Why Economic Justice Matters: This Machine is Worker Owned (Part 4)


IMG_0039As we’ve seen thus far, the income inequality in the United States (and really, worldwide) is an issue that is leading to stagnating and destructive economic results. One possible solution is to cap the ratio between CEO pay and worker pay. There is, however, another alternative.

 

Worker-owned and operated co-ops, where workers own actual equity in the company and vote on management and executives, have proven to be quite successful worldwide. The best example is the Mondragon Institute where workers vote on their wages, vote on who their managers are, vote on who gets to be CEO, vote on the pay of the CEO, and all worker-owners have a share in the profits generated by the co-op. There are, of course, other examples out there.

 

The overall point is that we need a system where workers benefit from their labor. Under our current system workers are merely parts to an overall machine. They are not individuals, they are not important, they do not matter; a factory worker quits one day and is replaced the next, much like if a cog were to break, it would be removed and replaced. There is a dehumanizing aspect to our labor, which is why we pay substandard wages for that labor. Corporations release a constant stream of emails to employees about the corporate success, about how much profit the corporation has earned, about how much the stock has increased, and expect the workers to actually care. But why should they care? The corporation has increased profits off the backs of the workers, profits the workers will not enjoy (though executives will). Why should the workers care?

 

To take the modern system further, even in a system where workers get a small share of the profits, they have no say in how the company functions. While corporations use empty terms like “team members” and tell workers that their feedback is important, the fact is that even if 98% of the workers thought something was a bad idea, the corporation would do it if they saw a chance for a profit. The ever increasing desire to impress stock owners and drive up stock value – sometimes by creating short term gains at the cost of long term consequences – has crashed many companies and continues to harm our economy.

 

So, if setting ratios isn’t your thing, perhaps this is: Worker Ownership. Worker ownership is exactly what it sounds like, where the workers own the corporation. The only equity holders in the firm are those who have not only invested their money into the company, but have also invested their labor into the company. In such an economy, there would be two types of worker-owned companies:

 

Family business/co-ops – small, family run businesses are without a doubt essential to any local economy. A local economy built on family-owned businesses typically has a sustainable economy. One can imagine what would happen in poorer communities, whether urban or rural, if there was more economic development for local businesses. Of course, some family-owned businesses need a support system. This is where co-ops would work in lieu of corporations. The co-op would be composed of different farmers, different distribution companies, and different grocers. They would all work together to provide produce throughout the region (or nation) and could even work with other co-ops around the country to exchange produce. In the co-op, the different businesses within the co-op would all have a vote and a voice on how the co-op would function. Rather than having someone in New York decide what works best for farmers and grocers in North Carolina (as might happen with a major corporation), the business owners and farmers in North Carolina would be able to give a stronger voice for what policies work best in their area.

 

Think of a co-op as a type of confederacy, where there is a union and all the different organizations work together, but all are also at the same time autonomous. All contribute to the profit of the co-op and receive profit dividends from the co-op, but can also act independent of the co-op when it comes to their own store policies.

 

Worker-owned corporations – the family-owned business can only go so far. While I’ll get my food from a mom and pop store, I wouldn’t want that same place making my car. When it comes to cars, major construction ventures, making commercial airliners, and the like, businesses are necessarily large. There are certain endeavors that simply require a large corporation. A small business or even a collection of businesses (co-op) isn’t sufficient or efficient for certain industries. In instances such as these, corporations would be massive, but owned by the workers. Rather than being abstract, let’s use Ford as an example:

 

Imagine tomorrow that Ford was sold entirely to its workers. This would mean that all management and executives would be voted on by the workers. All profits would be distributed to the workers. The company could never move jobs overseas because worker-owners aren’t going to move their own jobs. There’d be no need for unions because the workers couldn’t go on strike against themselves. They’d vote on what wages should be for each position, on their own wages, and so on. It’s a form of direct democracy in the workplace, or democracy on a small-scale (the only place where democracy works best).

