McDonald’s Hits All-Time High As Wall Street Cheers Replacement Of Cashiers With Kiosks

On June 20, 2017, Tae Win writes on CNBC Investing:

McDonald’s shares hit an all-time high on Tuesday as Wall Street expects sales to increase from new digital ordering kiosks that will replace cashiers in 2,500 restaurants.

Cowen raised its rating on McDonald’s shares to outperform from market perform because of the technology upgrades, which are slated for the fast-food chain’s restaurants this year.

McDonald’s shares rallied 26 percent this year through Monday compared to the S&P 500’s 10 percent return.

Andrew Charles from Cowen cited plans for the restaurant chain to roll out mobile ordering across 14,000 U.S. locations by the end of 2017. The technology upgrades, part of what McDonald’s calls “Experience of the Future,” includes digital ordering kiosks that will be offered in 2,500 restaurants by the end of the year and table delivery.

“MCD is cultivating a digital platform through mobile ordering and Experience of the Future (EOTF), an in-store technological overhaul most conspicuous through kiosk ordering and table delivery,” Charles wrote in a note to clients Tuesday. “Our analysis suggests efforts should bear fruit in 2018 with a combined 130 bps [basis points] contribution to U.S. comps [comparable sales].”

He raised his 2018 U.S. same store sales growth estimate for the fast-food chain to 3 percent from 2 percent.

The analyst raised his price target for McDonald’s to $180 from $142, representing 17.5 percent upside from Monday’s close. He also raised his 2018 earnings-per-share forecast to $6.87 from $6.71 versus the Wall Street consensus of $6.83.

“MCD has done a great job launching popular innovations within the context of simplifying the menu, while introducing more effective value initiatives that have recently begun to improve the brand’s value perceptions,” he wrote.

http://www.cnbc.com/2017/06/20/mcdonalds-hits-all-time-high-as-wall-street-cheers-replacement-of-cashiers-with-kiosks.html

Gary Reber Comments:

This is yet another recent article that looks at a future where there will be hordes of citizens of zero economic value as tectonic shifts in the technologies of production destroy jobs and devalue the worth of labor.  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 that will transform the future.

Using common sense, if raising the minimum wage will not kill jobs then why not raise the minimum wage to $25.00 or $50.00 or $100.00 per hour? McDonald and other fast food establishments have other ways to combat minimum wage increases – further digitalization and automation. Of course there are consequences that either are reflected in job elimination or increased prices. In this case, the mobile digital ordering kiosks will replace workers throughout the McDonald empire, and as well prices will be increased, as has been occurring.

Virtually never are the OWNERS of corporations willing to reduce profits. If wage levels were not a factor there would be no reason for ANY company to unnecessarily automate or exit production in the United States and move production to foreign lands with significantly less labor costs. Also, there is the impact on pricing levels, as any increases in the cost of production or service always results in pricing increases.

If this were not the case, then no companies would be compelled to seek other more cost-efficient means of production or to move production to foreign countries whose workers are paid far less than  Americans.  Increasingly, companies are seeking more efficient and less long term costs that non-human technology can deliver to reduce their operating costs, provide higher build quality, automate service, and maximize profits for their OWNERS. As is virtually always the case, the OWNERS of companies do not want to reduce profits.

What the proponents of raising the minimum wage fundamentally are addressing is that low-paid American workers need to earn more income.

Rather than focus on Job Creation, Job Retraining, and a redistributed Minimum Guaranteed Income that holds back technological invention and innovation, our economic policies should 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?

Ford to Save $1 Billion Building Focus In China Instead Of Mexico

On June 20, 2017, Keith Naughton writes on Bloomberg:

Ford Motor Co. is canceling controversial plans to build the Focus small car in Mexico, saving $1 billion by ending North American production of the model entirely and importing it mostly from China after next year.

The U.S. automaker will start making the next-generation Focus in China from the second half of 2019, a year after output ends at one of its plants in Michigan. Ford will trim about $500 million in costs by shifting production to China, adding to the $500 million already saved from canceling construction of a small-car factory in Mexico earlier this year.

The move is the first major decision Ford has announced under Chief Executive Officer Jim Hackett and marks a complete break from the strategy of his ousted predecessor, Mark Fields, to relocate small car production to Mexico. The company will be testing both consumer appetite for China-built cars and the tolerance of President Donald Trump, who has criticized automakers for importing vehicles from overseas.

“We’ve done a lot of research and consumers care a lot more about the quality and the value than they do about the sourcing location,” Joe Hinrichs, Ford’s president of global operations, said Tuesday in a conference call with reporters. “iPhones are produced in China, for example, and people don’t really talk about it.”

U.S. Investment

Ford announced the Focus production plans along with a separate, $900 million investment it’s making in a Kentucky truck factory to build Expedition and Lincoln Navigator sport utility vehicles. News of that spending will preserve 1,000 jobs and could help insulate Hackett, 62, from the attacks Trump levied against the automakerduring the tenure of ex-CEO Fields.

“China gets a lot of attention, we’ll see how this plays out,” Hinrichs said in response to a question about possible criticism of the move from Trump. “But we believe this is a much better plan for our business globally. And it frees up from the original plan about $1 billion of capital that we can reinvest in the business, including exciting things that we’re working on in autonomy and electrification, and a lot of that work is done right here in the U.S.”

Both Ford and General Motors Co. management have come under pressure this year to boost their flagging share prices. Executive Chairman Bill Ford replaced Fields, 56, with Hackett while GM CEO Mary Barra has engineered exits from Europe and India. Ford may follow suit in abandoning sizable markets where the manufacturer struggles to make money.

“We wouldn’t be surprised if Ford announces further moves in the coming months,” Joe Spak, an analyst at RBC Capital Markets, said in note to clients. “The next announcement could be an exit from the Indian market, something the company has alluded to.”

Ford slipped 0.8 percent to $11.15 as of 1:21 p.m. in New York trading. The shares have declined 8 percent this year, while GM’s have dropped 1.2 percent. Both have trailed the 9.2 percent gain for the benchmark S&P 500 Index.

SUV Boom

Hackett is shaking up Ford’s Focus production plans as American consumers increasingly shun small cars and opt for roomier crossovers and SUVs. Focus deliveries have slumped 20 percent this year and have been in decline annually since 2012, as more buyers opt for utilities like the Escape or Explorer models.

After importing initial production of the new Focus cars from China, Ford said it will later ship variants of the model from Europe. The Michigan Assembly Plant now making the Focus will be retooled to produce the Ranger midsize pickup in late 2018 and the Bronco midsize SUV in 2020.

The move doesn’t signal a broader shift of other Ford models to China, where workers are paid less than they are in Mexico, Hinrichs said.

“Labor costs are cheaper in China than they are in Mexico, but of course you have to take into account the shipping costs, which are significantly higher from China,” Hinrichs said. “So I wouldn’t say this is a variable cost decision. It’s still cheaper to build in Mexico than China for the North American market if you have the capacity.”

Net Exporter

Ford will remain a net exporter to China, even after it begins importing Focus models to the U.S., Hinrichs said. The automaker expects to export more than 80,000 vehicles to China this year, including Michigan-built Mustang sports cars and Lincoln Continentalluxury sedans.

That should help protect Ford should Congress implement a border tax on imported goods, Hinrichs said.

“We expect to continue to be a net exporter and have a trade surplus with China even after we start bringing the Focus in,” he said. “We think the significant capital savings outweigh any of the risks associated with any adjustments to the border.”

https://www.bloomberg.com/news/articles/2017-06-20/ford-to-save-1-billion-making-focus-in-china-instead-of-mexico

FORD’S NEW CEO SNUBS President Trump…Will Build Focus In China…Export To U.S.

http://www.huffingtonpost.com/entry/ford-focus-china_us_5949efbbe4b0177d0b8a556d

Also see previous story at http://www.foreconomicjustice.org/?p=14356

This is a depressing story about American manufacturing corporations eliminating jobs by shifting manufacturing to China and using the cost savings as retained earnings for investment in future productive capital investment, which further concentrates capital asset ownership among the already wealthy capital ownership class. This is yet another example of the further outsourcing of jobs and natural resources as the American auto manufacturing industry invests in new factories not only Mexico, under existing free trade agreements, but also China, driven by the business to lower production costs and maximize profits, no matter what the consequences for American communities and the American labor force.

Auto companies have announced no new assembly plant plans in the United States since 2009. (The Tesla Motors factory in Fremont, California, is considered a reopening since it is on the site of a former joint Toyota-GM plant, though it does entail substantial job-elimination technological retooling and reconfiguration.) During that same time, six new auto factories were announced in Mexico, representing a combined investment of more than $8 billion, according to the Center for Automotive Research. And now Ford latest announcement to build in China.

Toyota, who is investing heavily in Mexico, said the cost of manufacturing a vehicle at the new factories will be approximately 40 percent less than what it spent to produce a car in 2008 due to a significant savings in labor costs ($2.47 to $5.64 an hour compared to $27.78 for their U.S. counterparts. Because of the nature of global competition, ALL American auto manufacturers must follow suit.

Still, according to Center for Automotive Research, even as the Mexican auto industry grows, automakers continue to invest in the United States. The car companies announced $10.5 billion in United States plant investment which includes retooling, reconfigurations and expansions of existing factories. That compares to $7 billion in Mexico and just $800 million in Canada. Of course, “retooling” and “reconfiguration” is really robotic super-automation employment housed in existing factories that will expand to accommodate technological efficiency – with the result that fewer workers will be required in the production.

Americans remain ASLEEP as the industrial prowess of the United States is sabotaged by a wealthy capital ownership class who seeks to further concentrate productive capital asset ownership while seeking the lowest possible wage and operational costs to maximize profitability.

