opportunity to access to capital ownership and purchase the capital, and pay for it out of what the capital produces. and create a level playing field based on anti-monopoly and anti-greed fairness and balance between production and consumption. In so doing, every citizen can begin to accumulate a viable capital estate without having to take away from those who now own by using the tax system to redistribute the income of capital owners. What the “haves” do lose is the productive capital ownership monopoly they enjoy under the present unjust system. A key descriptor of such innovation is to find the ways in which “have nots” can become “haves” without taking from the “haves.” Thus, the reform of the “system,” as binary economist Louis Kelso postulated, “must be structured so that eventually all citizens produce an expanding proportion of their income through their privately owned productive capital and simultaneously generate enough purchasing power to consume the economy’s output.”
At present the economy’s growth is anemic and the vast majority of citizens are facing job insecurity and wage stagnation.
We need to return to environmentally responsible and quality growth if we are to create general affluence for EVERY citizen. One feasible way is to lift ownership-concentrating central bank (such as the Federal Reserve System) credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street or the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today––management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed.
Thus, we should be using the Federal Reserve Bank to insure loans that will translate to long-term growth of the economy, and NOT engage austerity measures that will result in negative growth.