 

How both of the above solve for income inequality is that for the majority of workers – not everyone could become a worker-owner, especially at a younger age – would have the right to vote on their own salary as well as the salary of the CEO. If the workers decided to let the CEO earn at a 200:1 ratio, then that’s their choice. It wasn’t forced on them. But more than likely, the CEO pay would be much closer to a manageable rate. Productivity would increase as well due to the simple fact that an increase in profits would be shared amongst the workers. Thus, if workers wanted a bigger bonus each quarter, they’d push harder to increase the profits for that quarter. By actually seeing the fruits of their labor they’d work harder to see bigger fruits.

 

The benefits of this system are as follows:

 

  • Income inequality is no longer an issue. When most workers are also owners, they choose the income that occurs. For family-owned businesses the issue of a wage is no longer an issue.
  • Their jobs would be secure. Worker-owners won’t outsource their own jobs, they won’t lay themselves off to increase profits, they won’t recruit cheaper labor from a foreign nation to drive down wages, and so on. They’ll continue to innovate and improve because when the company succeed, their checkbooks will feel it.
  • They’ll be far more environmentally conscious. Part of the reason these companies have no issue polluting or destroying the environment in rural areas is because the executives and upper management don’t have to live in those rural areas. Worker-owned companies, however, would have owners who live in the local areas, who have to drink the water, who have to breath the air, and have to live with the consequences of their environmental impacts. While none of this promises complete environmental safety and we would still need regulations, environmental disasters or practices harmful to the local environment are less likely to occur because the workers don’t want to see their families harmed.

 

Of course, between the ratio system and the worker-owned system, there are some common themes.

Why Economic Justice Matters: This Machine Looks at Ratios (Part 3)


DSC02081The Ratio Solution

It’s quite obvious that as CEO pay has gone up, economic advantages have gone down. While we can say that correlation isn’t causation, in this case there’s a distinct cause. While CEO pay has increased, it’s come by cutting into the wages of workers. As pointed out already, this stagnating wages and lack of hope in progression is what’s fertilizing the ground for a growth in fascism. So how do we stop the growth of CEO pay without capping CEO pay?

The problem is ratio; the higher the ratio between Executive pay and Worker pay, the bigger the economic problem. In the 1960s the average CEO (who is typically the highest compensated employee) earned at a 20:1 ratio. That means that it took 20 worker salaries to equal the salary of the CEO. If the average worker earned $7,000 a year, the CEO would earn $140,000 a year. In the modern age, the average salary is about $46,000 (which still accounts for millionaires, yet is still relatively low), with the average CEO earning 200 times what his average worker receives ($9.2 million). Take that $9.2 million and break it down to a 20:1 ratio and the average worker would be paid $460,000 a year; not a shabby income.

Thus, if income inequality is the problem, the solution isn’t to cap CEO pay, but rather tie the company’s effective tax rate to the company’s income ratio. The question, of course, is how do we determine an acceptable income ratio? We want an income ratio that allows the top compensated employee to be a position of wealth, as this provides incentive, but we also want a ratio where the average worker makes a living that doesn’t require survival. Not to mention that the ratio impacts politics – if I earn at a 400:1 ratio to my employees, it would take 400 employees to match what I could donate to a candidate (which would require a lot of cooperation). Thus, the more wealth an individual has, the harder it is for people to gain a voice against his wealth. So whatever ratio we choose it has to not only provide a fair wage to workers and provide an incentive to get better, it also has to be low enough so that no one person obtains enough wealth to overpower the population.

From various views, a 20:1 ratio is the ideal ratio. It’s high enough to provide incentive to work harder, but low enough to prevent our economy from diving into a tailspin. Of course, political realities being what they are and with some differences in companies, we could create an ideal of 20:1 and a maximum of 100:1. Rather than capping CEO pay, the government would instead cap the ratio. Thus, if a CEO earns $10 million, more power to him, but his average worker better earn $100,000 (and the “average” would need to exclude executive pay from the equation).

The negative aspect of government regulation – of capping the ratio – would be on the upper end of 100:1. But I also believe in creating positive reinforcement for companies as it creates more economic freedom. That being said, I’d create the following tax bracket.