But let’s not completely blame those American capital owners for not insisting on exclusive investment within the United States in the technological innovation that is exponentially shifting the technologies of production and negating the necessity for labor workers while devaluing the worth of labor. The blame also should be put on our so-call “political leaders” for not implementing economic policies that would facilitate the rapid technological growth of the United States economy, while simultaneously creating new capital owners and “customers with money” to buy the goods, products and services our economy is capable of producing. Such implementation MUST provide insured, interest-free capital credit to finance retooling, reconfigurations and expansions of existing factories as well as finance the building of new factories, owned by employees and citizens using Employee Stock Ownership Plans (ESOPs) and Capital Homestead Accounts or “CHAs” (a super-IRA or asset tax-shelter for citizens) extended to EVERY child, woman, and man by 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 media and academia also are the blame for not educating Americans about why OWNING productive capital assets that build wealth and produce income is SO CRITICAL to their future. For example, no where in this article did the author, Keith Nauthton, even mention OWNERSHIP or question WHO WILL OWN these new productive capital assets or to explain how invested retained earnings further concentrates ownership. If he had, he would have had to come to the realization that the already wealthy ownership class will just get RICHER and RICHER by monopolizing ALL future economic growth.

Oh, but wait, Nauthton did mention that somehow we should be “cheering” because Ford announced the Focus production plans along with a separate, $900 million investment it’s making in a Kentucky truck factory to build Expedition and Lincoln Navigator sport utility vehicles. News of that spending will preserve 1,000 jobs. Of course, no mention, with respect to out-sourcing manufacturing using the web of free trade agreements, was given that such actions will enable the United States to feed the Mexican auto industry with billions of dollars of raw materials, such as plastics, steel and aluminum – in other words, depleting our natural resources without directly benefiting Americans owning the new productive capital manufacturing assets. Again, this bolsters the earnings and wealth building of an exclusive wealthy capital ownership class that is steadily acquiring ALL of AMERICA and creating tremendous economic inequality, both income and wealth ownership.

WAKE UP AMERICA!! WAKE UP Keith Naughton, WAKE UP Bloomberg and take responsibility for your lack of actionable responsibility.  And let’s not leave out all the politicians who just play us with memes and slogans that really never delve into solutions other than coming up with ways to take from those who already own, instead of empowering EVERY child, woman, and man to contribute productively to the FUTURE economy through their OWNERSHIP of “tools,” as well as their labor when necessary. In this way, we can build a future America that can support general affluence for EVERY American by putting us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.

Restaurant Die-Off Is First Course Of California’s $15 Minimum Wage

California political leaders and labor have struck a deal to raise the minimum wage to $15 per hour over the next seven years. One excited fast food worker hugged Gov. Jerry Brown at the announcement Monday, March 28, 2016. Video courtesy of The California Channel

 

On June 13, 2017, Jeremy Bagott writes in The Fresno Bee:

In a pair of affluent coastal California counties, the canary in the mineshaft has gotten splayed, spatchcocked and plated over a bed of unintended consequences, garnished with sprigs of locally sourced economic distortion and non-GMO, “What the heck were they thinking?”

The result of one early experiment in a citywide $15 minimum wage is an ominous sign for the state’s poorer inland counties as the statewide wage floor creeps toward the mark.

Consider San Francisco, an early adopter of the $15 wage. It’s now experiencing a restaurant die-off, minting jobless hash-slingers, cashiers, busboys, scullery engineers and line cooks as they get pink-slipped in increasing numbers. And the wage there hasn’t yet hit $15.

As the East Bay Times reported in January, at least 60 restaurants around the Bay Area had closed since September alone.

A recent study by Michael Luca at Harvard Business School and Dara Lee Luca at Mathematica Policy Research found that every $1 hike in the minimum wage brings a 14 percent increase in the likelihood of a 3.5-star restaurant on Yelp! closing.

Another telltale is San Diego, where voters approved increasing the city’s minimum wage to $11.50 per hour from $10.50, this after the minimum wage was increased from $8 an hour in 2015 – meaning hourly costs have risen 43 percent in two years.

The cost increases have pushed San Diego restaurants to the brink, Stephen Zolezzi, president of the Food and Beverage Association of San Diego County, told the San Diego Business Journal. Watch for the next mass die-off there.

But what of California’s less affluent inland counties? How will they fare?

Christopher Thornberg, director of UC Riverside’s Center for Economic Forecasting and Development, told the San Bernardino Sun that politicians should have adopted a regional approach. He said it would been better to adapt minimum-wage levels to varying economies – something like the Oregon model, the nation’s first multi-tiered minimum-wage strategy.

Oregon’s minimum-wage law is phased, with increases over six years. By 2022, the minimum will be $14.75 an hour in Portland, $13.50 in midsize counties and $12.50 in rural areas.

“That makes sense,” Thornberg told the Sun. “That’s logical.”

California is even more varied economically than Oregon. Thornberg believes hiking wages in blanket fashion will spark layoffs and edge low-skilled workers out of the job market.

In the Central Valley, wages for all workers, on average, are lower than those of the coastal counties.

U.S. Census Bureau data show about 21 percent of workers in Bakersfield earned from $8 to $12 per hour in 2015, the most recent year for which data was available. In Fresno, 32 percent of workers were in that wage group, and in Modesto about 25 percent. Contrast that with Santa Clara County, home of Silicon Valley, which registered only 12.5 percent at that level.

The state’s diverse unemployment rates tell a similar tale. Unemployment in Bakersfield was 9.5 percent; 8.8 percent in Fresno, and Stanislaus County notched 7.9 percent. Compare that to Silicon Valley’s unemployment rate – 3.2 percent.

“Part of our whole concern with (the $15 wage) is it’s a one-size-fits-all,” Rob Lapsley, president of the California Business Roundtable, told The Sacramento Bee last year. “Areas with double-digit unemployment, this is scaring them to death.”

Jamil Dada, chairman of the Riverside County Workforce Development Board, told the Sun that he believed the state’s Inland Empire will be hit harder than other parts of the state.

“It might be tolerable in the coastal regions,” he said. “Their business environment is completely different.”

As politicians insert their sausage fingers into subtle market mechanisms, scarcity and unintended consequences will ensue.

Joining San Francisco’s restaurant die-off was rising star AQ, which in 2012 was named a James Beard Award finalist for the best new restaurant in America. The restaurant’s profit margins went from a reported 8.5 percent in 2012 to 1.5 percent by 2015. Most restaurants are thought to require margins of 3 and 5 percent.

If what’s happening with one early adopter of the $15 wage progression is any indication, locally famous inland hash houses and burger joints from Calexico to the Cow Counties will disappear as mandated wages climb to $15 statewide. And that will only be the start of things.

http://www.fresnobee.com/opinion/opn-columns-blogs/article155979969.html

But raising the minimum wage was supposed not to kill jobs or create operational costs that would squeeze profit margins and result in business closures. Wasn’t it?

Using common sense, if raising the minimum wage will not kill jobs then why not raise the minimum wage to $25.00 or $50.00 or $100.00 per hour? Of course there are consequences that either are reflected in job elimination, increased prices or business closures. Virtually never are the OWNERS of corporations willing to reduce profits, which often are marginal.

If wage levels were not a factor there would be also no reason for ANY company to exit production in the United States and move production to foreign lands with significantly less labor costs. Also, there is the impact on pricing levels, as any increases in the cost of production or service always results in pricing increases.

If this were not the case, then no companies would be compelled to seek other non-human more cost-efficient means of production or to move production to foreign countries whose workers are paid far less than  Americans.  Increasingly, companies are seeking more efficient and less long term costs that non-human technology can deliver to reduce their operating costs, provide higher build quality, automate service, and maximize profits for their OWNERS. As is virtually always the case, the OWNERS of companies do not want to reduce profits.

What the proponents of raising the minimum wage fundamentally are addressing is that low-paid American workers need to earn more income.

We need to begin focusing on the means for people to earn more income, and not solely dependent on earnings from jobs, which are being destroyed with tectonic shifts in the technologies of production. We need to implement financial mechanisms to finance future economic growth and simultaneously create new capital asset owners. This can be accomplished with monetary reform and using insured, interest-free capital credit (without the requirement of past savings, a job or any other source of income), repayable out of the future earnings in the investments in our economy’s growth.

But how, you ask, can such an OWNERSHIP CREATION solution be implemented?

We can and should do more to create universal capital ownership not only for workers of corporations but ALL citizens. What I believe is crucial to solving economic inequality and building a future economy that can support general affluence for EVERY citizen is to address concentrated capital ownership, the fundamental cause of economic inequality. The obvious solution is to de-concentrate capital ownership by ensuring that all future wealth-creating, income-producing capital asset formation will be financed using insured, interest-free capital credit, repayable out of the future earnings of the investments, creating ownership participation by EVERY child, woman, man. This should be about investment in real productive capital growth, not speculation as with the stock exchanges. But the problem is the vast majority of Americans have no savings, or at best extremely limited savings, insufficient to be meaningful as increasingly Americans are living week to week, month to month, and deeply in consumer debt. So forget about proposals for tax credits, retirement and health savings accounts.  There is no feasible way that past savings can continue to be a requirement for investment if we are to simultaneously create new capital owners with the productive growth of the economy. The current economic investment system is structured based on the requirement of past savings used directly or as security collateral for capital credit loans. But past savings are not necessary as viable capital formation projects pay for themselves. This is the logic of corporate finance.

Capital acquisition takes place on the logic of self-financing and asset-backed credit for productive uses. People invest in capital ownership on the basis that the investment will pay for itself. The basis for the commitment of loan guarantees is the fact that nobody who knows what he or she is doing buys a physical capital asset or an interest in one unless he or she is first assured, on the basis of the best advice one can get, that the asset in operation will pay for itself within a reasonable period of time – 5 to 7 or, in a worst case scenario, 10 years (given the current depressive state of the economy). And after it pays for itself within a reasonable capital cost recovery period, it is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Still, there is at least a theoretical chance, and sometimes a very real chance, that the investment might not pay for itself, or it might not pay for itself in the projected time period. So, there is a business risk. This can be solved using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). On a larger scale, the path to solve the security issue, that is, the risk can be absorbed by capital credit insurance or commercial risk insurance. Thus, in order to achieve national economic democracy, we need a way to handle risk management in finance by broadly insuring the risks. Such capital credit insurance would substitute for the security demanded by lenders to cover the risk of non-payment, thus enabling the poor and others with no or few assets (the 99 percenters) to overcome the collateralization barrier that excludes the non-halves from access to productive capital.

