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Economic Democracy Reduces Poverty

Charles Hayes: When I hear senate candidate Elizabeth Warren explain to an audience that no one makes a fortune in America all on their own, I can’t help but wonder why it has taken so long for this argument to surface.

When I hear Elizabeth Warren explain to an audience that no one makes a fortune in America all on their own, I can’t help but wonder why it has taken so long for this argument to surface. Warren praises those who build factories and employ workers, but she reminds entrepreneurs that they did so using an infrastructure paid for by taxpayers and that the workers they hire were also educated with taxpayer money, not to mention the legal system that makes business possible.

Elizabeth Warren

When a person purchases a turnkey business, say a fast-food franchise, they pay a percentage of gross income to the company headquarters that put the package together. A progressive income tax is fundamentally a franchise fee on public investment, and those whose success reaches the stratosphere of financial reward should take pride in paying it.

The complex moral concern at the core of this argument is precisely the reason I don’t want as president of the United States a person who claims primarily to be a businessman or businesswoman. The federal government is not a business; it’s much more important than a business on too many levels to list. That’s why America isn’t a large corporation, although I expect some people wish it were.

I don’t want a president whose fundamental orientation toward life is the business model. Life beyond business is what makes living truly worthwhile, and our species has lived for thousands of years with many divergent forms of economic exchange. What we have today, for all practical purposes, is new and is still being tested, and for a large percentage of our population, it is failing because it is rigged by the winners.

Business depends upon efficiency and the ability to operate at a profit. While these attributes are certainly important to government, they are very often beside the point of what government must accomplish. First off, many of the biological forces that impel and drive the actions of human beings are neither profitable nor efficient. Having children is one glaring example. Raising children is not efficient, and it’s certainly not profitable. War is not in any sense efficient, although for some, it is profitable.

Health insurance is another matter which, in my view, leaves no room for profit when that profit depends upon denying citizens needed medical treatment. The government has many functions that are incompatible with profit. The infrastructure we all depend on daily as we go about our lives is a product of government effort, as is the general maintenance required to keep it functioning.

Extremely low wages do not reflect the real worth of the job for which they are paid. Low wages are expressions of power, namely a lack of it. Having a substantial population of working poor people is a surefire way to avoid real democracy

It’s not uncommon to hear our economic system compared to a religion in which free-market zealots qualify as prophets. And it’s not surprising that so many people assume there is something divinely inspired about capitalism. The very familiarity of what we grow up with can assume a religious or spiritual role. We internalize a sense of reverence for our economic system simply because our whole emotional selves are caught up in the experience, whether our familiarity is positive or negative, or whether we are rich or poor. You’ve only to listen to champions of laissez faire capitalism to appreciate their fervent belief in the system’s divine worth.

But the truth of the matter is that many aspects of our current economic system are arbitrary, and it’s not an exaggeration to say that some of them are corrupt. Champions of status quo economics use the word freedom lavishly as a defense for their actions, regardless of the financial or legal advantage they have lobbied into law for themselves. But are people really free who are engaged in seemingly meaningless jobs that someone must do but that don’t pay a living wage? Are they free if they can’t go elsewhere because they will lose their health insurance, even though it offers pitiful coverage to begin with?

In his book Land of Desire: Merchants, Power, and the Rise of a New American Culture William Leach pointed out that the consumer capitalism we take for granted may have been “among the most nonconsensual public cultures ever created,” because it was put in place by elite commercial groups who were in the right position at the right time. People learn to think a system is fair simply because they have become used to it over a long period of time. The same phenomenon causes people to learn to judge themselves by standards they do not even agree with but apply habitually. For example, they may not think they belong to an inferior class or race, but unconsciously they may feel as though they do because they’ve internalized a cultural prejudice simply from long-term exposure. Our economic system may indeed be powerful, it but suffers egregious inequities.

The number of possible methods for conducting our economic business is staggering, and yet we tend to think our current system is the only practical way forward. Imagine following the advice of Silvo Gessel, a merchant of Germany and Argentina, who argued in 1890 that you could move far more goods by reversing the practice of interest payment on capital principle. Gessel suggested that instead of paying interest to those who held onto money, citizens should instead pay a circulation fee for hanging onto it, thus changing private gain to public profit.

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In her book Interest and Inflation Free Money: Creating an Exchange Medium That Works for Everybody and Protects the Earth
German author Margrit Kennedy suggests that modifications to a system like the one Gessel advocated could go much further in bringing about social justice than any kind of government aid program to help the poor. Methods like these can result in having currency circulate through an economy hundreds of times instead of 21 to 25 times, as is normally the case. Kennedy’s book provides the details necessary to put a program like this into action.

Or, imagine a system with two kinds of currency: one for needs and one for wants. The first to be available electronically; the latter would be common currency like what we have now, but the former would expire if not used in a specified amount of time. For another example, Fareed Zakaria suggested a value-added tax awhile back that would eliminate the federal income tax for most Americans while balancing the budget over time. My point is that an economic system can be rigged for fairness and equitable distribution just as easily as it can to give an advantage to greed.

charles hayes

Extremely low wages do not reflect the real worth of the job for which they are paid. Low wages are expressions of power, namely a lack of it. Having a substantial population of working poor people is a surefire way to avoid real democracy, because it ensures that the people with the most to gain are too busy just scraping by to protest. Moreover, they are very likely to lack the education they need to articulate their unfair disadvantage effectively. This is true, of course, up to a point: revolution.

Here is one quick way out of our current economic slide:

  • Take the cap off of Social Security.
  •  Collect Social Security taxes on all earnings.
  •  Roll back the retirement age to 65.

Increase the amount of the monthly Social Security benefit so that each recipient receives an income near the top of today’s maximum Social Security payout, regardless of how much they paid in. People who have worked all of their lives at low wages deserve a dividend for having made life easier for those who have earned more and benefited from the low prices of the goods and services that the low wages made possible.

This may seem inefficient. It may not be considered good business. But as a foundation for a just society it is much more important than the business of business, period. It would have the distinction of making America a great country. It would clear the way for thousands of younger workers to enter the workforce while making it possible for others to retire. It would, in effect, make freedom ring.

In a society where all of the rules of business are made by those who reap the greatest rewards from the results, there has to be a method of providing equity for everyone else or there can be no common good or common ground. Call it the redistribution of wealth if you wish, but I prefer a just distribution of wealth, which is precisely what it is. Without a method of establishing and maintaining a moral foundation of equity in a society rigged by the winners, an incessant emphasis on the notion of freedom is at best little more than fraudulent propaganda and at worst a seething contempt born of mortal insecurity and the existential angst that comes with the human condition.

Charles Hayes

Charles Hayes

Providing a liberal or existential education to the population at large is a reasonable and necessary remedy for this situation. It is the only hope we have of getting citizens to understand the complexity of human behavior and how easily we are turned against one another as a tool of business or when confronting any special-interest group with an agenda. On the one hand, we need to create jobs for full employment, and on the other hand, we would be much better off environmentally and socially if many of the jobs created were left undone or unperformed. It takes a great deal more than business savvy to create a viable democratic civilization.

Charles Hayes