70:1 – 100:1: They would pay an effective tax rate of 40%. That means that after deductions, if their rate fell below 40% they’d be penalized until the rate reached 40%. Nothing they do, no moving around in the books, nothing could ever drop them below 40%.

50:1-69:1: They would pay an effective tax rate of 30%. They could take deductions, but could never drop below the 30% mark.

30:1-49:1 Their tax rate would drop to 20%. But notice that this is not an effective tax rate. In this instance, they could take deductions in order to reduce their tax rate, but never below 15% (the bottom effective tax rate).

20:1 – 29:1: This, being the ideal, would receive the best treatment. The maximum they’d pay in taxes would be 15% and there’d be no bottom in terms of their deductions. That is, if their deductions resulted in them paying 0% taxes, then so be it. The fact is, any company that fell in this range would be helping to create a powerful middle class, which would more than make up for any lost revenue from the business.

The only companies this would apply to would be any and all publicly traded companies and companies with 50 or more employees. Small businesses wouldn’t face this law. The reason is smaller businesses tend to have lower ratios by nature of their existence. Likewise, for start ups and other companies that do earn millions, but keep a small staff, the competition of bigger salaries from bigger companies would naturally keep the ratios low.

What’s great about this plan is that it literally costs corporations nothing. They don’t have to find a way to increase revenue (as they do with minimum wage), to increase their profits to make up for a loss, or to take a loss. The only thing it does is give back the wealth that the executives took (remember, executive pay jumped 725% from 1970 to 2015, while worker pay increased 5.6%, so this is a matter of giving economic justice and worker’s dues than it is redistributing unearned wealth). The company merely has to rework their payroll and benefits structure. Things such as stock options and profit sharing that add to the overall compensation of an executive would likewise have to be handed down to the workers until the total compensation of the highest earning employee (typically the CEO) matched the total compensation of the average worker.

In this scenario profits aren’t impacted, stock holders aren’t impacted, companies pay no extra money, and so on. All that happens is that executive pay is greatly reduced while worker pay is greatly increased, at least within a 20:1-100:1 range.

Of course, some might argue that production companies will just take their factories overseas or outsource their labor to overseas labor, that way executives can keep a high pay. They’ll just dump the workers. Here is where certain protections would need to be put into place. But again, those protections don’t have to be necessarily arbitrary, such as saying, “You can’t send your stuff overseas.” After all, globalization isn’t entirely bad and can help some struggling economies if handled correctly. How, then, do we handle it correctly?

We apply the same ratio rule to all overseas labor and, by extension, to all outsourced labor to foreign companies. That means if a technology company wants to outsource the production of their products to Foxconn, they’d have to ensure that the executives at Foxconn don’t earn greater than 100:1 compared to their workers. If a company wants to open an overseas factory, adjusting for inflation the same ratio rules would apply. A company could still send jobs overseas, but the advantage of using near-slave labor would disappear, which would protect multiple jobs in the US and possibly bring some jobs back.

The fact is, we have to do something and this is one possible option. It’s revolutionary, but that’s what we need in this moment. We need a revolution that seeks to change the system for the better by seeking a way to help all, not just a few. Of course, there is another possible way of revolutionizing the system in order to fix our economic woes.

Why Economic Justice Matters: This Machine Provides Solutions (Part 2)


IMG_0031Faced with the onslaught of fascism and nationalism, finding a well fertilized situation in current economic trends, the question arises as to what we should do. Increasing the minimum wage in such a situation seems a bit too little, too late. Increasing the minimum wage would hold the same effect as to throwing a bucket of water onto a home engulfed in flames. Sadly, we do need a revolution to fix the numerous problems in our system. We need an entirely new way of thinking through our economy. We know the problems rest with greedy CEOs increasing their pay while keeping worker wages stagnate. We know the problem is that if the workers threaten to strike or unionize in order to obtain better wages, the jobs will just ship overseas to near-slavery conditions.

