More Effective Remedies for Inequality

Yves here. The subject of inequality in income and wealth has, in the last year or so, become an oft-mentioned topic in economic and political commentary. It’s now even acceptable to use the word “oligarchy” to describe the US. Yet too often lost in the debate is that this type of inequality is the result of what right society allows various members to have. For instance, in the last 30 years, intellectual property laws have gotten stronger while the rights of workers to organize have been cut back.

We had a more equitable society when unions were stronger, taxes were more progressive, and anti-trust laws were enforced. This post by Geoff Davis serves as a reminder that there are remedies other than progressive taxation (which he regards as an after-the-fact remedy) to achieve that end.

By Geoff Davies, author of Economia: New economic systems to Empower People and Support the Living World (ABC Books, Sydney, 2004), and the eBook The Nature of the Beast: How economists mistook wild horses for a rocking chair. His new book is Sack the Economists. Cross posted from Steve Keen’s Debtwatch

I have read only reviews of Thomas Piketty’s Capital in the Twenty-First Century, but clearly it is valuable for documenting the nature and history of inequality over the past century or three, and for highlighting the excessive political power that flows from super-wealth. Yet he frames it in terms of capital and capitalism and, for all the quality of his diagnosis, his main prescription evidently is just to tax the wealthy, through income and inheritance taxes.

The trouble is, capital and capitalism are very ill-defined. To speak of capitalism is to invite an un-constructive shouting match. Capitalism has caused great harm to people and the world! Yes but capitalism is what has made us rich!

A more useful framing is that there have been, and can be, many ways to structure a market economy. When one looks into the mechanisms that have operated in market economies, one can readily identify mechanisms that pump wealth from the 99% to the 1%. One can then think of ways to stop or reverse these flows, so wealth flows more fairly to everyone involved in its generation. It will be much more effective to fix the problems at the source than just to apply traditional retro-active bandaids like taxes.

In my own book Sack the Economists, I identified seven fairly obvious such mechanisms. Below is an edited excerpt that summarises mechanisms identified in the course of the book’s analyses. (Dean Baker has also made lists, short and longer, which are a little more detailed and only partly overlapping with mine.)

Finan­cial mar­ket speculation

The financial markets are dominated by speculation and other activities whose sole objective is to siphon wealth from the productive economy. The amount of wealth involved is very large. Some indication might be obtained from the fact that financial sectors in the US and Australia now account for 30–40% of corporate profits. Because corporate profits would be a large fraction of GDP, this means a significant fraction of total wealth is pumped to the rich by this mechanism.

Cap­tur­ing emer­gent com­mu­nity wealth

This is the wealth that results from the proximity of individual assets and investments. It belongs to no individual, it belongs to the community. In some places some of this wealth is captured for community use, but very commonly the wealth passes as a windfall to private interests, much of it to developers and landlords. In this way small property holders and renters lose their share of community wealth to those rich enough to be able to capture it.

Inter­est charged on new money

Our money is created in the course of making loans, and interest is charged as though it were savings, rather than having been created out of nothing. Because we need money for the economy to function, this burden of interest weighs on the whole economy. Banks profit by maximising loans, so the amount of money in circulation is maximised, and this increases the burden on everyone. This is effectively a private tax on the entire economy that pumps wealth to the richest ten percent. A simple charge for the service of providing a medium of exchange, along with stronger regulation of loans, would be far less burdensome on the economy.

Access to loans

The rich can obtain loans much more easily than the poor. They can invest their loans and become even richer. This mechanism is widely recognised and clearly an important factor, though it is hard to estimate the amounts of wealth involved. Mohammed Yunus demonstrated, with his Grameen Bank in Bangladesh, that it is possible to give loans to the poorest people and so to reduce this iniquity.

The own­er­ship escalator

We use only a restricted range of ownership options in our present economic system. As a result ownership is highly concentrated. Even though public corporations are owned collectively, it is the rich who own shares disproportionately. Even though many people own some shares through retirement funds, the distribution of ownership is still strongly skewed to the rich. Once you gain ownership of significant assets, wealth begins to flow to you. If you are poor and have to rent your accommodation, wealth drains away from you. Owners are on an up escalator. The poor are on a down escalator.

As William Greider observed, the problem is not that capital is privately owned, the problem is that most people don’t own any. We already have many forms of ownership that can change this. Ownership can be distributed much more equitably by actively promoting less common forms such as ownership by employees and other stakeholders. Ownership can also be conditional, with time limits and progressive transfers of ownership, or owning buildings but not land, and so on, as discussed earlier.

Cor­po­rate welfare

There are many subsidies paid to corporations or rich minorities that benefit the rich at the expense of the poor. Often they harm the environment as well, thus harming everyone. Even a decade ago perverse subsidies amounted to perhaps $2 trillion annually, a considerable fraction of global wealth generation. Subsidies to fossil fuel use amount to perhaps $300 billion globally.

This is closely related to cor­po­rate wel­fare, because it is prac­tised mainly by large cor­po­ra­tions, par­tic­u­larly transna­tional cor­po­ra­tions. They do this by com­plex inter­nal trans­fers of money that exploit loop­holes in tax laws, or dif­fer­ences in tax sys­tems among nations. They are abet­ted by a few small nations that charge min­i­mal cor­po­rate tax. Such tax havens could be closed down overnight by con­certed action of a few rich nations, but those nations’ gov­ern­ments are owned by the rich, so it doesn’t hap­pen. The pro­por­tion of taxes col­lected from cor­po­ra­tions has dropped by about half over the past half century.

This list will not be exhaus­tive, but it already demon­strates that vast amounts of wealth are trans­ferred to the rich by mech­a­nisms that can­not be jus­ti­fied as the fair oper­a­tion of mar­kets. Either the mar­kets oper­ate per­versely, through the invis­i­ble fist instead of the invis­i­ble hand, or they have been rigged, with the con­nivance of com­pli­ant leg­is­la­tors. Cor­po­rate wel­fare and much tax avoid­ance result from explicit inter­ven­tions. The other mech­a­nisms are due to mal­func­tion­ing mar­kets that allow some indi­vid­u­als to exploit an insta­bil­ity, an up esca­la­tor, that allows the rich to become richer.

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107 comments

  1. RanDomino

    There aren’t going to be any top-down solutions. Any proposals which rely on a framework of the existing political/governmental system are dead on arrival. The only proposals which matter are ones that suggest ways of organizing bottom-up systems. Any specific mechanisms like those stated here can only, at best, be suggestions of what might be possible under a different system. Otherwise they are worthless, because there’s already a surplus of criticism and wishful thinking.

    1. Nell

      It is hard to imagine right here and now how it would be possible to move the establishment from it’s current path. But it is even harder for people to imagine a new political/economic paradigm. We need a popular movement, and it has to be a popular movement that people can relate to. People relate to the cultural values that they are embedded in. It is how the neoliberal paradigm took over. They used the cultural value of ‘freedom’ to effectively remove the freedoms from the masses. We need to do the same kind of thing – but in reverse – remove the freedoms of the oligarchs. The constant level of attack on the current order based on a critique of underlying assumptions is a good thing. It should continue as none of us know what idea, or set of ideas will spark a movement.

    2. Banger

      Sadly you are right. Over the years I’ve heard or read about dozens of well argued policy proposals about everything imaginable that you and I would agree are common issues. But if it doesn’t make a sh@tload of money for some oligarch it isn’t going to happen; so these sorts of well meaning ideas presented by all the many very smart people that post and comment here are marginally interesting but usually fail to face up to current realities which we’ve discussed here endlessly. Unless someone comes up with some reasonable road map for change we are wasting our time proposing policy reform.

      1. Glenn Condell

        ‘Over the years I’ve heard or read about dozens of well argued policy proposals about everything imaginable’

        Too right, though it would be more like hundreds than dozens. There are dozens here alone on any given day.

        ‘But if it doesn’t make a sh@tload of money for some oligarch’

        Sounds like a job for Omidyar, perhaps via the Clinton Initiative with a TED talk and Summers on the board.

        ‘Unless someone comes up with some reasonable road map for change we are wasting our time proposing policy reform’

        Yes, we deal in destinations generally, and ignore the potholed (or non-existent) paths that might lead to them. I have always thought that utilising the net to allow citizens to register indicative preferences on all issues (or just those they can be bothered about) in real time on a constitutionally protected open public database would provide a rough but broad highway to enhanced governance, but very few people seem to agree. Pie, meet sky.

        This was interesting; the idea of using citizen juries drawn by lot to address each major governmental decision:

        http://www.smh.com.au/comment/forget-democracy-we-need-a-new-way-to-govern-20140422-zqxuv.html

    3. NotoriousJ

      Agreed, so I see the primary value of this list as a de-bunking of the Randian tripe that redistributive taxation is interference with otherwise free markets. Our markets are highly manipulated already – in favor of the owners of capital.