One feasible way is to lift ownership-concentrating 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 and 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. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

The Federal Reserve Board is already empowered under Section 13 of the Federal Reserve Act to reform monetary policy to discourage non-productive uses of credit, to encourage accelerated rates of private sector growth, and to promote widespread individual access to productive credit as a fundamental right of citizenship. The Federal Reserve Board needs to re-activate its discount mechanism to encourage private sector growth linked to expanded capital ownership opportunities for all Americans (Section 13(2) Federal Reserve Act).

Until we address concentrated capital ownership and implement solutions to simultaneously broaden capital ownership by creating new capital owners with the growth of the productive economy, money power will reside in the hands of politicians and bankers, not in the hands of the citizens. That is why, to reform the system leaders and advocates for economic justice must focus on money, how it should be created and measured, how it should be controlled and why a more realistic and just money system is the key to universal and equal citizen access to future ownership opportunities as a fundamental human right. Then prosperity and economic democracy can serve as the basis for effective and non-corruptible political democracy, an ecologically sustainable environment, and global peace through justice.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

175 CEOs Pledge To Promote Workplace Diversity, Inclusion

On June 12, 2017, Amanda Eisenberg writes on Employee Benefit News (EBN):

Some 175 companies are joining forces in an effort to advance diversity and inclusion in the workplace.

The new CEO-lead alliance, called CEO Action for Diversity & Inclusion commitment, has three goals — to encourage conversations about diversity and inclusion, implement and expand unconscious bias education, and share diversity strategies — to help employers create better workplaces for millions of their employees.

Bloomberg

“We are living in a world of complex divisions and tensions that can have a significant impact on our work environment,” says Tim Ryan, U.S. chairman and senior partner of PwC, who first proposed the idea of the alliance. “ Yet, it’s often the case that when we walk into our workplace — where we spend the majority of our time — we don’t openly address these topics. By sharing best known actions and programs, we are helping to create a more inclusive environment that will encourage all of us to bring our greatest talents, perspectives and experiences to the workplace.”

Company strategies, unconscious bias education modules and other information will be uploaded to CEOAction.com, a website that will serve as a communal hub for companies to catalog effective programs and measurement practices to help with their own diversity and inclusion strategies.

In the fall, signatories from employers such as Anthem, Coca-Cola, Pfizer and Under Armour will come together to assess initial progress, understand fundamental gaps and determine the next phase of this work, according to the coalition.

“As industry leaders, we are seizing the opportunity to help drive meaningful change in the communities we serve,” says Bill Ford, CEO of venture capital firm General Atlantic, one of the companies part of the initiative. “Acting now and having open conversations about diversity and inclusion in the workplace will empower our people to deliver their best work which will undoubtedly lead to greater business.”

https://www.benefitnews.com/news/175-ceos-pledge-to-promote-workplace-diversity-inclusion

Gary Reber Comments:

The question for me is will any of these CEO’s advocate for and pursue making their employees owners of the corporations that employee them? Certainly they should know about the financial mechanism to achieve this without taking any ownership from those who already own. It is the Employee Stock Ownership Plan (ESOP).

Binary economist and corporate tax attorney Louis Kelso was the architect and pioneer of the Employee Stock Ownership Plan (ESOP), which Kelso invented to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield — on the promise of the capital investment’s future income.

The ESOP provides access by employees to capital credit to buy company stock and pay for it in pre-tax dollars out of what the assets underneath that stock yield. Bank loans are made to the ESOP trust that represents employees, instead of to the company (current owners). The trust gives the lender a note and with the borrowed monies makes the investment in the company stock. The company then issues stock to the ESOP trust. The company now has the money, which otherwise could have been borrowed directly without the ESOP (benefiting current owners), to make the planned investment and repay the loan from pre-tax forecasted future capital earnings. The company promises the bank to make pre-tax full-dividend payments to the ESOP trust to enable the trust to replay the lender. Assuming that it would take five years for that capital investment to pay for itself, at the end of five years the employees now own the full stock value in the expanded company.

Companies can use the ESOP as the credit mechanism to create employee ownership in ratios up to a 100 percent leverage buyout. Nothing has been taken away from the existing owners. However, using the ESOP, the existing owners will surrender the exclusive right to acquire more ownership in the company and have a smaller percentage of ownership in the total company, but they have not been prevented from making a fair rate of return on their thus-far accumulated ownership shares because the company earns a rate of return throughout the process. After the loan has been paid off with pre-tax earnings, the employees will have more earnings from capital and they will have more consumer power to purchase products and services. Multiply this by tens of thousands of employee-owned companies and the economy revs up to grow dramatically.

There are now over 11,000 profitable ESOP companies, of which 1,500 of those companies are worker majority owned, with workers paying for their stock shares out of future corporate profits, not by reducing their take-home labor worker incomes.

ESOPs work as designed and optimized when the workers receive the full property rights as owners, including full voting rights, not simply treated as beneficial owners with power concentrated at the top of the company, without any accountability or transparency. Unfortunately, some ESOPs have been structured so that the rights, powers, and benefits of ownership remain concentrated in a small non-accountable elite controlling corporate and financial governance. When all of the employees are owners, dependent on their income from the company’s bottom line rather than through ordinary labor wages and benefits, the workers’ economic interests are more invested to see that their company succeeds. In this way, each person in the company is empowered as a labor worker and as a capital worker (owner) and inspired to work together as a team to make better operational decisions to serve and maximize value to their customers.

Under our current financial system, the security (collateral) necessary to secure an ESOP loan must come from the company, and therein the current owners are providing the security to broaden employee capital ownership with the benefit that expanded capital ownership drives expanded consumer power to purchase products and services. (This is somewhat akin to Henry Ford’s policy to pay workers sufficient wages to enable them to purchase the automobiles they manufacture.)

Under this scenario the company owners are “insuring” the risk without a benefit, which can be re-compensated by paying the employees less labor wages, reduced pension benefits, and receiving government tax forgiveness benefits, which are written into the Internal Revenue Code.

With the ESOP, employees can acquire capital ownership with the earnings of capital. ESOPs have thus far only provided part of the solution, and the stock acquisition is limited to the employer company and to those employed by a for-profit business corporation.

Robert Ashford, Professor of Law at the Syracuse University College of Law (New York) and a former lawyer in Kelso’s San Francisco law firm, specializes in the teaching of binary economics. He has expanded the ESOP trust into what he terms the “Super ESOP,” which includes multiple company diversification facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). Under Ashford’s plan, the promissory note can be offset to the government’s central Federal Reserve Bank in return for the cash equivalent of the amount of the loan, less an administrative fee. The only cost to the direct lending bank in making a loan to the corporation would be the administrative fee, or about 2 percent of the loan’s principal and then another 2 percent for capital credit insurance, with an additional quarter of a percent paid to the Federal Reserve Bank to monetize the loan and give the lender the same cash as it would have had if it had actually loaned money to the corporation. The lender’s cash loaned to the ESOP trust is replenished with the Federal Reserve Bank cash. When the company pays the ESOP trust enough money to enable the trust to repay the lender, the lender has to retrieve the note and pay back the Federal Reserve Bank. Thus, the loan cost would be essentially not more than 5 percent to allow ownership broadening financial capital to be in­vested in ownership broadening ESOP trusts to create new capitalists. Thus, national capital credit insurance replaces the requirement for the current corporate owners to pledge security.

ESOPs and other Kelsonian plans avoid the gambling trade and Wall Street firms that play with your money. The ESOP circumvents that. According to Kelso: “In a single transaction, you finance tools for the employer and ownership for the employees. The pre-tax yield of corporate assets of prosperous companies varies from 25 to 60 percent. The yield on secondhand securities is around five or six percent. Sure, with capital gains, you can get a little more, but don’t forget, that’s a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t fly any airplanes or raise any corn or do anything else in the way of producing products and services. It just plays games with your dough. And when you take it out in pensions, you’re going to get less than the company put in for you. You have to; that’s the dynamics of it.”

See http://www.cesj.org/?s=ESOP

Here’s How The U.S. Got To $20 Trillion In Debt

On June 9,2017, Robert Schroder writes on Market Watch:

Fighting wars, big tax cuts and economic stimulus packages have all added to the debt burden

The U.S. is approaching $20 trillion in national debt — the nation is a cool $19.85 trillion in the red as of Monday — and when it crosses that mark, get ready for some finger pointing over who’s to blame.

If history shows anything, it’s that both parties share responsibility for boosting the debt. Fighting wars, big tax cuts and economic stimulus packages have all added to the burden over the years.

Here, we’ll take a look at some key moments in the debt’s trajectory until now, and also where it is going.

In August 1981, with the U.S. at the beginning of a recession, President Ronald Reagan signed major tax cuts into law. While Reagan’s supporters credit the cuts in tax rates with juicing the stock market and the U.S. economy, the downside was obvious: less money flowing into the government’s coffers. A U.S. Treasury paper shows the 1981 act reduced federal revenue by an average of $118 billion a year (in today’s dollars) during the first four years.

President George W. Bush also signed tax-cut packages into law in 2001 and 2003. Individual-income tax rates were cut, as were taxes on capital gains and dividends. This table shows where the Bush tax cuts fall in size compared to other major bills. President Barack Obama extended the cuts for two years in 2010, and made most of them permanent in 2012. Kathy Ruffing, a consultant to the Center on Budget and Policy Priorities, estimates that the cuts originally enacted during the Bush years will account for $5 trillion of debt outstanding through fiscal 2017. That includes interest.

The U.S. spent heavily on the wars in Afghanistan — which the U.S. invaded after the Sept. 11, 2001 terrorist attacks — and Iraq. According to consultant Kathy Ruffing, the two wars account for about $2 trillion of the debt, including interest.

The year-and-a-half long Great Recession began in December 2007, brought on by the collapse of the U.S. housing market. The downturn spanned the Bush and Obama presidencies, and heralded the ballooning of budget deficits as the government responded with huge bank bailout and stimulus programs. In fiscal years 2009-2012, deficits exceeded $1 trillion.