Increasing taxes on the wealthy – while necessary – doesn’t promise that we’ll distribute the wages. After all, while increasing taxes in the 1950s worked well the world wasn’t nearly as globalized as it is now. Globalization almost takes away the impact of increasing taxes on the wealthy as jobs can still be sent overseas in order to increase profits, a way to make up for the increase in taxes. Increasing the minimum wage is just ineffective. Capping CEO pay also makes little sense as any cap would be quite arbitrary. Plus, one might be the CEO of a company, but also be the only employee of that company (which can happen if one is a consultant to other companies). So can we really cap that individual’s income? Such an argument makes little sense.

There’s the other issue that while some forms of Democratic-Socialism have shown to lower income inequality, it also creates a high tax burden and does tend to make workers less productive. For instance, Financial Times reported back in 2014 that productivity in the Nordic nations had dropped and that cracks were beginning to show in its welfare state. Part of the problem is that people have such a huge safety net in Nordic nations that there’s little incentive to work harder. It’s why the Nordic nations have some of the highest income inequality in Europe, but also have the strongest middle class – the government essentially props up the middle class with little effort required from businesses. Such a model, while admirable and a good temporary solution, is not sustainable and will eventually need to be revamped.

So what do we do? How do we create a system that averts the problems of nationalism and fascism? How do we improve our economy to the point that people see no need for a revolution or to radicalize? I can see two options. These options presented are by no means comprehensive and are barely an introduction to the two potential solutions. Likewise, these solutions are not mutually exclusive – both could be put in place and I’d recommend both be put in place. They are way outside of the box, but that’s what we need. We need a system meant for the modern era and we have to stop pointing to past solutions for modern problems.

Why Economic Justice Matters: This Machine Kills Fascism (Part 1)


JPEG image-552A266454C7-1It’s a common argument against socialism (or what is perceived as socialism): “We can’t have complete economic equality because it’d remove all incentive to work harder and be innovative.” And to a certain extent, that’s completely true. Why would I work harder to take on a position of more responsibility and risk if I didn’t make more money for it? Certainly there are some out there who’s egos alone would push for such a promotion, but at some point most people would ask why you’d want to be the CEO when you can make the same amount of money as being the janitor.

Yet, a similar argument that’s rarely brought up is that low wages have the exact same effect. After all, if people on the “fry line” or “flipping hamburgers” sees their managers, even general managers, struggle to pay bills, sees them on government support, sees them struggling paycheck to paycheck, then why work harder to take on that responsibility? If you tell someone who struggles to put food on the table that with 5-10 years of real hard work they can finally break through to the lower-middle class, what incentive is there in working harder? The more the middle class shrinks and the less meaning there is to being middle class (in that it doesn’t really provide as high a standard of living as its used to), the less incentive there is to work harder or be innovative.

Thus, it seems there’s a happy medium to be had, one where wages are staggered enough to provide enough incentive to work harder and be innovative, but pay well enough to provide enough incentive to get to that new position.

And that, kids, is why the minimum wage debate is so pointless. We’re debating over the minimum a person earns, which impacts about 3.9% of the population. Not that I’m against raising the minimum wage – we need to – but that in the best case scenario, raising it will give us one to two years of economic growth. After that, we’re back to debating on raising the wage again. And raising the minimum wage would inevitably send some jobs overseas (jobs that would have gone eventually, but an increase in minimum wage would be the tipping point). It wouldn’t be the doomsday scenario of conservative talkshow hosts, but it also wouldn’t be the economic utopia of liberal think-tanks. Raising the minimum wage, while necessary and overall good (even with some negative consequences), is focusing on the wrong problem.

See, our economic problem isn’t that our minimum wage is too low, it’s that our median wage is too low. Now, ultimately, our problem is greed, but you can’t legislate people to be virtuous and to give up their greed. You can, however, create an environment where they can’t practice their greed, or where you can limit their pursuits in the name of greed. After all, I can’t legislate someone from hating another person, but I can legislate stopping them from acting on that hate. Likewise, while I can’t prevent people having an attitude of greed, I can prevent them from acting on that greed. The reason our median wage is so low is because we’ve allowed people to act on their greed, and it’s time to stop.