  2. Middle Seaman

    Extreme inequality plagues the whole capitalist world. The US immense inequality isn’t unique. By all likelihood, extreme inequality is the current evolutionary stage of capitalism. Taxation, regulations, taking money out of political campaigns may sound helpful, however, the problem cannot disappear by partial measures.

    When the executive and legislative branches of government represent the rich instead of the voters, the cancer has metastasized. OWS had it right. Don’t expect congress or the president to help.

  3. reason

    mmm..
    So let’s count up the number of separate bandaids we need.
    I like to keep it simple. Redistribute – increase the income of the poor and they will save and build ownership, and make having large holdings of assets more expensive, and so less attractive. What is wrong with such a simple solution? He doesn’t say.

    Guaranteed citizen’s income, it may offend the moral sensibilities of some (something for nothing), but the micro-economics are much better and it scales – it continues to work even when circumstances change – rather than having to find another new bandaid.

    1. susan the other

      I for one would much prefer the use of something-for-nothing economics than the one we have, which is a free for all for any profit at all-for-the-death-of-the-planet. Something for nothing, in this context, enriches us all.

      1. Gabriel

        Susan,

        Nice — “[A] free for all for any profit at all-for-the death of the planet” – a to-the-point, concise description of our economy, and unfortunately accurate.

        Maybe economist and politicians should use your description when they discuss our economy – at the very least it makes people stop and think.

    2. ian

      There are big practical difficulties to what you suggest. When you take from X to give to Y, how do you spend the money wisely without corruption or waste? How do you avoid creating yet more entrenched interests that don’t want to be cut off from the money in the future?

  4. Hugh

    I agree that economic change will not happen without political change. And political change will only flow out of a popular mass movement that has a clear program of what it wants and what it does not want and an equally clear view of its goal, the society it and its members want to build.

    Only out of such a movement would it make sense to talk about reinvigorating unions, re-regulation, an end to corporate personhood, a guaranteed minimum income, the right to a meaningful job paying a living wage, rights to healthcare, education, housing, and food, ending the Fed’s bubble blowing and its war on American wages, and the repatriation of wealth stolen by the rich and elites.

    In this regard and to place effective upper limits on wealth, a progressive tax system is imperative. My suggestions which I have given in the past for this are

    1. A 50% tax rate for incomes above $300,000 going to 75% at $1 million.

    2. A marginal 95% tax rate for income above $1 million. All earnings here and abroad from whatever source to be declared and taxed as income. Any wealth and/or income undeclared to be confiscated and subject to additional financial and criminal penalties.

    3. A yearly 10% asset tax on household wealth above $20 million.

    4. Current charitable foundations set up by families (think Gates, Buffet, etc.) to also be taxed at this same rate. Ban family foundations in the future.

    5. A 50% tax on gross corporate profits. All profits and assets here and abroad to be declared or subject to confiscation with additional financial and criminal penalties for both the corporations and their chief officers.

    6. 100% estate tax on all estates over $3.5 million per individual, $7 million for couples. Eliminate most trusts.

    7. No renunciation of citizenship accepted until all tax assessments are paid and any assets in excess of $3.5 million returned to the American people.

    8. Any bank which hides or abets in hiding assets from taxes shall lose its charter to do business in the US.

    1. Dan Kervick

      I agree. Aggressive progressive taxation will not only immediately address existing inequalities. It also restructures the system of incentives and helps prevent new inequalities from emerging. The historical record seems to bear this out: the CEO salary boom took place after the neoliberal assault on the progressive tax code.

      Geoff’s call for a redistribution of ownership and changes in corporate governance structure are also very valuable. Dense concentrations of private wealth lead to even greater concentration.

      Also, the fact that the public doesn’t always know where the wealth is, who possesses it, and how it is moving from owner to owner and place to place is a scandal of the modern world and a key enabler of the global capital and wealth extraction rackets. A global movement pushing for the creation of a global capital registry would be an exciting thing for ordinary people around the world to get behind. Public information is public power.

      1. mansoor h. khan

        Dan Kervick said:

        “Aggressive progressive taxation will not only immediately address existing inequalities. It also restructures the system of incentives and helps prevent new inequalities from emerging.”

        And we have a working example of the above even now in the western world itself:

        The Scandinavian countries

        By pointing to and showing a working example is how you convince people. Real examples is what convinces most people especially when they are screwed and open to new ideas.

        We need to make the rest of the world aware of how Scandinavian countries think and the “social” thinking they have. These guys have been and are on the right path. These countries know Reaganomics and Thatcher-ism is tantamount to cluelessness. They know that without taking care of all members of a community the community is doomed.

        These countries have “shared” the fruits of industrial civilization much more within their community.

        These countries even though industrialized have kept much of the pre-industrial “take care of everybody in the village” mentality.

        Even though atheism is very strong in these countries intellectual honesty (and the Quran) compels me to give credit where it is due. I dislike atheism.

        We should not give up so easily. We need to study these cultures and emulate the useful/good features/thinking from them.

        Even Japan is more “social” thinking than the Anglo Countries. But Scandinavian countries are much better at it. They have the right balance of individualism and “community spirit”.

        Mansoor H. Khan

        1. amateur socialist

          There may be a more recent and pertinent example: The reunification of Germany. It involved significant expenditure and financial stress (and the associated political turmoil) to reconcile inequality between East and Western German workers. It caused quite significant short term economic turmoil, at one point I think unemployment in Berlin approached 20% during the transitional period.

          Seems to have worked out pretty well for them after the fact.

          1. NotTimothyGeithner

            I think the Berlin unemployment involved a major influx from east germany, much like FDR’s policy against share cropping led to short term unemployment in certain urban areas as people moved on. The Berlin unemployment headline number was skewed because much of the unemployment was about people leaving their jobs and east Germany ventures retooling. How many steel mills does Germany need? When there two Germanies, at least two.

            1. amateur socialist

              Okay but whatever the mechanism, whether eastern workers moved west or stayed put and found better paying jobs the net result was the same. Lots of eastern german workers made more and became more affluent over a relatively short period.

              This cost western german workers a little bit in raises and taxes, and the corporations a little bit in profits etc. but it happened. The country decided as a matter of policy to devote significant resources towards reconciling the inequality bred of 50 years of soviet privation. Maybe the US can find the political will to address the inequality bred of 40 years of corrupt business and developer friendly policies. Anything’s possible.

          2. susan the other

            Northern Germany is virtually Scandinavian. Southern Germany is a bit more willing to be neoliberal. It’s the cold weather in the north that makes people come together mentally. Betcha. I know northern Germans really look down their nose at those “gemutlich” Oktoberfest displays of beer and vomit. Followed by more beer.

            1. allcoppedout

              I find myself wondering what life is about. I don’t do religion, finding it grimly trivial. Science tells us our planet is doomed. In shorter term we look like a bacteria colony poisoning its own environment. Longer term the sun dies and so do we unless we can find a way to travel to other worlds. Even then the universe flies to ‘heat death’ and we’ll (whatever we then are) need another one. So what are we to have faith in?

              Why should we bother. The Gnostics hold we should not. Creation is a mistake and we should return peacefully to nothingness. Even this isn’t enough, as evolution tells us something else will rise after our demise.

              Economics doesn’t help much with faith or why we should bother. Somehow, everything will be fine, yet we go to war, burn and poison the planet as we bow to this religion, doing jawbz we don’t like as cogs in the groaf engine. This is life disabled of faith in rationality. We can’t address poverty directly, or global warming by not burning fossil fuels. We scream silently watching the few monkeys with all the grapes.

              Faith is peculiar Most of us surely know so little of economics we can’t have knowledge-based faith. I’ve found it very like religion in that familiarity with text breeds contempt. Anthropology and history tell us people will have faith in the weirdest stuff. One wonders why we can’t have faith in egalitarian systems and transparency. But then, faith also has opaque mystery.

              1. mansoor h. khan

                allcoppedout,

                Well. I used to think like this in my teens. Then Buddhism taught me “Life is Suffering” (in my early twenties). I started (kinda) of believing in buddhism because all the bad stuff I saw on TV and all around me. I actually took a college course in buddhism to learn more about it. However, after marriage and kids and having a decent job I realized life is not completely suffering.

                Then I really learned Islam (even though I was born in a Muslim family) I did not really get it until the late twenties. Islam teaches that life is a test and suffering is an incentive to search for the infinite perfect truth.

                I have written about how I interpret Islam. You can read it here. I wrote it from a western mind’s perspective (atheist’s perspective):

                http://mansoorkhan114.blogspot.com/2013/03/why-islam-last-update-31-2013-this.html

                Mansoor H. Khna

              2. Glenn Condell

                Well said, that’s the unavoidable residue left after every epiphany or soul-search. You have channelled me, at least until I have had strong coffee in the morning.