With the U.S. still reeling from the Great Recession, President Barack Obama signed the American Recovery and Reinvestment Act in February 2009. In addition to tax cuts, Obama’s stimulus bill spent billions of dollars on unemployment benefits and infrastructure projects. Obama said the plan would be “a major milestone on our road to recovery,” but Republicans trashed the measure as a waste of government money. Originally scored at $787 billion, the Congressional Budget Office in 2015 put its price tag higher, at $836 billion. Including interest payments, it added $1 trillion to the debt through fiscal 2016, according to the Committee for a Responsible Federal Budget.

CBO

The debt is projected to keep growing as the U.S. spends more on programs for its aging population. The Congressional Budget Office estimates that if current laws remain the same — that is, if President Donald Trump and the Republican Congress were to do nothing — debt held by the public would rise to 150% of the total economy in 2047 from the 77% it’s at now. Trump has vowed a few polices that could have a big impact on the debt, including major tax cuts and a military buildup. What’s more, he pledged to leave programs including Medicare and Social Security unchanged. A tax plan Trump proposed during the campaign would add about $7.2 trillion to the debt over a decade, the Tax Policy Center estimated. The Congressional Budget Office is planning to release an analysis of Trump’s budget in mid-July.

http://www.marketwatch.com/story/heres-how-the-us-got-to-20-trillion-in-debt-2017-03-30?reflink=email&utm_source=lfemail&utm_medium=email&utm_campaign=lfnotification

The national debt is debt not associated with productive growth. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

Instead, the Federal Reserve needs to stop monetizing unproductive debt, including bailouts of banks “too big to fail,” Wall Street derivatives speculators, war and begin creating an asset-backed currency that could enable every child, woman and man to establish 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 would process annually an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets.

The shares would be purchased using interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the added technology, renewable energy systems, manufacturing factories, rentable space for entrepreneurial endeavor and infrastructure, both repair and new, added to the economy.

Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.

We need to lift ownership-concentrating 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. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. 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 and 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 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. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

Making EVERY citizen productive is the ONLY way that the real economy will grow along with incomes from both wages and dividends to repay the national debt and set our nation on a course of inclusive prosperity, inclusive opportunity and inclusive economic justice.

See my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

 

Why Elon Musk Is A Fast Talking Hustler Who Preys Upon Scientifically Illiterate Bureaucrats To Siphon Billions Of Dollars From Taxpayers

On Jun3 13, 2017, Ethan Huff writes on Natural News:

If the quintessential public welfare abuser had a corporate replica, it would be Elon Musk and his multibillion-dollar trio of companies: Tesla Motors Inc., SolarCity Corp., and Space Exploration Technologies Corp., also known as SpaceX. As successful as these three entities appear to be on their own, the truth of the matter is that none of them would even exist were it not for Musk’s crafty ways in swindling governments out of billions in taxpayer dollars to subsidize his various pet ventures.

It is estimated that since their respective launches, Tesla, SolarCity, and SpaceX have together benefited from an estimated $4.9 billion in government welfare payments. This means that everyday working folks are having a portion of their hard-earned wages handed over to Musk so he can pump out more Model S electric sedans, for instance, which typically sell to buyers who, on average, boast household incomes of about $320,000.

From the very beginning, Musk has centered his attention towards extracting as much cash as he can from the public coffers to fund his endeavors. This includes taking advantage of every incentive, grant, tax break, and environmental credit available at both the federal and local level. When this isn’t enough, Musk has been known to go even further, bringing together state leaders to compete for his business by doling out even more money.

The ways in which Musk obtains taxpayer funds for his various business ventures closely resembles what someone who’s addicted to food stamps might do to keep the E.B.T. card loaded without actually having to work. The public-private financing model upon which he relies is the primary means keeping Musk’s businesses alive, as neither Tesla nor SolarCity have yet to operate in the positive.

“He definitely goes where there is government money,” stated Dan Dolev, an analyst at Jefferies Equity Research, to the Los Angeles Times. “That’s a great strategy, but the government will cut you off one day.”

If you’re a taxpayer, you’re helping rich people buy Tesla cars and SolarCity solar panels

This hasn’t happened yet, though. In fact, Musk seems to be expanding his financial maneuvering whenever and wherever possible to seize an even greater share of the welfare pot for his companies. He recently smooth-talked New York State into contributing $750 million towards a new SolarCity manufacturing plant in Buffalo. SolarCity’s annual rent will be just $1, and the company will not be required to pay property taxes at the site for 10 years.

Meanwhile, New York taxpayers will be footing the bill, even though many of them could never afford to purchase SolarCity solar panels, even with the small subsidies offered by the government. They’ll also have to continue paying property taxes on their own homes and businesses, while SolarCity – which, again, wouldn’t exist without taxpayer money – gets a free ride for at least the next decade.

Or how about the $1.3 billion in incentives the state of Nevada recently awarded to Tesla to develop a large battery manufacturing facility near Reno? This incredible feat was accomplished after Musk aggressively negotiated with Nevada lawmakers for more than a year, pitting the leaders of other states against them to maximize his welfare handout. By playing welfare hardball, Musk was able to convince Nevada lawmakers to actually forego giving incentives to other industries such as film and insurance to instead funnel it all to him.

In Texas, a small community at the southern tip of the state awarded Musk’s SpaceX company with a generous $5 million benefits package that includes infrastructure spending and subsidies. These subsidies include a 15-year property tax break from the local school district, which means $3.1 million less for local schools, and $3.1 million more for SpaceX. And this is all in addition to the $10 million that the state of Texas also awarded to SpaceX for the apparent privilege of having a Musk facility on its land.

Each state, including Texas, that’s cooperated with Musk in giving him everything he demands has done so under the pretense of creating more jobs, and thus more revenue. The leaders of these states have been more than eager to gulp down Musk’s Kool-Aid because they really believe that what he’s bringing to the table in terms of innovation will far exceed their initial investment.

Will Musk ever fulfill his promise of releasing an affordable Tesla vehicle for the middle class?

This may end up being the case eventually. But as of now, a lot of Musk’s endeavors are still a pipe-dream in terms of actually paying off. Things get even more complicated when considering that he isn’t even keeping simple promises like releasing Tesla cars that are actually affordable to the average person like he said he would.

“In the early days at Tesla – when the company first produced an expensive electric sports car, which it no longer sells – Musk promised more rapid development of electric cars for the masses,” writes Jerry Hirsch for the L.A. Times, noting that Musk promised in a 2008 blog post to release a sedan costing no more than around $40,000. That, of course, never happened.

“In fact, the second model now typically sells for $100,000, and the much-delayed third model, the Model X sport utility, is expected to sell for a similar price. Timing on a less expensive model – maybe $35,000 or $40,000, after subsidies – remains uncertain.”

Bre Payton, writing for The Federalist, put it oh so well when she described Musk as “a pretty shady dude who preys on taxpayers by pressing on progressive lawmakers’ soft spot for renewable energy.” She says that both SolarCity and Tesla “have a reputation of sucking the marrow from taxpayers in the form of mandates, rebates, and tax breaks.”

NaturalNews would agree, based on Musk’s extensive track record of milking the system for his own personal gain – in the name of helping the environment and paving the way for a renewable future, of course.

http://www.naturalnews.com/2017-06-13-why-elon-musk-is-a-fast-talking-hustler-who-preys-upon-scientifically-illiterate-bureaucrats-to-siphon-billions-of-dollars-from-taxpayers.html

Such huge taxpayer-funded incentives are just the beginning as Elon Musk and his executive team have forecast growth to be in the several billions of dollars over the course of the next five years, further enriching the stock ownership portfolios of Musk corporations’  monopoly ownership. Yet the workers just get to have jobs, but no ownership such as could be provided using an Employee Stock Ownership Plan (ESOP) with new shares issued and paid for our of future earnings without reducing worker wages or other benefits, and at the same time incentivizing workers as true owner-partners in the enterprises.

Elon Musk represents one of the perfect examples of crony-end game capitalism disguised to the taxpaying citizens as necessary to create jobs and advance solutions to environmental enhancement. In this case, the game is played in the name of alternative transportation, planetary colonization and the environment. NO WHERE is there a stipulation that the subsidies, tax exemptions, loans and grants be conditioned on 100 percent worker owned companies, not as a collective but in individual worker titles, or that the financing is structured so that the workers will end up owning a significant share of the new capital assets and the benefits of the future wealth-creation and income generated. While supposedly more than 6,500 jobs will be created, subsidized by taxpayer incentives, in large measure the new factories will be technologically infused with advanced “robotics,” digitalized operations, and super-automation capital assets, that will be OWNED by Elon Musk and a select narrow group of wealthy owners who get to cash in on our taxpayer incentives and subsidies as the worth of the corporations accelerate.

Once again, taxpayer supported government welfare is extended to the private sector without the stipulation of broadening private, individual ownership of NEW productive capital investment related to technological innovation and invention. This is in the form of government subsidies, loan guarantees and tax incentives that are issued in the name of JOB CREATION, while oblivious to the CONCENTRATED CAPITAL OWNERSHIP CREATION resulting from bolstering the financial ownership interests of the awarded companies’ ownership class.

What is needed is a massive loan guarantee economic growth plan with the aim to balance production and consumption by empowering EVERY American to acquire private, individual ownership in FUTURE wealth-creating, income-producing productive capital asset investments and pay for their loans out of the earnings of the investments. This approach embraces the logic of corporate finance, that is, that the investments will over time, typically within 3 to 7 years, produce income to pay for the capital credit extended and to continue to produce income for the corporate owners over the course of numerous years in the future.

Unfortunately, with Elon Musk’s corporate enterprises and others, the subsidies, tax incentives, direct loans and loan guarantees do not stipulate the demonstration of broadened private, individual ownership among the employees of the companies receiving taxpayer financial support. Instead the direct loans and loan guarantees are pitched as JOB CREATION measures while completely hiding the fact that a privilege ownership class benefits as the owners of investment assets.

In the short-term FUTURE, ALL direct loans and loan guarantees should stipulate that corporations demonstrate broadened ownership of their corporations by their employees and other Americans. We should quickly reform the system to eliminate ALL tax loopholes and subsidies and provide equal opportunity to insured, interest-free capital credit to finance the FUTURE building of an economy that can support general affluence for ALL Americans.