When we allow economic inequality to continue, when we allow the poor to become poorer, when we allow the middle class to disappear quicker than the polar bears, we create an environment that inevitably leads to a revolution of sorts. The times we face are hardly unique to world history. Economic inequality preceded many horrible events in history, such as the French Revolution and the Bolshevik Revolution. In both cases income inequality erupted into violence. But we often forget that income inequality and its crippling effect on a nation preceded the election of Benito Mussolini and Adolf Hitler. Both Italy and Germany suffered from high income inequality prior to the rise of fascism, and Germany suffered from a national inferiority complex due to losing WWI (which radicalized their fascists into Nazis, a more extreme version of fascism). A combination of national pride, blaming of the “other,” and workers not making enough to live led to the eventual conquest of fascism.

Fast forward to the modern era and we’re on the brink of seeing a revival in fascism, both in Europe and the United States. In Europe the far-right parties such as UKIP (United Kingdom), Front National (France), Law and Justice (Poland), Danish People’s Party (Denmark), and many other nations are experiencing an increase in nationalistic movements. These movements typically focus on the struggle of the working class, but tend to blame immigrants rather than the ruling elite (though the ruling elite are still blamed, the vitriol is saved for immigrants). Within the United States we have Donald Trump on the verge of victory in the Republican Party and a legitimate shot at winning it all. Fascism is alive and well, but it doesn’t appear ex nihilo. Rational people who lead comfortable lives don’t just wake up one day and go, “You know what, I hate immigrants, the poor, and want a revolution.” Fascism can only find berth in a revolution, and a revolution only arises out of discontent. The breeding ground for fascism – lack of economic growth, stagnation in the real economy, lack of motivation to move ahead, a loss of hope – are real issues. Failing to adequately address and fix those issues will almost always lead to horrible results.

We’ve had 30 years of globalization policies that have all but destroyed our economy (as well as many other economies). There’s a popular video going around about a Disney worker losing his job and having to train foreign workers to take over his job, workers hired by Disney because they’ll work at a cheaper rate. Manufacturing jobs lost in the 80s and 90s due to recession went overseas and will never return. Wages have stagnated and fallen. We have an entire generation today that is worse off upon graduating high school and/or college than generations before them, which is a first in American history. A populist backlash – and make no mistake, fascism is populist, as is socialism – was inevitable. That backlash has taken on the form of Trump in the United States, but resembles different leaders and candidates in other nations.

The above are all very real problems. It’s a problem that a job can be sent overseas to near-slave labor (which doesn’t benefit the worker in that country or the worker in the US). The wage gap in America is a massive problem, allowing the super-rich undue influence in politics, which secures their position while lessening the position of the average voter. By ignoring economic justice, by removing our economic policies away from doing what is right, we’ve created a very dangerous situation, a breeding ground for one of the worst political ideologies to come out of the Enlightenment.

What, then, are we to do?

Human Dignity vs. Minimum Wage or, Where the Right Goes Wrong


DSC02097Matt Walsh, the male Ann Coulter for the right (and he’s on the same path), is back at it again, creating a straw man and then hacking it to pieces. This time around, he’s picking on Walmart employees that don’t enjoy the wages and treatment, saying they should be thankful to have a job and that if they just worked a bit harder, they’d all get promotions. In this conservative utopia where hard work is always justly rewarded, everyone becomes the manager, everyone works their way up to the top, and everyone becomes rich who deserves to be rich. Sadly, however, Matt Walsh (and conservatives in general) ignore the importance of human dignity within the wage debate (not that liberals do any better; they demonize and dehumanize the rich, whereas the conservatives demonize and dehumanize the poor).

From a purely practical standpoint, basic psychology tells us that if we treat someone as less than human then that person will act as less than human. One wonders why in the Roman Empire there were so precious few slave revolts until one realizes that beating slaves and treating them as less than human led them to believe they were less than human. The same rings true within the American south, where slaves didn’t revolt even when they made up a majority. Typically, when humans are exploited, they begin to think of themselves as “lesser than” and act accordingly. It should serve as no surprise, then, that when you put a minimum investment into a person you get a minimum return.