                Perhaps the believers have it right after all; maybe the trick is fooling yourself out of trivial grimness and into trivial gaiety by the simple expedient of ignoring the brutal facts you limn above, or by enlisting these as actors in some cosmic drama that places you in a role, however minor, that cauterises the fear those facts provide as a bass note to your life.

                ‘One wonders why we can’t have faith in egalitarian systems and transparency’

                We can, we do..most of us. But having faith ain’t enough, and hope is even worse. What is missing is a mechanism of transmission of electoral desire into electoral representation – democracy I guess.

                We are using tools of governance we created hundreds of years ago, mired in the slo-mo of tri or quadrennial election cycles, the campaigns for which, by crushing years’ worth of issues into a few months of well-funded sqwarking disinfo effectively neuters a decent consideration of any of them.

                Such considerations would not tick those items off your terrifying laundry list above, but it might help you face and even accept them with a little more equanimity.

                Still, it’s probably easier to get religion!

            2. Robert Dudek

              Northern Germany isn’t colder than the south. That is because the south is more mountainous.

          3. President Costana

            Germany’s corporate governance laws are radically different than in the US. Under Germany’s co-determination law, 50% of directors are elected by workers, which would be unthinkable in the US. Worker representation has proven to be solid success and Germany has retained most of its industrial base, quite unlike the US where greedy CEOs relentlessly outsourced manufacturing. The CEO to worker pay gap is also much smaller than in the US.

            However, don’t expect the US to adopt a co-determination system. In fact, hardly anyone in the US is even aware of German style co-determination because the mainstream media refuses to even acknowledge that it exists. Such ideas are not part of the acceptable parameters of political debate in the US, not even on the left fringes of the Democratic party.

      2. Middle Seaman

        Talk about Neoliberalism misleads people to think that the current inequality, huge financial sector and CEO control ensued due to decision made by the Great Satan, i.e. Neoliberals. The EU, some Asian countries and some South American countries didn’t have the Glass Steagall Act nor did their government have the largess of the US government. Still, all these countries suffer of pathological inequality.

        Current inequality seems to be caused by the move to service industries, the decline of manufacturing, establishing an information industry and elections that require large investments.

          1. susan the other

            Part of the problem was that private banks were allowed to create the fiat to finance all this very messy neoliberalism, and earn money on interest on that very fiat. So that’s one big reason to allow national finance to shut down the creation of money for the sake of private finance’s profits. Keep being reminded about my favorite line in Catch 22 where the guy says to the priest, “You guys haven’t had a good idea for 2000 years.” I’d say that applies to finance as well.

    2. Ulysses

      These are all excellent proposals. I think the value of number 6 cannot be overstated. This would provide excellent incentives– for the wealthy to do more socially useful things with their money than to merely expand and hoard their treasure.

      1. Vatch

        Yes, number 6 is valuable, but I think it needs a slight change. Instead of a very high (or total) tax on estates above a certain value, such as $3.5 million, I think this tax should be on inheritances above this value. For information on the difference between an inheritance tax and and an estate tax, see:

        http://www.irs.com/articles/inheritance-tax-vs-estate-tax

        Chapter 12, “Revamping the Ovarian Lottery”, of the book Billionaire’s Ball, by Linda McQuaig and Neil Brooks, recommends an inheritance tax instead of an estate tax. Their reasoning is that if there are several heirs, each person’s inheritance is already reduced by the amount that other people are inheriting. An estate tax will unfairly reduce the already reduces inheritances. But an inheritance tax will be based on what a person will actually be inheriting.

        Imagine a simple case in which the estate tax is 0% for the first $3.5 million, and 100% for anything above that. Suppose an estate is worth $4 million and there are 10 heirs with equal portions. The estate will be reduced by the tax to $3.5 million, and each will get $350,000. Suppose another estate is also worth $4 million, but there is only one heir. That heir will receive $3.5 million.

        Now imagine a case in which the inheritance tax is 0% for the first $3.5 million, and 100% for anything above that. Suppose an estate is worth $4 million and there are 10 heirs with equal portions. The estate will not be altered, and each will get $400,000. Suppose another estate is also worth $4 million, but there is only one heir. That estate will not be altered by tax, either, but the inheritance will be limited to $3.5 million, so that heir will receive $3.5 million.

        The inheritance tax will prevent an heir from receiving an absurdly large sum, but it will not reduce the inheritance of a person who is getting a more moderate sum.

    3. amateur socialist

      Or we could just start with having the State Dept verify tax compliance with the IRS and state revenue departments for any passport renewal. It always struck me as odd that you can get a passport denied for various kinds of felony convictions or even severe indebtedness but not for failing to file a tax return.

    4. Propertius

      6. 100% estate tax on all estates over $3.5 million per individual, $7 million for couples. Eliminate most trusts.

      Across the board? No exemptions or exceptions?

      So you’re in favor of eliminating what’s left of small, family farms in favor of corporate agribusiness? Check out the price of farmland in the more productive areas of the Midwest, Hugh: it’s currently running over $11k/acre. At that rate, a mere half-section (320 acres) would come very close to your confiscatory tax. That’s so small that it’s not really a sustainable operation in the 21st Century.

      And what does it mean to tax an estate “for individuals” or “for couples”? Estate taxes are levied against the estate itself, not the recipients. Is an estate passed down from the surviving member of a couple long after his/her partner has died an “individual” estate or a “couple” estate? Do both owners have to perish simultaneously for it to be a “couple” estate?

      Does it really make sense to tax a (very) small, working farm that may have been in a family for generations at the same rate one taxes the estate of a Koch, Walton, Soros, or Buffet?

      1. ambrit

        Dear Propertius;
        I can think of one way to side step your “family farm” objection: Make the tax contingent upon divestment of the farm. The tax would kick in when any of the heirs sells his or her share of the farm. The tax would only apply to the value subtracted from the total farm, and an exception could be made for lesser value sale of shares in the totality back into the farm. The farmers are incentivized to maintain integrity, of land and ethics.
        Also, when it comes to farming, I would contend that economic viability is not the same as agricultural viability. quite the opposite seems to be the case as far as the health of the land is concerned. A man I work with has a brother who is slowly going bankrupt trying to maintain the family farm at the level of infrastructure “modern” economic based farming requires. By trying to keep up with the huge industrial farm conglomerates, he is being punished by the downsides of the economy of scale.

      2. Hugh

        How many family farms are there in the US worth more than $3.5 million? How many would there be if the current speculative bubble in land prices was squeezed out by higher income, asset, estate, and corporate taxation? I think limited exceptions could be made for farms being actively worked by a family as opposed to land held by it and rented out to some large agribusiness. Why should large family farms which are corporations not be treated like corporations?

        1. Propertius

          How many family farms are there in the US worth more than $3.5 million?

          Quite a few – probably most, in fact. As I pointed out, that’s about the current value of a half-section in the best farming areas in the country. I know 320 acres sounds like a lot to an urban dweller, but it’s actually somewhat below the average size of a family farm in the US (418 acres). While some crops can be grown quite profitably on fairly small farms, many require larger operations in order to achieve economies of scale.

    5. ian

      And who determines what this great windfall will get spent on? Or that it will be spent wisely? Or not simply given to cronies?
      Or are you simply arguing that it doesn’t matter what it gets spent on, as long as it is taken away from the ‘undeserving’.

      1. John A

        Exactly. Everyone is so quick to turn on everyone else who is “undeserving.” Half of the comments on this board are truly scary. It seems like many people simply want to grind everyone down to the same level, just because it will make them feel better about themselves or make them feel righteous and self-satisfied. There’s true ignorance in some of the comments as well. Corporate taxes is one example. Corporate taxes are a feel-good accounting fiction used as a talking point. Corporations don’t pay taxes. Ever.

  5. mellon

    There are areas in existing laws which are designed to discriminate totally and silently. For example, just like restrictive covenants blocked nonwhite and Jewish people from living in affluent communities, hidden gotachas in laws prevent poor children of authors from owning intellectual property that otherwise would be theirs under law.

    And then the agencies tasked with enforcement announce they don’t plan to enforce the laws we do have unless the amount is too small to matter.

    Basically, they all have set up a system to steal huge amounts of IP from an entire class of poor children, pretend to be fair, but in fact since the system gives them rights based on their personhood, and identity, which is not a question of law, its a question of fact, therefore what is in fact happening is that the system throws the question of their very legal existence into an adversarial legal context, which exposes them to lawsuits, where they could have to pay their opponents illegal fees, lawsuits they could never afford to defend themselves in. Because it costs huge amounts of money.

    Then they call that “justice”! Its an attack on the poor because they are poor. Taking something of immense value which should by all rights be theirs, just because they are powerless to defend it.