The REAL issue regarding the structural problem with the economy, which is rigged to further the CONCENTRATED CAPITAL OWNERSHIP interests of the wealthiest Americans at the expense of the American majority who are exponentially facing job losses and labor worth devaluation as tectonic shifts in the technologies of production require less and less labor workers to produce the products and services needed and wanted by our society, is ignored. This issue is NEVER addressed, which is the crux of the problem causing our declining economy.

What we need is for the Federal Reserve to stop monetizing unproductive debt and begin creating an asset-backed currency that could enable every child, woman and man 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. The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets, The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy. Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance back  by the government, but would not require citizens to reduce their funds for consumption to purchase shares. ALL subsidized loan guarantees would have the stipulation that the companies benefiting from the loan infusion demonstrate NEW owners be created among their employees and others in which ownership shares are purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets.

We need to lift ownership-concentrating 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. This entity would serve to seed the new policy direction and would fulfill the government’s responsibility for the health and prosperity of the American economy.

Our political leaders, academia, and the media fail to understand that our financial system has resulted in a fundamental imbalance between production and consumption. We have ignored the systematic income inequalities that persist and grow exponentially due to the steady progress of tectonic shifts in the technologies of production, shifting productive input from labor to the non-human factor of production––productive capital, as generally defined as land, structures, human-intelligent machines, superautomation, robotics, digital computerized automation, etc. Productive capital assets are OWNED by individuals and, respecting private property principles, those individuals are entitled to the earnings generated by such assets.

The significant problem has been the systematic denial of participation as capital owners on the part of the majority of consumers. While the wealthy capital ownership class has essentially rigged the financial system to their benefit, and by that is meant to continually concentrate ownership of productive capital among the richest Americans, the majority of Americans have been and are dependent on JOB CREATION. Yet, none of our political leaders, academia or the media addresses this imbalance with the richest Americans entitled to income growth associated with productive capital ownership and the majority facing further job losses and degradation due to technological advancement.

Ordinary Americans of so-called “middle-class position” have used consumer debt financing as a means of bettering their life with an abundance of consumer products and services. The government has used income redistribution via taxation and national debt to prop up the economy with monies spent on supporting a massive military-industrial complex comprised of a small group of owners and millions of “employed,” and various social programs to uplift the American majority’s life and prevent their decline into poverty––supported by government dependency.

The ONLY way out of this mess, if we are to not become a complete socialist or communist communal state governed by an elite class, is to embrace growth managed in such a way that EVERY American is empowered to acquire over time a viable wealth-creating, income-producing capital estate and pay for their acquisition out of the FUTURE earnings of the investments. Such is the precise means that the richest Americans continually advance their wealth and thus, income.

We need leaders who will put this issue before the national debate stage, and we need the media to put forth the questions whose answers will provide the financial mechanism specifics to reverse the ever dominant OWNERSHIP CONCENTRATION. Such concentration and the economic power that result is taking control of our representative government, with productive capital ownership channeled through plutocratic finance into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies to redistribute income or not to redistribute income. If Americans do not demand that the holders of the office of the presidency of the United States, the Senate, and the Congress address these issues, we will have wasted the opportunity to steer the American economy in a direction that will broaden affluence. We have adequate resources, adequate knowhow, and adequate manpower to produce general affluence, but we need as a society to properly and efficiently manage these resources while protecting and enhancing the environment so that our productive capital capability is sustainable and renewable. Such issues are the proper concern of government because of the human damage inflicted on our social fabric as well as to economic growth in which every citizen is fairly included in the American dream.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

 

 

California’s Descent To Socialism: Joel Kotkin

Environmentalist Tom Steyer speaks to the Center for American Progress’s annual policy conference in Washington in this November 2014 file photo. (Manuel Balce Ceneta, AP Photo, File)Environmentalist Tom Steyer speaks to the Center for American Progress’s annual policy conference in Washington in this November 2014 file photo. (Manuel Balce Ceneta, AP Photo, File)

On June 11, 2017, Joel Kotkin writes on the Los Angeles Daily News:

California is widely celebrated as the fount of technical, cultural and political innovation. Now we seem primed to outdo even ourselves, creating a new kind of socialism that, in the end, more resembles feudalism than social democracy.

The new consensus is being pushed by, among others, hedge-fund-billionaire-turned-green-patriarch Tom Steyer. The financier now insists that, to reverse our worsening inequality, we must double down on environmental and land-use regulation, and make up for it by boosting subsidies for the struggling poor and middle class. This new progressive synthesis promises not upward mobility and independence, but rather the prospect of turning most Californians into either tax slaves or dependent serfs.

California’s progressive regime of severe land-use controls has helped to make the state among the most unaffordable in the nation, driving homeownership rates to the lowest levels since the 1940s. It has also spurred a steady hegira of middle-aged, middle-class families — the kind of tax-burdened people Gov. Jerry Brown now denounces as “freeloaders” — from the state. They may have access to smartphones and virtual reality, but the increasingly propertyless masses seem destined to live in the kind of cramped conditions that their parents and grandparents had escaped decades earlier.

A GREEN PEOPLE’S REPUBLIC?

There is some irony in a new kind of socialism blessed by some of the world’s richest people. The new policy framework is driven, in large part, by a desire to assume world leadership on climate-related issues. The biggest losers will be manufacturing, energy and homebuilding workers, who will see their jobs headed to other states and countries.

Under the new socialism, expect more controls over the agribusiness sector, notably the cattle industry, California’s original boom industry, which will be punished for its cows’ flatulence. Limits on building in the periphery of cities also threaten future growth in construction employment, once the new regulations are fully in place.

Sadly, these steps don’t actually do anything for the climate, given the state’s already low carbon footprint and the fact that the people and firms driven out of the state tend to simply expand their carbon footprints elsewhere in their new homes. But effectiveness is not the motivation here. Instead, “combating climate change” has become an opportunity for Brown, Steyer and the Sacramento bureaucracy to perform a passion play, where they preen as saviors of the planet, with the unlikable President Donald Trump playing his role as the devil incarnate. In following with this line of reasoning, Bay Area officials and environmental activists are even proposing a campaign to promote meatless meals. It’s Gaia meets Lent.

A DIFFERENT KIND OF SOCIALISM

The oligarchs of the Bay Area have a problem: They must square their progressive worldview with their enormous wealth. They certainly are not socialists in the traditional sense. They see their riches not as a result of class advantages, but rather as reflective of their meritocratic superiority. As former TechCrunch reporter Gregory Ferenstein has observed, they embrace massive inequality as both a given and a logical outcome of the new economy.

The nerd estate is definitely not stupid, and like rulers everywhere, they worry about a revolt of the masses, and even the unionization of their companies. Their gambit is to expand the welfare state to keep the hoi polloi in line. Many, including Mark Zuckerberg, now favor an income stipend that could prevent mass homelessness and malnutrition.

HOW SOCIALISM MORPHS INTO FEUDALISM

Unlike its failed predecessor, this new, greener socialism seeks not to weaken, but rather to preserve, the emerging class structure. Brown and his acolytes have slowed upward mobility by environment restrictions that have cramped home production of all kinds, particularly the building of moderate-cost single-family homes on the periphery. All of this, at a time when millennials nationwide, contrary to the assertion of Brown’s “smart growth” allies, are beginning to buy cars, homes and move to the suburbs.

In contrast, many in Sacramento appear to have disdain for expanding the “California dream” of property ownership. The state’s planners are creating policies that will ultimately lead to the effective socialization of the regulated housing market, as more people are unable to afford housing without subsidies. Increasingly, these efforts are being imposed with little or no public input by increasingly opaque regional agencies.

To these burdens, there are now growing calls for a single-payer health care system — which, in principle, is not a terrible idea, but it will include the undocumented, essentially inviting the poor to bring their sick relatives here. The state Senate passed the bill without identifying a funding source to pay the estimated $400 billion annual cost, leading even former Los Angeles Mayor Antonio Villaraigosa to describe it as “snake oil.” It may be more like hemlock for California’s middle-income earners, who, even with the cost of private health care removed, would have to fork over an estimated $50 billion to $100 billion a year in new taxes to pay for it.

In the end, we are witnessing the continuation of an evolving class war, pitting the oligarchs and their political allies against the state’s diminished middle and working classes. It might work politically, as the California electorate itself becomes more dependent on government largesse, but it’s hard to see how the state makes ends meet in the longer run without confiscating the billions now held by the ruling tech oligarchs.

California is widely celebrated as the fount of technical, cultural and political innovation. Now we seem primed to outdo even ourselves, creating a new kind of socialism that, in the end, more resembles feudalism than social democracy.

The new consensus is being pushed by, among others, hedge-fund-billionaire-turned-green-patriarch Tom Steyer. The financier now insists that, to reverse our worsening inequality, we must double down on environmental and land-use regulation, and make up for it by boosting subsidies for the struggling poor and middle class. This new progressive synthesis promises not upward mobility and independence, but rather the prospect of turning most Californians into either tax slaves or dependent serfs.

California’s progressive regime of severe land-use controls has helped to make the state among the most unaffordable in the nation, driving homeownership rates to the lowest levels since the 1940s. It has also spurred a steady hegira of middle-aged, middle-class families — the kind of tax-burdened people Gov. Jerry Brown now denounces as “freeloaders” — from the state. They may have access to smartphones and virtual reality, but the increasingly propertyless masses seem destined to live in the kind of cramped conditions that their parents and grandparents had escaped decades earlier.

A GREEN PEOPLE’S REPUBLIC?

There is some irony in a new kind of socialism blessed by some of the world’s richest people. The new policy framework is driven, in large part, by a desire to assume world leadership on climate-related issues. The biggest losers will be manufacturing, energy and homebuilding workers, who will see their jobs headed to other states and countries.

Under the new socialism, expect more controls over the agribusiness sector, notably the cattle industry, California’s original boom industry, which will be punished for its cows’ flatulence. Limits on building in the periphery of cities also threaten future growth in construction employment, once the new regulations are fully in place.