The better I’m treated, the less I have to worry about bills, the more incentive there is to earn higher pay for working harder, the likelier I am to be a better worker. The promise of an eventual promotion that may or may not come is merely dangling a carrot in front of the horse, getting him to run harder without the promise of ever actually eating the carrot. “If you work hard, then perhaps someday you too could become an executive in this corporation!” This, of course, is assuming that you’re able to keep a roof over your head, pay for electricity and water, and then afford the necessary education to get promoted. More than likely, however, even the hardest working Walmart employee (or any other big retail chain) will find herself stuck within store management, typically after years of hard work.

See, for all the love between Christianity and American conservatives, we would do well to remember that the two are not the same. Modern conservatism, or neo-conservativism is actually Darwinian and materialistic in its outlook on life. Modern conservatism, at least economic conservatism, is nothing more than the bastard child of Ayn Rand, the ugly offspring of objectivism. Within this philosophy the individual reigns supreme, even over the family unit. The essential core is that if a man wants to be rich, he has to be willing to outwork and undercut anyone around him, even if it’s his wife and kids. The end objective of existence is for the individual to realize himself. Such a teaching stands in stark contrast to Christianity, which teaches that the individual is nothing without the community, that a man must sacrifice himself to his family’s needs, and the objective of existence is to become like God.

Thus, the minimum wage debate is an interesting one in which we have conservatives, many of whom want to “take back” a “Christian America,” arguing for pragmatic utilitarianism, one of the most anti-Christian philosophies out there. “I’ll pay you for what I think you’re worth, depending on what you bring me.” Such a thought process inherently views the laborer not as a person, but as a commodity. The laborer is then viewed as nothing more than livestock, produce, or whatever it is the company happens to sell. While the labor itself is a commodity, the laborer is not; he is a human being and worthy of dignity and respect. The Christian view, then, is that the commodity of labor is to be treated fairly to the laborer because he is made in the image of God. Continue reading

Rethinking our economy


Imagine you live in a town where everyone needs to have widgets. Because everyone needs to have widgets, there are about twelve different companies dedicated to making widgets. Since all these companies compete against each other and the supply matches the demand, the price of widgets is low. But then one company becomes innovative and creates a higher quality widget at a relatively cheaper price. As time goes on, only about 2-3 companies are left who produce the widgets. Since these 2-3 companies all produce equal quality widgets, they each claim they have to raise the price of the widgets because the quality is so high. While the owners of each company never talk to each other, they watch each other and keep the prices of the widgets about the same, slowly raising the price.

The workers, seeing their bosses make more and more money from the widgets, demand that they get a share of the profit. They go on strike until the bosses begin to share their profit with the employees via benefits and an increase in wage. The bosses, however, don’t want to give up their total profits, so they increase the prices of the widgets. The workers realize this and demand more money and benefits; after all, the cost of living in the town has gone up because the price of a necessary item (the widgets) has gone up. The cycle continues until the bosses realize that the widgets are going to simply cost too much.

Thus, the bosses begin to have the widgets produced overseas at a much cheaper price, but keep the price of the widgets the same. Because people in the town are now out of jobs (since the 2-3 widget producing companies are the only ones left and they’ve shipped the jobs overseas) they struggle to pay for the widgets. The bosses open stores in the town where people can buy the widgets and employ the people to work in those stores, though at a reduced rate and with no unionized labor; thus, the employees are at the mercy of the stores.

People begin to rise up against these bosses and demand the government do something. The bosses, realizing the government could bring an end to all their profit-making ways, contribute money to politicians. Two companies contribute funds to one politician while another company contributes money to another politician. Either way, whichever politician wins will owe his victory to one of the companies, meaning he won’t be able to come down against them. And even if he can, there are multiple politicians in the town; so long as the company can purchase the majority of them, nothing can be done to the companies. The town is then left without recourse to change the way things are.

What is sad about the above scenario is that it’s not hypothetical; I believe it adequately summarizes the United States’ economy post-WWII. Since WWII, more and more small businesses and small corporations have been consumed by bigger corporations. In doing this, we’ve moved from a three class system (rich, middle-class, and poor) to a two class system: Job creators and the employed. Some may not see the problem with having these two classes, but think on it for a moment.