    It’s really a scandal, considering the sanctimonious way the US tries to portray itself on IP.

  6. paul meli

    “Our money is created in the course of making loans…”

    Not actually true. Since WWII, roughly 56% of our “money” came from public spending (~$68T), 44% as result of credit expansion (~$47T).

    The quoted text above is based on an assumption that income taxes only accrue against public spending, but in fact income taxes are blind and accrue against all income no matter the source of spending.

    Two hoses filling the “pool” of funds…what remains after taxes does not alter the ratio of the sources of the funds. Most of our money is created through public spending.

    Nevertheless the belief that our “money” comes mostly from credit is widely held and misunderstands the real money circuit completely.

    Further complicating the discussion is the fact that credit adds nothing if it isn’t expanding, but expansion is limited by income levels, which have been declining in relative terms for those that need to borrow. Since 2008 private credit outstanding has not returned to its all-time high point. No wonder. Where will the income come from to support it?

    Any further expansion of credit from here without a corresponding increase in income for borrowers is likely to result in another banking failure.

  7. TomDority

    Taxation upon land and removal of taxes from wealth creating activities (the productive economy) and the removal of taxes on the products of wealth is a progressive tax with huge benifits to the man-made economic environment we live in. Without a progressive tax system that recognizes and targets economic rent extractive activities and, applies revenue gained therefrom into the public sector (infrastructure, energy, sustainability, education, removing poverty, creating a habitable planet for all creatures etc); no amount of minimum wage, guaranteed work, guaranteed minimum income or other superficial dressing will reverse the direction our current form of capitalism is leading us.
    Our current form of capitalism is driving our planet earth and all its inhabitants into a dead end – literally. Our current form of capitalism is disintegrating the minimal progress man has made over hundreds of thousands of years. Our current form of economics leads people to believe that individual survival – survival of the fittest WITHIN our own species – is the paramount game despite all the evidence to the contrary throughout the entirety of our planets history…including our very short history and our limited observations of other species on this lone (mayby not, but, does it matter?) space craft we call earth.

    I have no doubt this earth will continue to support life for a million years to come…. I have no doubt that mans destruction and distortions of the earth’s environment will change the balance of species that will flourish upon this planet. I have great confidence that our species, through our own invisible hand, through our own hubris and habitual fighting amongst ourselves; will lead to our own disposession of our only planet.

    I have great hope for the future. I may not see that future but, I do know humans can achieve a future where we all strive to maintain the best possible conditions for all the inhabitants (plants, animals, micro, macro etc) on this planet. This planet is the best dang space ship we have and, the only one that provides everything we need to flourish. We evolved into it and are part and parcel of this complex organism (we are completely woven into this ecosystem, completely embedded and dependent to a much higher degree than our hubris allows us to recognize. Embedded from the smallest prion to the largest expanses of the universe). Not to get religious but, we are stewards of this planet and have dominion over it….however one wishes to spell out how we came to this apex position, it is a fact and, by the looks of it, we are doing a piss poor job of it.

    So where does my hope stem for a better future? This is how I think of it. Our current history is denagrated by an unjust revenue system; a revenue system that favors economic rent seeking over wealth creation, economic rent seeking over planetary health….a blind lust for dominion, blind to the bigger picture and blind to this paths end which, IMHO, is a path leading to the unsustainable decoupling of our species interdependence upon this earth’s ecosystem. Earth is the ultimate public space…the ultimate commons. If we tax economic rent seeking and apply that revenue towards the commions….just maybe….maybe we can see light in the long dark tunnel we find ourselves.
    Sorry for the rant.

    1. mellon

      Technology is producing abundance, not scarcity. Thats a big part of what’s happening. With the current focus of at least teh US on military spending, a great deal of the money which is gathered via taxation is spent on something which adds no real value. The wisdom of increasing taxes without first reducing military spending is questionable. All we would be doing is giving the government more money to spend on toys which eventually would likely be used in the worst ways imaginable. If instead we concentrated on creating value, and put even our military and “security” related spending to a test which evaluated its investment in the future nation’s prosperity, for everyone, then we could probably drastically increase our national focus on building value for our future without the large tax increases on anybody but the super wealthy. And we could even make that a buy in situation. Voluntary.
      With our current government – which is corrupt, increasing taxes is a double edged sword.

      1. jrs

        good point. The military, homeland security, the security agencies, they will be used against the people of the world as they long have been, and increasingly probably against the 99% in the U.S. as well (as will the prison industrial complex). We’re just funding our own destruction. Sure they may not need to raise taxes to fund all of it (or what is money printing for) but it does give them money to play with. The thing is they tend to hold us hostage, all that destructive spending can’t be cut no matter what (too many vested interests I guess), but agree to more taxes or social program gets it (whose vested interest have no such money to throw around).

        1. jrs

          Of course taxing purely rent or plutorcrats is another matter (as opposed to raising taxes on the majority that file), but in a state that the plutes control it will be spent for the plutes benefits? Yes, probably. And that includes the military and security forces. But in a state that the plutes control it probably won’t be them that get their raised taxes anyway? Yes. It all becomes completely circular. Without a people’s movement, it’s all pretty worthless.

  8. mansoor h. khan

    paul meli said:

    “Any further expansion of credit from here without a corresponding increase in income for borrowers is likely to result in another banking failure”

    So we need more money in the hands of the spending public by whatever means (JGP, Social Credit, much higher public assistance, much much much higher mininum wage, etc.).

    Mansoor H. Khan

    1. mellon

      Real single payer health care, which means no insurance companies, can save the nation’s people a lot of money. At least a quarter million dollars per person over their lifetimes. Its the only way. (The fake single payer a lot of people, states, etc are promoting to confuse the issues, which doesnt get rid of the insurance layer of waste is not single payer, and doesnt save money, though. It will actually cost MORE. Real single payer will require changes in US trade policy, though which they are loathe to do.)

  9. Paul Tioxon

    Yawn…. Well, if wishes were horses, beggars would ride, add that to your list. Inequality over the last century is only the most recent century for inequality. You also need to list every other century, but then you would have to be a social scientist, not an economist to have something to say that isn’t only slightly more interesting than a CPA. Capital and capitalism are very ill defined, so say you. You can’t be talking about Piketty’s book having admitted to not him reading at all, only reviews. Can I assume that you do not know what you are talking about because you end up raising your voice when you do talk about capital and capitalism? I’ll be productive by not using any caps in blogging my response.

    Let’s start with a simple definition of capitalism. It is the perpetual pursuit of profits. The pursuit begins with a process of turning anything and everything into a commodity, by placing a price on it by means of the market, which will be defined as a pricing mechanism. Since profits are a concept, an intangible symbol for getting more from a transaction than you put into your side of the trade, all profiting must be unequal by nature. You are selling something for more than the value of it creation. Perceived value, utility, another intangible concept, does not matter to profit making. The only thing that determines profit is to sell at a price greater than the price of production. So, in capitalism, a system is set up to profit, but only by unequal trading. Where does the profit come from other than inequality at the point of the transaction?

    Eventually, the market system goes up against the social order, the social relations set and accepted as the expected behavior by people everyday of their lives. Labor becomes a commodity, landed aristocrats transform their sleepy, self sufficient holdings into profit making enterprises, by farming in order to sell at a profit and changing the social relations of the common people into labor that can be hired or fired at a moments notice, to plant or harvest or engage productively in another profitable venture. But the nature of trade needs more help to grow. It needs enabling investments such as roads and bridges connecting areas that were inaccessible. It needs police to protect goods being transported and courts to settle disputes among other businesses or even labor. The market needs the state to recreate the social relations to further the various profit making enterprises that are growing and taking over command of the people and the resources of the territory within boundaries of the state. This governing order of the social relations is capitalism, the co-dominion of market and state. The politics of state is transformed into what will benefit the market and all of the people who are benefited by the market, all 1% of the populace. The state serves the market and its needs and the market is not placed into service for the national interests of the state, unless there is some benefit, some profit. What’s good for GM is good for America, because America’s business is business and business is good. And, in a system whose foundation is unequal trading, even the commodity of labor will be treated unequally with dire political consequences for labor at first, then without any countervailing policies, for the entire unequal system.

    I hope this clears up any radically competing vagueness over the definition of capitalism. Having operational definitions in the social sciences let’s us all know what we are talking about. As if we all know what we are talking about.

      1. paul meli

        “So what is your “fix” for capitalism?…”

        Capitalism is more in need of competent management than fixing…the fundamental reality of capitalism is that it transfers wealth to the top of the income spectrum naturally…it’s not a conspiracy, it’s part of it’s nature. Capitalism is based on extracting “surplus” from workers efforts in the quest for “profits”. This inevitably results in a one-way flow, just like electrical current flows in only one direction. The only way for this to occur in reverse (trickle-down) is for businesses in the aggregate to lose money…not going to happen and not desirable anyway.