Sadly, these steps don’t actually do anything for the climate, given the state’s already low carbon footprint and the fact that the people and firms driven out of the state tend to simply expand their carbon footprints elsewhere in their new homes. But effectiveness is not the motivation here. Instead, “combating climate change” has become an opportunity for Brown, Steyer and the Sacramento bureaucracy to perform a passion play, where they preen as saviors of the planet, with the unlikable President Donald Trump playing his role as the devil incarnate. In following with this line of reasoning, Bay Area officials and environmental activists are even proposing a campaign to promote meatless meals. It’s Gaia meets Lent.

A DIFFERENT KIND OF SOCIALISM

The oligarchs of the Bay Area have a problem: They must square their progressive worldview with their enormous wealth. They certainly are not socialists in the traditional sense. They see their riches not as a result of class advantages, but rather as reflective of their meritocratic superiority. As former TechCrunch reporter Gregory Ferenstein has observed, they embrace massive inequality as both a given and a logical outcome of the new economy.

The nerd estate is definitely not stupid, and like rulers everywhere, they worry about a revolt of the masses, and even the unionization of their companies. Their gambit is to expand the welfare state to keep the hoi polloi in line. Many, including Mark Zuckerberg, now favor an income stipend that could prevent mass homelessness and malnutrition.

HOW SOCIALISM MORPHS INTO FEUDALISM

Unlike its failed predecessor, this new, greener socialism seeks not to weaken, but rather to preserve, the emerging class structure. Brown and his acolytes have slowed upward mobility by environment restrictions that have cramped home production of all kinds, particularly the building of moderate-cost single-family homes on the periphery. All of this, at a time when millennials nationwide, contrary to the assertion of Brown’s “smart growth” allies, are beginning to buy cars, homes and move to the suburbs.

In contrast, many in Sacramento appear to have disdain for expanding the “California dream” of property ownership. The state’s planners are creating policies that will ultimately lead to the effective socialization of the regulated housing market, as more people are unable to afford housing without subsidies. Increasingly, these efforts are being imposed with little or no public input by increasingly opaque regional agencies.

To these burdens, there are now growing calls for a single-payer health care system — which, in principle, is not a terrible idea, but it will include the undocumented, essentially inviting the poor to bring their sick relatives here. The state Senate passed the bill without identifying a funding source to pay the estimated $400 billion annual cost, leading even former Los Angeles Mayor Antonio Villaraigosa to describe it as “snake oil.” It may be more like hemlock for California’s middle-income earners, who, even with the cost of private health care removed, would have to fork over an estimated $50 billion to $100 billion a year in new taxes to pay for it.

In the end, we are witnessing the continuation of an evolving class war, pitting the oligarchs and their political allies against the state’s diminished middle and working classes. It might work politically, as the California electorate itself becomes more dependent on government largesse, but it’s hard to see how the state makes ends meet in the longer run without confiscating the billions now held by the ruling tech oligarchs.

http://www.dailynews.com/opinion/20170611/californias-descent-to-socialism-joel-kotkin#.WUBNQTvrrcU.facebook

The Most Radical Aspect Of Jeremy Corbyn’s Program? Democratizing The Economy

A few months ago, a group of Labour Party researchers quietly delivered a report titled “Alternative Models of Ownership” to Shadow Chancellor John McDonnell.

On June 6, 2017, Michal Rozworski writes on In These Times:

“Alternative Models of Ownership” returns to a key demand of the Left, one posed since the nineteenth century: that we take over the machinery and fundamentally retool it — that we take a private system of production and transform it into a social organism und

So much about the 2017 Labour election campaign has been heartening: the energy, the conviction, the full-throated embrace of remaking government in the service of the many.

All of the main campaign pledges — from free tuition to thousands of new homes to a stronger National Health Service — will change where money and resources flow in the UK, from those who need them least to those who need them most. But one set of proposals, if implemented, would go further, starting to transform the foundations of the economy.

A few months ago, a group of Labour Party researchers quietly delivered a report titled “Alternative Models of Ownership” to Shadow Chancellor John McDonnell. Its core message is simple: the Left must begin to democratize the economy.

An abandoned creed

And democratizing the economy means challenging the most important fundamental of capitalist economics: the primacy of private ownership. In particular, private ownership of capital, of all the things — the buildings, the machines, the tools, the hardware, and the software — that we use to make other things. Without a say in how tools are used, workers themselves become passive tools. Being able to actively participate in decision-making and ownership go hand in hand. Democratizing means taking ownership.

These ideas are not new, but they have been suppressed under the decades-long advance of right-wing ideas, including within traditionally left-wing parties and movements. In the UK, one of the last major proposals for democratizing the economy was the Lucas Alternative Corporate Plan. It was put forward by unionized workers at the Lucas Aerospace in 1976 in response to imminent restructuring that would see many of them fired.

The unions at Lucas canvassed their members and produced a detailed plan for an alternative kind of restructuring that would see the company transformed: from one with half of its output going to the military, to one producing socially useful products. Expanding on existing technology, workers proposed retooling to make everything from sorely needed kidney dialysis machines to early solar cells to hybrid power drives for vehicles.

Despite a global campaign, the Alternative Plan failed without adequate government pressure on Lucas. With the election of Margaret Thatcher a few short years later, the window on any similar push for economic transformation was shut.

“Alternative Models of Ownership” is one example of the window’s reopening. Many of the document’s ideas have subsequently found their way into the Labour Party election platform. The right-wing press has used it as evidence that Corbyn would “take Britain back to the ’70s.” But they’re wrong: the plans are firmly oriented to the future.

Why take control

The UK today is in a low-investment, low-productivity trap. And workers are feeling the brunt of it: long-run wage growth is hitting lows not seen since the nineteenth century. Inequality has grown steadily since the financial crisis. The economy, in short, is not working for most people.

“Alternative Models of Ownership” makes the case, rarely heard today, that we can tackle the roots of economic injustice and inequality, not just manage their effects. Democratizing ownership can move the UK economy away from the short-termism of the rich, who profit from unproductive, low-wage work. Socialists have always sought a high-productivity economy, where common ownership translates productivity gains into less work, more leisure, and a better life — as Corbyn says — for the many, not the few.

Instead of the usual fearmongering about robots taking jobs, the report argues that we can, and should, share in the benefits of automation and technological progress. Owned in common, technological advances of the future could free us of drudgery, rather than merely leave us unemployed and destitute.

And while it still makes too much of the dreaded automation, which has yet to show up in the productivity statistics, the document avoids uncritically repeating the wildest prognoses of imminent catastrophic unemployment. Democratic control over production, it says, is a goal regardless of whether robots are doing 20 percent, or one day 90 percent, of the work. Automation can be a threat or a promise depending on the structure of the economy:

“The bigger immediate challenge is not the imminent rise of the robots but that too many people will remain trapped in robotic, drudgery-filled and low-productivity jobs. In this context, accelerating automation is a key political project. The goal should be to embrace the technological potential of modernity, accelerating into a more automated, productive future with all its liberating possibilities, while building new institutions around ownership, work, leisure and investment, where technological change is shaped by the common good.”

How to take control

So if more economic democracy is the end, Labour’s plans focus on three means of reaching it.

First, there are co-ops, membership organizations where ownership and decision-making are shared by the members. There are many types of co-ops, from consumer co-ops where members do nothing more than elect boards of governors every few years to fully worker-run co-ops where shop floor decisions are subject to democratic deliberation. At their best, co-ops ensure new technology is implemented quickly but work is redistributed so that jobs are not lost.

Unsurprisingly, the Labour document focuses on worker co-ops. It relies on three main examples — plywood processing in the US Northwest, the region of Emilia-Romagna in Italy, and the Mondragon network from Spain — to make the case that worker co-ops can be as efficient (if not more efficient) than their privately owned counterparts. This argument is key to presenting co-ops as a cure to the diagnosis of low productivity.

Next there is “municipal and locally-led” ownership. This broad category includes everything from community shops to farmers’ markets and development trusts to social enterprises. Many of these are halfway houses between capitalist enterprise and direct economic democracy. The important fact is that they are responsive to their communities, are limited, partially or totally, in using profits for anything other than reinvestment in the community, and have broader social or environmental goals.

Because of their generally small size and precarity as outcrops of democracy in rough capitalist seas, both co-ops and locally led institutions require other “anchor institutions” to sustain or protect them. For instance, co-ops have a harder time accessing finance because lenders cannot gain rights of control if things go wrong. Local social enterprises, on the other hand, often find it difficult to get off the ground without procurement contracts from local authorities for what they produce.

The third category of economic democracy, national ownership, is usually on a vastly different scale. Where co-ops or social enterprises are most often quite small, state-owned enterprises are usually found among the “commanding heights” of the economy.

Even conventional economics grudgingly admits that there may be “natural” monopolies, sectors where fixed capital costs are so high that any number of firms greater than one is too costly. The post service is one example: a network of post offices that serves the entire population is a very costly thing to create. Not only does it not make sense to have two; anyone trying to create a second one will most likely fail, consumed by the high start-up costs (unless, of course, the government goes out of its way to hamstring or dismantle these monopolies).

“Alternative Model of Ownership” argues for state ownership where natural monopolies exist, in sectors where only the government can carry out the long-term and risky investment that scares off private investors, and where high-quality services are needed. This third category is — rightly! — kept quite broad. Economic democracy is not a narrow niche.

While state-owned enterprises give the government direct control over such things as pricing and production, there are no guarantees that they will be significantly more democratic, neither for their workers nor the citizens who use their goods or services. Labour’s report holds out the promise for a different kind of state, one that recognizes public ownership is a means for more democracy, not an end in itself.

In a more democratic state, workers might elect front-line managers within a national railway company whose board included representatives from unions, passenger rights groups, and local government. Community councils of patients could help chart the strategy of a public hospital — an idea the NHS briefly flirted with in the 1970s. Economic democracy is far more than public ownership.

What to control

Of the ideas within “Alternative Models of Ownership,” the one that figures most prominently in the Labour manifesto is nationalization. Or rather, renationalization. Corbyn has pledged to take crucial services such as rail and mail back under public ownership.