A job creator has no reliance on the employed. If he opens his business in America he is typically leaving it open for skilled labor only. Even then, if he can ship it overseas to make money then he will do so. Thus, the employed are almost literally a dime a dozen, but completely reliant upon the job creators. Why do we value the job creators so much? Because we apparently base the strength of our economy on the number of people employed, or number of people who have jobs. But this is a false measure for the strength of the economy. Having a job is nothing more than being a wage slave – your income is completely artificial and in a bad economy, that income is cut. Thus, you may have a “job,” but that doesn’t mean the economy is healthy – we could employ all the out of work people in America and put them on minimum wage, but it wouldn’t mean our economy is healthy.

To go back to our analogy, let’s assume that a mid-level manager for one of the widget companies makes a comfortable salary because he’d educated. Yet, within 10 years the majority of the town has the same education, meaning there are others out there who are willing to work this manager’s job for less pay. He is then left with having to take a major pay cut or lose his job entirely. This is why being paid a wage isn’t always ideal, that same wage can be devalued in an instance even if the product you sell isn’t.

Instead, the real measure of a strong economy is how many people own capital producing property. This means that, in some way, they have control over their income through being part-owners in a business or complete owners in a business. In this case, one’s income is only reduced when (1) the demand for the product is reduced and/or (2) a better product comes along. Thus, to paraphrase G.K. Chesterton, the problem with Capitalism isn’t too many capitalists, it’s too few. Or, the problem isn’t that people own private property, it’s that too few people own private property. We are the town in the analogy where only a handful of companies ultimately run everything, meaning that capital producing private property is held by a few people. To liberals this is a social injustice, but to conservatives this must be understood as the destruction of the free market. In other words, the current system we have in our nation is not a free market system; it’s something that neither conservatives nor liberals can tolerate (hence the Tea Party and Occupy protests being so similar in their complaints, but different in their solutions).

The reality is we need a complete reformation of our economic system. The practical aspects of that can be debated and discussed by economists, but I believe the following philosophical principles need to undergird it:

  1. There is no utopia. Any system we developed will have inherent flaws to it, corruption will still exist, and injustices will still happen. The goal is to create a system that minimizes these realities and does all it can to delay them. Within the system there should be a series of checks that allow for penalties when corruption is found, but we should acknowledge that corruption will never be completely eradicated. There will always be the rich and the poor, the have and the have-nots, Peter will always make more than Paul, there will never be economic equality, and so on. The goal is to lessen these realities, not eradicate them.
  2. Any economic system we develop must value human beings as people with inherent rights. In other words, they cannot be part of the collective as they are in Communism, nor can they be means to an end as they are in Industrial Capitalism (or Objective Capitalism). The primary motive in any economy cannot be profit; while it must be a motive, it cannot be the motive. The primary motive needs to be the betterment of individuals and the local community.
  3. We must allow for the free market, but in a true sense of the word. The free market is the best way to value human beings because it allows them to make something of themselves. But the free market must truly be free; when left unregulated or free from government involvement, eventually the free market collapses. When only a handful of companies control the market, it’s not a “free market.” Thus, the government has the obligation to protect the free market, by limiting the growth of certain companies, or by ensuring that in corporations that are necessarily large (such as car companies) the overall power of the company is in the hands of the many and not the few (more on this later). At the same time, this means the government must keep their hands off small businesses and let those businesses develop within reason. It means the government’s job is to protect and support the ownership of private property, not make it more difficult via taxation. Thus, the system cannot be socialist, but it cannot be capitalist (as presently understood) either.
  4. In necessarily large corporations, the power within the company must be divided. While we need leaders and people who are visionaries, as a company grows, so too must its ownership. This simply means that the workers ought to get a share of the profit via direct profit share, not through wage increases. In many ways, this makes all the workers types of owners. On big decisions, such as moving the company or the like, everyone should be allowed to voice their opinion. While this allows for corporations, it takes away the power of the corporations and especially of those at the top – the richest people in the corporations still don’t have enough money to influence elections. It also lowers the gap between rich and middle class (which is a problem). While the owners and CEOs will still make quite a bit of money, in having to share the profits of the company with the workers, that gap is reduced. Furthermore, when people know that working harder will bring in a higher profit bonus, most people will be motivated to do so, which makes for better products put out at a faster rate, which does make for a better economy.
  5. The government must regulate the market to protect the free market. That is, they must protect the market against monopolies and de facto monopolies (when 2-3 companies rule an entire region). In cases where a monopoly become inevitable – such as an energy company – the government holds the job of regulating the cost and preventing the cost from getting too high. They also hold the responsibility to ensure that in large corporations the workers are given a profit share and treated as co-owners.
  6. The government must watch its regulation and not peddle when some companies fail. Failure is a good thing because it allows for learning and growth. While painful it is a necessary part of an economy. Thus, if a company is about to fail, let it fail, even if it’s a large company. The temporary pains won’t destroy the economy, but the government getting involved and ruining the free market will destroy an economy.