        Progressive taxation was designed to control or reduce this parasitic process. What looks like re-distribution is really public investment in combination with the reduction of disproportionate wealth accumulation.

        On the other end, it seems obvious we need more public investment…infrastructure development (mass transit, development in sustainable energy technologies, maintenance of existing infrastructure, etc..), provision of free education for anyone that wants it, expand health care services to everyone (single-payer), a job guarantee…

        …the last thing we should be doing is creating a system based on more and more people going into debt (neo-liberalism), which is where we are/where we are heading further.

        That just feeds the monster, and the outcome won’t be (can’t be) pretty for the 99%.

      2. Paul Tioxon

        Mansoor,
        Capitalism can not be fixed. America tried that with the New Deal. It introduced a hybrid, the mixed economy. Capitalism did not function for a period because the awesome power of the state was used in service to the most of the populace, primarily White Men, who extended this noblesse oblige to their wives and children. The American South was left out, along with minimum wages for waitresses, domestic workers, agricultural workers, who comprised the bulk of the work available in the economically undeveloped Southern USofA. That does not mean the market mechanism was totally outlawed, that the state directly owned and directed the major industrial production of steel and cement and heavy machinery or commuter autos, it means that the policies of the state started to serve first and foremost, the needs of everyday people by rural electrification, (you should read Caro’s most recent volume of his LBJ bio on what life was like in the Texas panhandle before Johnson worked as a New Dealer to bring washing machines for women and radios and light bulbs to a lonely desolate and hard scrabbling working class), the TVA and The Grand Coolee Dam, the expansion of higher ed with community colleges and a massive expansion of medical care and old age pensions with Social Security and Medicare.

        While this was done without putting a bullet into the heads of thousands of rich people and appropriating their wealth in a bloody revolutionary campaign, it did create a bitter reactionary political struggle of vengeance against the Labor and Liberal coalition that put a limit on the pursuit of profit.

        The political counter moves to overturn these institutions began at the inception of each and everyone of these legislative and social gains. Today, the reformist model of saving capitalism from itself can be revealed empirically as a total failure. Even while profits could be curtailed by government action, when you operate a mechanism that produces infinite results of the type of intangible profits that can grow fast enough to mount a political takeover of the government and a large swath of the cultural institutions that influence the opinions of voters, the government’s actions can be overturned by the stroke of pen with bought and paid for politicians.

        It is not money per se, but the inability to use the force of government in the national interest of preserving a democratically controlled republic that results in capitalism firmly re-establishing itself as the dominating power network in the USofA. It’s takeover of the government is not total, but enough so that it is clearly useless to point to any limits, legal, moral, ethical or some other kind, on the successful pursuit of profits. Legal and illegal enterprises are both booming. From the sex trafficking of children, to the slaughter of animals in dog or cock fights to sports gambling, the most sordid past times are sought after and paid for in the $Billions. Any kind of toxic pollution is dismissed as too costly, will take too long to clean up anyway. Any kind of investment that will allow for a capitalist growth industry to take off, such as solar is derided as a Solyndra boondoogle of the democratic party corruption hiding behind the skirts of feel good environmentalism, a pipe dream that will never be cost competitive with the newly emerging, almost too cheap to believe natural gas from fracking. Maybe you’ve seen their inundation TV spots for safe, clean, proven reserves of natural gas, the new green capitalism, not that hippie dippie crap solar wind stuff.

        Taxing the wealthy and raising the standards of living for the average American so that affluence can be rightly seen as a nearly universal status, free from hunger, cold and disease and couple of weeks paid vacation only lasted for a few short decades. The rich have their Belle Epoque, I’ll call mine the Prole Epoque.

        But every single fix is under attack. Many have been destroyed. Welfare, food stamps, has a work requirement, and this for a program funding food and cash payments overwhelmingly to the disabled and children. I need not recount the daily attacks against social security, medicare, medicaid, unemployment bebefits, even voting is under attack! The problem is that even in a mixed economy, you can’t trust the rich to not fund a counter-revolution and I am afraid, Mr Monsoor, that I can not trust most of the people, even on this site, with their bourgeoisie mindset, their complete socialization and acculturated backgrounds to seen beyond the current system that has served them so well, to imagine anything different, even it is explained to them with examples performing for them right now in front of their nose.

        Capitalism can not be fixed. It will not sit still for long with limits placed upon it and will mount a comeback. We are witnessing that comeback. Will the system of profit seeking completely ruin the social order to the breaking point right before capitalism collapses upon itself in the coming years?

        For almost 200 years now, valid, clear criticism of capitalism has been presented. On the theoretical and the practical level. On the theoretical level, the commodification process has to be limited by the force of government. Everything can NOT have a price placed upon and then set on the shelf for sale in the market. That does not mean that the market is to be outlawed completely and some as yet unrecognized system take its place. Public utilities owned by the government for electricity, broadband internet service, public transit, can clearly be operated solely without any profit what so ever, taking them off the table as commodities in a market to be sold for a profit.

        Limited equity housing corporations, run on a non profit basis, can serve the needs of the vast majority of the people who can not afford 4000 sq ft McMansions and don’t want to try to live in 700 sq ft rodent infested, leaky, moldy unsafe housing with 3 other people. Innovation, entrepreneurship have a role, but the end result of private initiative and private profiting can not be to turn its sights of vast pools of wealth to take political control of the government to make even more money and change the laws to favor the returns on the investment of capital at the expense of impoverishing millions of the citizenry. It is not an economic fix, it is a political fix. And that leaves out the economists, unless they start educating themselves with history and the social sciences integrated into policy development.

        1. mansoor h. khan

          Paul,

          “unless they start educating themselves with history and the social sciences integrated into policy development.”

          Thank you for a detailed reply. I agree with much of what you have said.

          I believe the real “fix” is people to understand connected-ness of things (as Banger would put it). I have hope . Europeans are much further along in this process. Maybe, the World Wars is what has changed their thinking.

          People in Scandinavian countries (including Germany) already practice a ton of what we have said we want in our live here in America. So I know it is possible here. I pray to Allah everyday that he guide us to act more sanely and responsibly toward our neighbors and toward the larger community.

          Survival of the fittest is about principles, values, behaviors which bring the best out of a community. It is not about raw power or the size of bank account only. Even power can be properly used by an enlightened leadership. There is nothing wrong with power or money. These are just tools to build a more satisfying life for oneself and for other humans.

          I have more hope we can change/reform our thinking and systems to be more like what northern Europeans have before it falls apart into a mad max dog fight.

          Mansoor H. Khan

  10. mellon

    Computer scientists often see us heading rapidly into a world where very few will work, or need to work, in order to maintain the same economic output as today. This isn’t some distant dream, within 20 or 30 years we will have “machines that think”. that can do virtually every kind of work humans do today.

    So short term, the lack of money will loom very large to many societies as many lose the ability to earn money by working, as few can hope to compete with computers on raw operations per second, as it were.

    However, at some point, if awareness of these changes can be accelerated, society’s focus may shift away from money because if most people lack the ability to keep increasing their skills, most people won’t be earning as much of it or even any of it.

    The skills bar to employment is rising very rapidly – very very rapidly.

    1. RanDomino

      Fabian Socialists used to believe this. Unfortunately, it doesn’t work out quite so well if the productivity gains are simply taken by the rich, who own the machines.

  11. mellon

    (Note about the following: I’m not trying to make a joke here, mostly just trying to bring people’s attention to a number of facts which often get overlooked:)

    What do people think about buying clubs for all necessities. Co-ops. Also co-housing, dining clubs (pot lucks where friends and or familes eat together in a rotating fashion.) ride sharing, and tool lending libraries, and so on. With the goal of spending the bare minimum and of course, having health insurance. (As the health insurance portion grows, if current trends continue, it will rapidly “crowd out” all other spending.)

    But in the short term, living in such a way would allow people to save some money now, during the present golden age of employment, while they still have jobs, for the workless future and their children, grandchildren, great grandchildren. etc.

    Who will probably not have access to jobs or public education or even transportation as many people from our generation have had. Unless they have inherited wealth or income from investments, they will otherwise fall off the economic map and powerless, be stripped of all they own, as the level of kleptocracy will certainly grow as real earning opportunities for the former lower, middle, and a good chunk of the former upper class diminish and eventually vanish. The solutions to previous crises, may be counter productive.

    What I think makes far more sense is to try to build alternative structures that are sustainable. (as opposed to the many structures around us which are not.) By concentrating on creating strong support networks for people, a great deal of misfortune might be averted. Also, it makes people assets to any community, rather than targets for people’s frustrations.