The privatization of the British railroads has been a textbook disaster: service has decreased, fares have skyrocketed, and ridership has dropped. The UK is a total laggard in the construction of high-speed rail — precisely the type of high-cost, high-risk endeavor with huge social and ecological benefits that is largely undertaken by state-run rail companies elsewhere.

The Royal Mail has seen some of the same dynamics in service quality and cost since becoming a for-profit business. Labour has committed to taking both back into public hands step by step: taking over rail companies as their franchises expire and reversing Royal Mail privatization.

A third major sector of the UK economy that’s gone from public into private hands is power generation and distribution. Unlike the cases of rail and mail, the pledge to bring the energy system back under public ownership draws on the second plank of “Alternative Models of Ownership”: Labour has said it will create a decentralized system where a single nationally owned grid is framed by a network of new municipally owned energy providers. The plan is to create new municipal entities alongside existing private providers, outcompeting and eventually replacing them with a combination of lower costs, better service, and mandated green power.

Moving the debate forward

John McDonnell has also spoken regularly about expanding co-ops, especially in cases where companies are failing and workers risk being laid off. Additionally, McDonnell has spoken of the “Right to Own,” a key proposal of Alternative Models of Ownership, which McDonnell says would give workers “first rights on buying out a company or plant that is being dissolved, sold, or floated on the stock exchange.” Labour is right to include co-ops as a potential source of economic democracy but its report isn’t as critical as it should be. In the first instance, there are times when businesses are struggling for good reason, whether due to technological obsolescence, a change in fashion or some other cause. Funds should then be directed not just to taking over the firms but to reorienting them.

This is what the precursors to Labour’s current policy at Lucas Aerospace wanted — and it is a much bigger project, one that may require far more than just buy-out funds: retraining, technical expertise, retooling, perhaps at least temporary nationalization to obtain funding.

More broadly, co-ops under capitalism often end up adopting capitalist business practices, even against the best wishes of their members. Wage disparities, an increasingly professionalized cadre of managers, arbitrary shop floor discipline — all of these are symptoms that have come to plague long-standing co-ops, for example ones in the Mondragon network. Others, such as those in the US plywood industry, have slowly died as the industry transformed.

There is nothing inherently good about small scale. It can, sometimes, root producers in communities and create some semblance of democratic ownership. But it can also generate inefficiencies, smaller cushions for risk, and provincialism — more parochial management or a lack of innovation.

Starting small may be easier, but ultimately more control over economic decision-making means more control over investment across the economy. Democratic planning has always been dogged by the question of directing investment. Alongside local experiments, we must be thinking about the heights of the global economy, the heart of our modern capitalist planning apparatus: the financial system. That it is missing from “Alternative Models of Ownership” shows the long road to more wholesale transformation.

In some sectors, economic democracy will be easier at the local level, in others larger entities will be more stable and resilient. There is an old left argument that capitalism creates its own conditions for being surpassed. Today’s enormous corporations pay poverty wages, despoil the environment, and are run as personal fiefdoms. But they also increase technical productivity and bring masses of people together, revealing the unquestionably social nature of work.

Despite the myth of meritocracy, workers in today’s global supply chains and massive service operations can see immediately that no one person, no Sam Walton, no Richard Branson, is responsible for making them run. We are bound together by a grand machinery. Under capitalism, the machinery distributes its growing bounty unequally, destroying human lives and nature in the process.

“Alternative Models of Ownership” returns to a key demand of the Left, one posed since the nineteenth century: that we take over the machinery and fundamentally retool it — that we take a private system of production and transform it into a social organism under democratic control.

Doing so requires steeling ourselves for a big fight. The report offers many proposals for democratic end goals, but we must also devise strategies for the inevitable struggles to achieve them. We cannot fall into a technocratic trap. Nationalizing industries or instituting municipal control are not neutral proposals but class demands. Labour’s surge in the polls and its fantastic campaign are a start – but we need a long-term focus on building the power that will be capable of making these ideas reality.

“Alternative Models of Ownership” is a real step forward, reviving the demand for economic transformation. It is an ambitious document and, undoubtedly, one of the most radical we have seen in mainstream politics for a long time. Jeremy Corbyn’s Labour is proposing not just that we have a bigger slice of the pie, but a bigger say over how it is made.

http://inthesetimes.com/article/20197/jeremy-corbyn-labour-democracy-economy-election

 

Why Is The Middle Class Shrinking?

On December 30, 2015, Steven Horowitz writes on FEE, the Foundation for Economic Education:

Economic inequality continues to be a major political issue even as the headlines scream about terrorism and climate change. Bernie Sanders has made it a centerpiece of his presidential campaign, and other candidates have addressed it along the way. And a recent study by the Pew Research Center has added new, though misplaced, fuel to the fire of those concerned about inequality.

The Pew study has been discussed in the media, and one key point has been grossly misunderstood. Among other things, the study found that the American middle class is shrinking and is now just under half of the population. Commentators quickly began to refer to the “hollowing out” of the middle class and to tie this study to the concerns about growing inequality.

However, a close look at the data shows that the middle class has shrunk since 1971 because more members of the middle class have moved up the income ladder than down it.

Don’t believe me? Look for yourself at the terrific graphic that the Financial Times created to illustrate the data:

You can watch as the folks on the left slowly slide to the right over 44 years. When you compare the 1971 distribution with the 2015 one, what do you see? A growth in households earning around $80,000 or above, adjusted for inflation, since 1971 and a significant decline in those making less than that amount (with the exception of the folks right around $0). It’s true that there’s not a fat middle class anymore, but why should that trouble us if there are more high-income households and fewer low-income households overall?

The funny part of this is that if you read the story in the Financial Times that accompanies this graphic, it’s as if they never actually looked at the graphic they produced. Their narrative is at odds with it, as the narrative proclaims the doom-and-gloom story that the graphic actually refutes. As they say, never let the facts get in the way of a good story.

This growth in household income may, to some extent, be a by-product of the same economic processes that have produced the concerns about inequality, illustrated in this graphic by the significant growth of the ultra-rich.

There are far more very rich people today than there were 44 years ago, but the growth of the upper class has gone hand in hand with the enrichment of a large number of less-well-off households. Are there ways in which economic inequality is good, then? I think the answer to that question is yes. If so, then, what are they? Here are two defenses of economic inequality that proponents of the free market could make.

First is the more obvious one: growing inequality is good because it might be a consequence of economic institutions that produce all kinds of results that we think are desirable. For example, if competitive markets lead to peace and rising prosperity for all but also create inequality along the way by allowing some folks to get very rich, then we should at least tolerate that inequality because the things that produce it also produce other things we like.

This is the usual defense libertarians invoke, and it’s a good argument. The critic, however, might say that even if the defense is true, it doesn’t prove that inequality is necessary for that result. There’s a difference between saying, “Good economic institutions will produce inequality while creating good economic outcomes for all,” and saying, “Good economic outcomes for all can’t be produced without inequality.” The critic would likely ask how reducing the inequality that markets produce will harm their ability to produce those good results.

And here is where we come back to the Pew study and get a second defense of inequality. One way the middle class (and all of us) has become richer in the last generation is that the cost of so many goods and services has dropped in terms of the number of hours we have to work at the average wage in order to purchase them. The lower price of basic goods has enabled more and more people to afford things like large TVs, smartphones, and new, cheaper medications.

One thing that has made this process happen is inequality. In The Constitution of Liberty, F.A. Hayek argued,

A large part of the expenditure of the rich, though not intended for that end, thus serves to defray the cost of the experimentation with the new things that, as a result, can later be made available to the poor.… Even the poorest today owe their relative material well-being to the results of past inequality.

Having a group of very rich people is what enables yesterday’s luxuries to become today’s basics.

There are two parts to this process: cost bearing and discovery. The very rich are able to afford the high prices of new technologies, thereby providing an incentive for firms to market new and expensive products. Once the rich pay the high initial price and cover the fixed costs of research and development, sellers can begin to price closer to the much lower marginal cost of producing additional units, making the good much more affordable to more people.

But the rich are also an economic canary in the coal mine that informs producers whether they are getting it right.

For example, a critic of inequality might complain that no one “really needs” a $100,000 luxury car with all kinds of new high-tech gadgets on it. But the fact that some can afford it and want to buy it helps the car companies figure out which new features might be popular. Rear-view cameras were once only available on top-end cars, but they have slowly become a standard feature. The same may soon be true of collision warning systems now available on high-end models of some cars.

In fact, everything we think of as basics today was once the province of only the well-off. The first microwaves were expensive and bought mostly by the rich. I can remember my parents paying about $900 for a VCR in the late 1970s. VCRs, of course, fetch a price close to zero these days. The rich who bought the early LCD TVs helped manufacturers defray the fixed production costs and figure out what people wanted, and now these TVs are in the vast majority of houses at a more affordable price.

The inequality at any point in time is a key part of the process that creates wealth for the rest of society over the years to follow. The very rich enable producers to experiment and cover their costs, and that makes more goods more affordable for the rest of us, from fun toys to life-saving necessities.

The inequality produced by the market is a key part of how the market moves forward, enriching all of us in the process. And that’s why the middle class is shrinking: the rich, through the competitive market, have helped make the middle class richer.

https://fee.org/articles/why-is-the-middle-class-shrinking/

Author Steven Horowitz’s argument ties “the rich” to production of goods, products and services as the ONLY way such goods, products and services will be developed and produced. This is a false argument in that broadly owned, as opposed to narrow owned productive capital assets (the reason for economic inequality), will produce even more affluence experienced by far more people as long as the full earnings generated by the investments are paid out to the new owners, which will create far more “costumers with money” to support demand for increased competitive development and production.

Broadly owned productive capital assets that create wealth and produce income for their owners will grow wealth for EVERY child, woman, and man who owns capital. As more and more “customers with money” are created, producers will engage in experimentation and cover their costs from the increased profits produced by increasing numbers of “customers with money.” and at the same time goods, products and services will become more affordable for EVERY citizen without inducing inflation.