    1. jrs

      I think it’s a good idea … with caveats. Obviously it’s easier to do this on a middle class income than minimum wage (where doing it is pretty near impossible in many expensive areas).

      But assuming one makes enough to with GREAT or small frugality to have disposable income then yes I like the idea of cutting spending as much as is reasonable for any given person (to the bone I’d say, but really you know your needs better than I). I like the community building that comes with doing this with others. I like the aspect of community support for using our money differently. In fact I think we really need this aspect and not just individual frugality!

      But I don’t think people should purely save money for themselves, I think they should give (at least a decent part) of it away for the hopes of having some future for us all !!! (fund alternative energy, fund alternative economics and mutual aid and strike funds, fund alternative viewpoints, fund the people that would build a better world if only they had the resources). Think what we could build with funding, for example what if we funded an awareness campaign of even something not very controversal but central to anything else like getting money out of politics or even just posted posters everywhere for this. Do we have the money of oligarch billionaires to spend on propaganda? No and we NEVER WILL. But maybe you don’t really need to reach that threshold. Is awareness enough? Only when coupled with the assumption that it means action. But really the point in time where any of the 99% will have the disposable income to fund anything may be limited, so now is the time to try.

      Alternative structures, yes, but these are only part of the solution – but when coupled with VERY different uses of our money (using our money for our battles – the battle for the future of the earth and the 99% of us that have no poliltical representation), it could leapfrog. So you can’t live entirely via alternative institutions yet in most cases. Well of course you can’t. The investor class buys up the housing, they buy up the farmland, the corporations with the state build an extractive health care system that takes ever more of our wages, fossil fuels even use thier wealth to stop solar, they crowd out anything else. And yes the city won’t easily give a permit to your co-op, the cops beat down your protests, the spooks infiltrate your organizations – but think leverage, because that’s what is needed.

      1. mellon

        The problem is that everyday people don’t have any organizations looking out for our interests. Everybody else does – they have lobbyists, etc. and they are basically looking at the people as a predator might look at a rabbit or mouse or something. As food.

        That’s what happened with health care, and of course, nobody wants to admit it because as I am trying to explain the implications will make life infinitely more difficult and costly, requiring that people give up all their dreams and basically band together in walled cities.

        All the dreams require democracy to occur, you see. They require trust.

    2. jrs

      By the way, doubt I could duckduckgo it right now, but there exists movements for individuals to buy into housing on cheap rural property and get out that way (and from there use whatever resources they have to build a movement I say!). Of course I do not think rural living and back to the land is for everyone in terms of being practical or even desirable, in fact I like the frugality so as to direct our money better even in the most urban areas. I’m definitely not anti-urban. It just strikes me a possible answer for a *few* people, but more if it’s used as a means to an end than just an escape.

      Oh another way we are crowded out, our money is bank money of course. If you save it you won’t get interest (and yet bank credit card loans created out of thin air get a very high rate of interest!) and they’ll try to use this interest below the rate of inflation to drive you into the stock market. Another reason to not JUST save, but rather save each other.

    3. NotTimothyGeithner

      I like the idea. I think the problem is how to make it work and the administration. Part time work and contracting have led to a more transient society which creates a planning dilemma. To function, these programs need a fair amount of government intervention to accomplish on a large scale. Take car shares, those work where everyone can walk or has a reliable public system for their regular travel pattern.

      As a disclaimer, I’m skeptical of micro-anything, mostly because of hyperbolic promises associated with growing one’s own food. The dust bowl and Ukrainian farm failures were caused weekend farmers on little plots who were going to break the shackles of society. Better agricultural policy and planting trees with an emphasis on bird and insect habit strikes me as better than microfarming. Growing tomatoes is fairly difficult.

      I think there is room in our more urban environments for cafeteria arrangements or meal clubs which would serve relatively modest meals similar to rooming houses of 100 years ago before zoning regulations ruined that practice. Could seniors who wanted to supplement an income run this operation? They get up early anyway.

      1. mellon

        Co-housing and “intentional communities” exist but so many of them are just really not the kind of situation normal people would want to be involved with. What I’m thinking of is the way people lived when they were students. Sharing meals saves a LOT of money. And much less food is wasted.

        Many communities also have tool lending libraries. They loan out tools just as a library loans out books. There also is a “hackerspaces” movement which I think could be leveraged to serve as a very creative environment for hardware startups. If only the big entrenched special interests weren’t so obsessive about preventing innovation defending “their territory”. The multinationals in retail sales and agribusiness would probably bring suit under free trade agreements asking for compensation if there was any government assistance to hackerspaces or dining clubs claiming a trade barrier and devaluing of the market and asking for compensation based on the size of the potential market, after all they are protected now under the various free trade agreements from any state action or inaction that negatively impacts their business. .

  12. Clonal Antibody

    Progressive taxation would be after the event remedy if it were only that. However, progressive taxation (at least in the US and many other countries) is accompanied by one more thing. Namely a 1:1 deduction for charitable donations. Also, increasing business expenses will reduce taxable income.

    The net of this is that progressive taxation encourages people to give away their earnings to charity (a form of Potlatch) or to pay their employees more (becoming a hero to your workforce)

    1. Vatch

      If the charity actually performs valuable services with a major portion of its donations, it’s like a potlatch in which gifts are given. But in some potlatches, wealth is simply destroyed in a bonfire.

      http://en.wikipedia.org/wiki/Potlatch

      Interestingly, there are some charities in which wealth appears to disappear into the aether. Perhaps donations to these charities would resemble the destructive bonfire potlatch. Just a few days ago, the mysterious financial activity of a charity was discussed here at Naked Capitalism in this thread:

      http://www.nakedcapitalism.com/2014/04/links-41814-2.html#comment-2009906

      1. jrs

        Charity can do good of course and if we must have oligarchs I’d prefer those with nobless oblige. But charity is also a means of social control, how can charities dependent on rich donors not be?

        1. NotTimothyGeithner

          As long as the money isn’t hoarded, what is the problem paying a staff to put on a movie night. In one sense, the government does plenty of questionable activities, but sometimes things have to be tried. My issue mi s private clubs and exclusionary churches which is why the office of faith based initiatives is particularly heinous.

          The problem with large charities is now the wealthy donor completely dominates and continually donates as opposed to giving the money he found to a local hospital or risk losing the money in exchange for status and a better room , the same donor can set up a charity to increase his fortune by using it as cover or even has incentive to use the charity as a market mover such as Gate’s faux-education crusade.

          1. Vatch

            The particular charity that was discussed a few days ago has more than $250 million in the bank. They are hoarding.

      2. mellon

        That’s because more and more people are going into the nonprofit industry – Looking for job stability.

        Europeans think the US’s nonprofit industry is crazy- generally they think that stuff is the government’s job to take care of.

  13. Conelrad

    The old/new idea of “the commons” holds enormous potential for equality. For example, in an On The Commons post titled “Imagining a New Politics of the Commons” (http://onthecommons.org/imagining-new-politics-commons), David Bollier describes “predistribution”:

    “[W]hile the commons shares many values with traditional liberalism, particularly on matters of democratic process and social concerns, the commons has a different moral footing. Liberalism is often accused of intervening in the marketplace to re-distribute wealth, a role that conservatives regard as a ‘confiscatory’ taking of their private property.

    “The very idea of the commons challenges this perspective about ‘redistribution-as-theft’ by pointing out that markets routinely take from, and frequently despoil, the commons. The investor class enjoys many direct and indirect subsidies–cheap use of public lands, airwaves and civic infrastructure; copyright and patent monopolies; research and services to support commerce; public education; etc. In addition, companies are accustomed to making the government and commoners pay to fix their messes–pollution, safety and health risks, illegal behaviors, community disruptions.

    “Rather than seizing the rightful property of the successful, as right-wingers see it, commoners are actually seeking to control and own something that belongs to them in the first place. They are seeking a predistribution of benefits from assets belonging to them, rather than a redistribution of wealth generated by markets.

    “This is the starting point upon which we can build a political framework of access, sharing, equality and social well-being. The Internet offers many rich examples of collaborating and sharing, from open source software to Wikipedia. Through the frame of the commons we can begin to assert – with greater impact than liberalism can manage – the need for proper limits on market activity.”

    1. mellon

      I’m afraid they beat you to it, they had this all planned out decades ago.

      Multinational corporations now have “ivestor-state” rights to compensation if any country tries to take any of those commons back. The US has been pushing this idea like crazy. Trade agreements all have it. The new corporate entitlements.

      The argument is that investors need stability and they can’t have it if there is any real democracy.

      Just like [it is in the US with healthcare](http://www.pnhp.org/sites/default/files/Nick%20Skala%20GAT%20and%20Health%20Reform.pdf).

  14. NotTimothyGeithner

    The United States has these kinds of proposed changes and structres. The problem is wealth inequality subverts those structures.