To broaden individual capital ownership simultaneously with the growth of the economy requires system reform.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

Now Just Five Men Own Almost As Much Wealth As Half The World’s Population

It’s not a meritocracy. It’s an oligarchy. (Photo: Pixabay/CC0)

On June 12, 2017, Paul Buchheit writes on Common Dreams:

Last year it was 8 men [see http://www.foreconomicjustice.org/?p=16799]. then down to 6, and now almost 5.

While Americans fixate on Trump, the super-rich are absconding with our wealth, and the plague of inequality continues to grow. An analysis of 2016 data found that the poorest five deciles of the world population own about $410 billion in total wealth. As of 06/08/17, the world’s richest five men owned over $400 billion in wealth. Thus, on average, each man owns nearly as much as 750 million people.

Why Do We Let a Few People Shift Great Portions of the World’s Wealth to Themselves? 

Most of the super-super-rich are Americans. We the American people created the Internet, developed and funded Artificial Intelligence, and built a massive transportation infrastructure, yet we let just a few individuals take almost all the credit, along with hundreds of billions of dollars.

Defenders of the out-of-control wealth gap insist that all is OK, because, after all, America is a ‘meritocracy’ in which the super-wealthy have ‘earned’ all they have. They heed the words of Warren Buffett: “The genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did.”

But it’s not a meritocracy. Children are no longer living better than their parents did. In the eight years since the recession the Wilshire Total Market valuation has more than TRIPLED, rising from a little over $8 trillion to nearly $25 trillion. The great majority of it has gone to the very richest Americans. In 2016 alone, the richest 1% effectively shifted nearly $4 trillion in wealth away from the rest of the nation to themselves, with nearly half of the wealth transfer ($1.94 trillion) coming from the nation’s poorest 90%—the middle and lower classes. That’s over $17,000 in housing and savings per lower-to-middle-class household lost to the super-rich.

A meritocracy? Bill Gates, Mark Zuckerberg, and Jeff Bezos have done little that wouldn’t have happened anyway. ALL modern U.S. technology started with—and to a great extent continues with—our tax dollars and our research institutes and our subsidies to corporations.

Why Do We Let Unqualified Rich People Tell Us How To Live? Especially Bill Gates! 

In 1975, at the age of 20, Bill Gates founded Microsoft with high school buddy Paul Allen. At the time Gary Kildall’s CP/M operating system was the industry standard. Even Gates’ company used it. But Kildall was an innovator, not a businessman, and when IBM came calling for an OS for the new IBM PC, his delays drove the big mainframe company to Gates. Even though the newly established Microsoft company couldn’t fill IBM’s needs, Gates and Allen saw an opportunity, and so they hurriedly bought the rights to another local company’s OS — which was based on Kildall’s CP/M system. Kildall wanted to sue, but intellectual property law for software had not yet been established. Kildall was a maker who got taken.

So Bill Gates took from others to become the richest man in the world. And now, because of his great wealth and the meritocracy myth, MANY PEOPLE LOOK TO HIM FOR SOLUTIONS IN VITAL AREAS OF HUMAN NEED, such as education and global food production.

—Gates on Education: He has promoted galvanic skin response monitors to measure the biological reactions of students, and the videotaping of teachers to evaluate their performances. About schools he said, “The best results have come in cities where the mayor is in charge of the school system. So you have one executive, and the school board isn’t as powerful.”

—Gates on Africa: With investments in or deals with MonsantoCargill, and Merck, Gates has demonstrated his preference for corporate control over poor countries deemed unable to help themselves. But no problem—according to Gates, “By 2035, there will be almost no poor countries left in the world.”

Warren Buffett: Demanding To Be Taxed at a Higher Rate (As Long As His Own Company Doesn’t Have To Pay) 

Warren Buffett has advocated for higher taxes on the rich and a reasonable estate tax. But his company Berkshire Hathaway has used “hypothetical amounts” to ‘pay’ its taxes while actually deferring $77 billion in real taxes.

Jeff Bezos: $50 Billion in Less Than Two Years, and Fighting Taxes All the Way 

Since the end of 2015 Jeff Bezos has accumulated enough wealth to cover the entire $50 billion U.S. housing budget, which serves five million Americans. Bezos, who has profited greatly from the Internet and the infrastructure built up over many years by many people with many of our tax dollars, has used tax havens and high-priced lobbyists to avoid the taxes owed by his company.

Mark Zuckerberg (6th Richest in World, 4th Richest in America) 

While Zuckerberg was developing his version of social networking at Harvard, Columbia University students Adam Goldberg and Wayne Ting built a system called Campus Network, which was much more sophisticated than the early versions of Facebook. But Zuckerberg had the Harvard name and better financial support. It was also alleged that Zuckerberg hacked into competitors’ computers to compromise user data.

Now with his billions he has created a ‘charitable’ foundation, which in reality is a tax-exempt limited liability company, leaving him free to make political donations or sell his holdings, all without paying taxes.

Everything has fallen into place for young Zuckerberg. Nothing left to do but run for president.

The False Promise of Philanthropy 

Many super-rich individuals have pledged the majority of their fortunes to philanthropic causes. That’s very generous, if they keep their promises. But that’s not really the point.

American billionaires all made their money because of the research and innovation and infrastructure that make up the foundation of our modern technologies. They have taken credit, along with their massive fortunes, for successes that derive from society rather than from a few individuals. It should not be any one person’s decision about the proper use of that wealth. Instead a significant portion of annual national wealth gains should be promised to education, housing, health research, and infrastructure. That is what Americans and their parents and grandparents have earned after a half-century of hard work and productivity.

https://www.commondreams.org/views/2017/06/12/now-just-five-men-own-almost-much-wealth-half-worlds-population

This is yet another article that should be an eye-opener to the reality of concentrated capital asset ownership among a tiny wealthy capital ownership class.

Paul Buchheit discredits the philosophy of “meritocracy” that has enabled people to become wealthy and stay wealthy — those holding power selected on the basis of their ability. Buchheit challenges the idea that “the super-wealthy have ‘earned’ all they have.”

I concur with the statement by Buchheit that “ALL modern U.S. technology started with — and to a great extent continues with — our tax dollars and our research institutes and our subsidies to corporations. I would describe the wealth (the non-human productive capital assets) concentration as a fault of the system. As I see it, the challenge requires us to reform the system in order to create a more human economy supports inclusive prosperity, inclusive opportunity and inclusive economic justice, while preserving personal rights in property; but one that does not result in 1 percent of the world’s population owning the same wealth as the other 99 percent moving forward as we build a future economy that can support general affluence for EVERY child, woman, and man.

While Buchheit challenges the belief that “the super-wealthy have ‘earned’ all they have,” (and I concur with Buchheit’s challenge), there is the matter of rights in property ownership, which must be upheld if we are to achieve economic democracy.

The system is the culprit. The system has been rigged by the wealthy and their political cronies to put up barriers that inhibit or prevent ordinary people from purchasing wealth-creating, income-producing capital that pays for itself out of its own future earnings. That is because the system requires “past savings” (denial of consumption) to finance capital formation projects. And ONLY those with substantial labor incomes are able to “save” or individuals have inherited “past savings” necessary to pledge as security collateral against risk of capital credit failure. Few actually “invent” or “innovate” without outside support.

The way to abate further concentrations of wealth, financial mechanisms need to be employed with the opportunity for EVERY child, woman, and man to use to build their own wealth overtime concurrently with the growth of the economy powered by new non-human inventions and innovations that eliminate the necessity for mass labor input.

In place of retained earnings and debt financing that only further concentrates capital asset ownership among those who already own and who have accumulated past savings, the government should require business corporations to issue and sell full-voting, full-dividend payout stock to more people to underwrite new productive capital formation, with the purpose of providing opportunity for new owners, both employees of corporations and non-employees, to participate in a growing economy by purchasing the newly issued stock using insured, interest-free  “pure credit” repayable out of the full earnings generated by the earnings produced by the actual future capital assets. Of course, there needs to be a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital — the rich. This is because “poor” people have no security or collateral, or sufficient income resulting in savings to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

Capital acquisition takes place on the logic of self-financing and asset-backed credit for productive uses. People invest in capital ownership on the basis that the investment will pay for itself. The fact is nobody who knows what he or she is doing buys a physical capital asset or an interest in one unless he or she is first assured, on the basis of the best advice one can get, that the asset in operation will pay for itself within a reasonable period of time––5 to 7 or, in a worst case scenario, 10 years (given the current depressive state of the economy). And after it pays for itself within a reasonable capital cost recovery period, it is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Still, there is at least a theoretical chance, and sometimes a very real chance, that the investment might not pay for itself, or it might not pay for itself in the projected time period (typically three to seven years). So, there is a business risk. This is why a form of capital credit insurance needs to be provide to secure the loans banks make to finance new capital formation project and create new capital owners. Otherwise, the lender has no reason to loan unless it has two sources of repayment. In addition to determining that the investment is viable and that the company is credit worthy and reliably expected to make loan repayments, there needs to be security against default. Thus, for the lender to make the loan security must be provided. This is the purpose of past savings meaning valuable assets can be seized should the investment not return sufficient earnings as projected.

But there is another way to provide loan security facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).

Accessible capital credit insurance, that replace the requirement for “past savings.” is essential to broadening capital ownership with the benefit that expanded capital ownership drives expanded consumer power to purchase products and services.

Capital formation investments are made by companies annually because they are based on projections a number of years out (at least 5 to 10 years) with the expectation that the investment will pay for itself as a result of sustainable growth and consumer demand. Thus, the concept embraces the idea that capital formation is self-financing. The question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan.

Conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers and the pledge of past savings. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners. Pew Research found that 53 percent of Americans own no stock at all nor retirement accounts, and out of the 47 percent who do, the richest 5 percent own two-thirds of that stock. And only 10 percent of Americans have pensions, so stock market gains or losses don’t affect the incomes of most retirees.

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

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

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 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 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.”

It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well being.

To read more about how to universally distribute economic power amongst individual citizens and never allow capital ownership to concentrate see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11 and my article “How To Resolve The Destruction Of American Jobs Problem” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9. This article calls for an actionable policy to resolve the elimination of jobs as a result of technological invention and innovation, as well a competitive globalization of production.