    If you want to remove the incentive for get rich quick schemes? Raise taxes.

    If you want to keep regulators from helping industry theft in exchange for a pay day? Raise taxes.

    If you want to keep the rentier class from expanding? Raise taxes. If they can’t put cash down, commodity prices come down to where people who need them can use them.

    All of a sudden, lobbyists have to argue on merits, universities spend money on the school not higher ups, regulatory agencies have teeth, the money allocated through outfits such as the small business bureau doesn’t have to compete with the super rich, and on and on. I bet the hmo’s would spend more money on patient care if the brass can’t take it home.

    The rich are never going to join some kind of people’s movement, no matter how great that it would be. It’s time to let the piped ream go.

    1. mellon

      Even if the HMOs spend more money on patient care, the big problem, the third of every healthcare dollar that goes simply to maintaining the 15000 payenr system and its complexity, remains. Also, with 15000 payers, there is no real way to do cost control. They end up being stuck with the very limited set of non-options that the US has not excluded in free trade agreements (one reason we push these trade agreements that block money saving strategies is to get higher prices for US pharmaceutical companies on drugs)

      So the net result of all these overlapping FTAs (overlapping on us) is that we have to get the worst deal of all.

      Please keep this quiet, its a big secret, obviously, since the media never write about it.

  15. umbleets

    Dollars spent at McDonalds leaves the community. Dollars spent at the local taco stand filter through the local economy. A mall filled with ipendent locals is better than multi nationals tho siphon off the local wealth.

    Good made in Mexico – are allowed to poison workers. and the environment. Yet those goods still cost more here… with the executves making windal profits destruction of people and the environment.

    THe Gop needs a Teddy Roosevelt to save their misguided party. Tariffs…. open spaces and free ice for the poor and the animals of New York during the heat wave of 1906 [?]

    Where have the heroes gone?

    1. NotTimothyGeithner

      The GOP should have been crushed under Obama’s heel by feb. 2009. The GOP doesn’t need a fraudulent messiah or to be rehabilitated. The GOP and people* who consider them legitimate actors in any kind of republic need to be tossed from office. Anyone who joins the GOP or didn’t leave with Jeffords possesses a significant personality flaw which should require some kind of adult guardianship if we were a more compassionate society. Yes, this includes all the good Republicans such as Chucky Hagel who makes Chris Matthews all warm and fuzzy.

      What GOP have you observed to even conclude that the party is in need of a 21st century version of Teddy? Hell, the racist imperialist Teddy would be too much of a sissy for today’s Democrats with his love of nature.

      *Serious people in Versailles and most Democrats.

  16. clarence swinney

    WELL OFF HOME OWNERS LOW INCOME RENTERS
    The fed spent $270B in 2012 to help Americans buy or rent homes.
    1.Fed Housing Spending disproportionally targeted higher income families.
    2.Housing policy favored owning over renting.
    3.Poor renters have greatest need for assistance
    4.Rental Affordability problems have worsened since 2000.
    5.Rental assistance helps the neediest
    6.Funding limitations prevent rental assistance from reaching most families in need.

    1. mellon

      It’s illustrative to read a speech given in 2008 by Robert Fitch to the Harlem Tenants Association on November 14, 2008 about Obama’s past in Chicago.

      Obama’s past allegiances are basically with the slumlords and large real estate developers who hope to extract the maximum possible amount of income from urban rental housing and if/when the economy warms up again, their first priority will be to replace rentals with million dollar condos on a massive scale. Destroying many people’s lives in the process. The best way to prevent this is to self-help, by fixing up urban housing (insulation and weatherproofing is really important for health) That will prevent the excuse from being given that older affordable housing needs to be destroyed in order to preserve the tenants health.

      Hurricanes Katrina and Sandy are examples of superstorms devastating effects on urban communities. The best way to prevent superstorms creating huge numbers of homeless people with no hope of ever being able to return to the cities they called home for most of their lives, is to be proactive and anticipate the effects of such storms. For coastal people that means knowing your true elevation and planning accordingly. (Many USGS topo maps are wrong, almost invariably they overstate elevation!)

    1. NotTimothyGeithner

      Oy, even 10.10 would be a disaster. Small businesses would close up left and right. Localities would shut down. The remaining teacher would make great money.

      High rent districts as nyc have different wage scales than sayames, iowa.

      The problem is the parasite class which has the money to subvert the system, and after $20, we would go to $40 when we have the same problems as before. Should we be raising the minimum wage? Yes, especially for servers who were omitted in 2008 and before then too.

      The simplest policy solution is still progressive taxation. It solves almost every problem instantly.

      1. F. Beard

        Relying on progressive income* taxing ALONE to counter unjust wealth inequality is like relying on a bilge pump to keep a leaky ship afloat. Yes, ships have bilge pumps but they are a SECONDARY line of defense. The first line of defense is to FIX THE LEAKS!

        *And where is your call for progressive wealth taxation? A sufficiently wealthy family could live many generations with no income at all! And they could so order things to minimize their expenses too by becoming energy independent, for instance.

          1. F. Beard

            Periodic re-leveling such as total debt forgiveness (every 7 years, Deuteronomy 15) and total land reform (every 50 years, Leviticus 25) are Biblical. But what isn’t Biblical is usury from one’s fellow countrymen (Deuteronomy 23:19-20) and oppression of the poor, even by subtle means such as government subsidized credit creation whereby the rich and other so-called creditworthy are allowed to steal the purchasing power of everyone else; these are the “leaks” that need to be fixed – an ounce of prevention being worth more than a pound of cure.

    2. mellon

      >Just raise the federal minimum wage to $20. Done and done.

      That would accelerate the pace of adoption of automation.

      It would make a lot more sense to look at the reasons why people need to make more money and address them.

      In other words, create such an effective safety net that people making modest wages could survive without difficulty.

      In other words, make quality healthcare for all free, everybody in, nobody out, paid for by taxes, abolishing health insurance (which would save at least a third of every healthcare dollar) and eliminate the tiered system, In order to practice, doctors would have to be included. The healthcare system would be the way doctors got paid so they would all need to participate. Buy drugs based on global average prices. The above changes, especially those in healthcare would require the US to withdraw from many of the trade agreements its written and promoted.

      Create high quality low cost public transit systems which made it easy for people to get around. Create an infrastructure that supported lifetime learning so when people were between jobs they could educate themselves in new skills. Create business incubators and give them financing to offer no-interest startup loans to allow new businesses to be created much more easily.

      Also, stop bailing out businesses with failing business models. Let prices for many things fall naturally. Whenever a business is deemed too big to fail, break it up into smaller pieces.

      Make cities bikeable and ban cars and trucks from a rotating selection of crosstown and uptown/downtown streets on a rotating schedule so that at any given time there are large car and truck free bikeable streets going all around the city.

      1. ian

        “In other words, make quality healthcare for all free, everybody in, nobody out, paid for by taxes, abolishing health insurance (which would save at least a third of every healthcare dollar) and eliminate the tiered system, In order to practice, doctors would have to be included. ”
        At a certain point, a lot of doctors will simply say “why bother?”. I’m sure you would be happy to be treated by the ones that remain.

  17. Peter L.

    Mohammed Yunus demonstrated, with his Grameen Bank in Bangladesh, that it is possible to give loans to the poorest people and so to reduce this iniquity.

    Ha-Joon Chang has discussed the work of Milford Bateman, who has edited a book, Confronting Microfinance: Undermining Sustainable Development, published in 2011. Bateman and other contributors provide argument and evidence that micro-finance, even the Grameen Bank, has not been so good. Bateman claims that “after more than 30 years since the microfinance movement was founded, there actually exists no concrete evidence to demonstrate that microfinance really works as it is supposed to.”

    http://kumarianblog.blogspot.com/2011/08/confronting-microfinance-set-to-release.html

      1. F. Beard

        Instead of interest, Islamic creditors take dividends – a percentage of the profits. But the Hebrew Bible, a sign of its Divine Origin, forbids profit-taking from one’s fellow countrymen too.

        Moreover, common stock as endogenous/private money requires:
        1) No interest nor even debt.
        2) No dividends.
        3) No reserves.
        4) No deposit insurance.
        5) No lender of last resort.
        6) No other government privileges.

        Then why aren’t common stock companies broadly and roughly equally owned? ans: Because why share one’s equity when one can instead leverage it massively* to legally steal the purchasing power of those with little or no equity?

        *Massively because credit creation is massively subsidized by the government, e.g. the central bank, deposit insurance, etc.

        1. allcoppedout

          I know that Masoor. My nephew converted many years back. There is a general problem with not practising what we preach.

      2. Peter L.

        Thanks for a link to Bateman and Chang. I did not know they had written a paper together. Looking forward to reading it.

        The book is worth looking at. I think it is fairly nuanced and fair to microcredit and microfinance schemes. That is, the papers make convincing arguments about why microcredit will not work in general, but also examine instances where it has helped people even if only in a limited way. (There is also some discussion of disastrous microcredit schemes which suck people into debt traps.)

    1. ChrisPacific

      I have the book ‘The Price of a Dream’ which discusses Yunus and the Grameen Bank. I was saddened by the discussion in the blog you cited, but it’s perhaps not surprising. Microlending is still lending and is subject to all the abuses and problems that can arise thereby. Also the idea that poor communities are simply waiting to self-organize into thriving and productive capitalist societies and lack only capital in order to put this into action is probably naive, and likely a product of neoliberal ideology.

      The book does have a discussion of attempts to replicate the Grameen formula in other countries, which largely failed. One of the points that emerges is that where Grameen was successful, it was often because of its strong local relationships and understanding of where improvements could do the most good for the local economy, with access to capital being a necessary element of the process but not the fundamental element. That’s the point that was missed in a lot of the attempts to replicate elsewhere, and it sounds like it may have gone astray in the Bank’s later work as well. That term ‘microfinance’ is somewhat worrying as well – I don’t recall it ever appearing in the book (which would talk about microcredit).

      I do think that one important contribution made by the microcredit movement was the idea that the poor are not necessarily any less hardworking, trustworthy or reliable than the wealthy are – in fact, frequently the reverse is true. This is at odds with neoliberal philosophy, which suggests that people get what they deserve (so just as the rich deserve their wealth, the poor must be poor because of some personal or character failing) and is a useful point for policymakers to remember. Unfortunately it also makes them easy targets for predators, which seems to be the direction that microfinance has taken.

  18. allcoppedout

    Capitalism causes squalor yet has made us rich. Prize for the first 10,000 word essay on misplaced ’cause’? I must say I think we have our debates framed wrong. Geoff Davis helps with this a bit. But we are soon back to our econobabble. We should be looking into such as motivation and constitution. Capitalism and its dancing imps of economics are just the grapes tossed to make we monkeys scream. What would we be talking about if we had a political constitution that let us deal effectively with issues like global warming, or if we understood human motivation?

    1. Banger

      Our problem is that we can’t get out of the silly arguments about capitalism. Capitalism is neither good or bad–it served a clear historical purpose that seemed to fuel great material progress and now we don’t need it so it has become a burden–it has lost its dynamism and is merely moving us inexorably into a neo-feudal situation. All the elements are here to go to a new stage of civilization but we are too confused and morally weak to do anything new.

      1. allcoppedout

        That hits the nerve Banger. We have never been modern. One can no doubt tot up the world’s wealth and divide by 7 billion or so.

  19. allcoppedout

    Paul T says a lot I agree with. Somewhere in all this we have to get necessary work done and keep on innovating without the threat of poverty “inspiring” us now.

  20. Jackrabbit

    It seems to me that the problem is not really capitalism as much as crony capitalism. A crony capitalist oligarchy subverts capitalism by breaking rules that are necessary for society to reap the benefits of capitalism. Libertarians that wish to destroy/severely weaken the State would only create a new form of oligarchy. Progressives are really the best capitalist because optimal progressive taxation would keep the wealthy and corporations in check just enough to ensure that they don’t have enough power to do harm to people or a process that benefits everyone (including, in an enlightened sense, themselves).

    Pr

    1. Dan Kervick

      Capitalism doesn’t exist. Neither does socialism. Those are intellectual idealizations that never have or could be implemented in full. We have a mix among public ownership, private ownership and common ownership; and we have a mix between private enterprise and public enterprise. Every country does. All the serious proposals are about different ways of changing the mix, sometimes modestly and sometimes dramatically.

  21. Nobody (the outcast)

    “The tragic reality is that very few sustainable systems are designed or applied by those who hold power, and the reason for this is obvious and simple: to let people arrange their own food, energy, and shelter is to lose economic and political control over them. We should cease to look to power structures, hierarchical systems, or governments to help us, and devise ways to help ourselves.

    — Bill Mollison, Permaculture: A Designer’s Manual, Chapter 14 — “Strategies for an Alternative Nation”

    The solution involves organizing at the community and regional level and accept living with less while devising our own solutions to supplying our needs.

    Unfortunately, we would rather have our wants met and cede power over our lives to sociopaths. As Dan K. wrote recently (I may be paraphrasing), “we are a bunch of spoiled brats.”
    We don’t want to grow up and take responsibility for our lives, if that means societal and environmental destruction, so be it. We can whine all we want, but until we take control of providing for ourselves and our communities, we are going to get nowhere. Citizen’s United was the final nail in democracy’s coffin here in the U.S. Time to move on.

    1. F. Beard

      blah, blah, blame the victims, blah, blah.

      So long as we have a government-backed credit cartel, any such local initiatives are subject to hostile takeovers by the banks and the so-called creditworthy.

      But kill government backing for the banks and very much becomes possible with regard to local initiatives, co-opts, etc.

      One cannot quietly go about his business while legal robber bands are allowed to loot.

      1. Nobody (the outcast)

        OK, let’s assume its the fault of the monetary system and the bankers (I don’t accept that, but I’ll play along). What are we going to do about it? How do you propose we kill the cartel? I mean practically, not theoretically. Who’s going to stand up to take them down? Believe me, the injustice boils my blood, but I can read the tea leaves, and I can see that no solutions will come from the top.

        1. F. Beard

          What are we going to do about it? Nobody (the outcast)

          Who is going to object to an equal and large distribution of new fiat IF it can be done without causing price inflation? So:

          1) Ban new credit creation by the banks, at least temporarily. This would cause massive deflation by itself as existing bank loans are repaid with no new loans to replace them.

          2) Counter the deflation caused by 1) with a new fiat distribution metered to just equal or slightly exceed the deflation caused by 1).

          That’s not the whole program of course but it should inform that reform is politically doable if sufficiently just and bold.

    2. jrs

      But there’s no path that leads there, or basically how would we go about doing that?

      We would “rather have our wants met and cede power over our lives to sociopaths”? Well what should we do instead? Boycott what they are selling? Yes if it’s not a necessity or near so (gasoline is near so for many, but one could argue this back and forth I guess, depending on location). Rise up against them? Ok but then what your actually saying is we would rather “cede power over our lives to sociopaths than risk mass civil disobedience”. And I guess that’s the case, but it’s not really about our wants then. It may be about being afraid, indifferent, and risk averse but not so much about being “spoiled brats”. If your talking worker ownership that is taking responsibility (and many have despaired whether the human race was mature enough for worker co-ops/non-state socialism/anarchy when it actually seemed a likely prospect – like after the Russian revolution when the existing system was destroyed – but state dictatorship is all anyone got instead). But is lack of responsibility really the reason the worker co-op business model has met with limited success in capitalist societies? Of course if all your arguing for by supplying our needs is municipal ownership of power and the like, I think that model can work well, and perhaps could be more broadly applied though I don’t see it being a challenge to the system as such, maybe just to a few entrenched interests.

      1. Nobody (the outcast)

        “But there’s no path that leads there”
        Permaculture.

        Mass civil disobedience is an option, but that takes mass organization, which requires mass awareness.

    3. Dan Kervick

      Well, taking charge of “providing for ourselves” is certainly not my approach. I did say that we are spoiled brats. And what I meant is that Americans have a stubborn addiction to personal liberty and individualism when nothing will do but a comprehensive social approach based on social obligation, strong and effective government and a healthy measure of organized planning.

      1. Nobody (the outcast)

        I didn’t mean to imply that we had the same take. I totally agree about the social aspect, the strong and effective government part (at least at the national level) is a pipe dream at the moment and for the foreseeable future. Well, it is strong and effective for those that “own” it. I call what you describe “hyper-individualism disease” and I fear it might be terminal (the young folks do seem to be less afflicted, which if true, gives me some hope). I just don’t think any solutions will come from the top, no matter who gets elected (not just economic, but environmental and social (inequality), as well). It’s too late for that, IMO.

  22. Geoff Davies

    There’s a missing subhead: second last paragraph should be headed Tax Avoidance – point 7. The paragraph might make a bit more sense then.

    And I’m a bit bemused, as usual, how much people stay within the old framings and miss the main point of this extract. Thus there’s a fair bit of argument here about “capitalism”, but it’s pointless because capitalism is many things. So I framed it as “a market economy” that can be structured in many ways. Then you can see the ways in which wealth is unfairly directed to the rich.

    Likewise there’s a lot of discussion of taxes. Well, they have their place but there are more direct and effective remedies.

    The book will make things a lot clearer I think, and it’s not very long. :-)

    But thanks for the repost and the lively discussion.

  23. Nathanael

    None of these proposals do what progressive taxation does — reliably prevent the fortunes from accumulating.

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