The goal in all of this is really to respect and protect the dignity of man. The most important point that I did not include is that we must have a moral society. We must drop the moral relativism that we’ve bought into and realize that objective moral values exist, naturally so, and that when we abandon them there are negative consequences to be had. While the above points would make for a better economy, what would ultimately help the economy is for people to realize that acting ethically allows for a more sustainable economy. Acting ethically may cap a business owner’s income to a few hundred thousand instead of a few hundred million, but it will allow for a stronger economy for everyone else and still give him enough money to live comfortably. But we have to be willing to do what is right and that requires us to reject subjectivism when it comes to ethics.

Thus, if we wish to fix our economy and overhaul it, the first step has to be an ethical one. It has to be a commitment to doing what is right and encouraging others to do what is right as well. The economy we have today was founded in the 60s and 70s, the self-love and individualistic ethos. To fix our economy we have to fix our social ethic, I’m just not sure anyone is willing to do that.

The Slavery of Capitalism (and Socialism)


In a televised interview on CNN Rand Paul (senator elect from Kentucky) was asked about a plan to ease the economic gap between the rich and the poor. His answer was something akin to some type of pantheistic economy, saying something to the effect that “we are all one, there is no rich or poor, we’re all part of the economy.” He then said, quite directly, that “We all work for rich people or we all sell to rich people.” All of this was said to justify giving a tax cut to the richest 2% of Americans along with a tax cut to the rest of Americans.

Whether Mr. Paul realizes it or not (most likely he doesn’t), he exploited a giant problem in the world today; we’re all slaves. We don’t have true economic freedom in America anymore and what is worse is no one seems to notice (or care). Even those who are debt-free are still slaves to the wage system.

Our recent economic problems have exploited the problem facing America’s economy, most notably that whether we lean towards Capitalism or Socialism we seem to fail. Sadly, under the recent administration, we have blended the worst elements of Capitalism and Socialism that has only further entrenched the average working American into a form of economic slavery. With the big bailouts – which we must admit that bailouts are necessary at times – huge companies such as GM were given money in order to stay afloat while small businesses were left by the wayside. Here we see socialism (using tax-payer money to subsidize a public firm) working on behalf of Capitalism (free-market competition). But this should come as no surprise since the two are really one in the same.

Industrial Capitalism teaches that competition is good and drives the economy along. However, as it is within the nature of humans to tend towards excess, such competition inevitably leads to monopolies. Often when we think of a monopoly we think of one company that has a tight grip over an area; however, a monopoly can also exist when there are only two or three choices for any given product or store. Chances are, if you want to go grocery shopping, you have three choices: Walmart, Target, or a grocery store chain that is “local” (but owned by a national chain). In all of this we have a monopoly – there isn’t any real competition because the three stores can drive the market. Why is organic food so expensive? Because the three stores don’t make a high profit margin off organic food, thus they drive the price up in order to equalize the profit margin they make on other foods. When one store does it, the other two can justify it and then “compete” with each other by lowering prices by cents, which are quite insignificant.

Though this demonstrates the problem of Capitalism, if we stick with the example of organic foods we can see the problems with Socialism. Another reason organic food is far more expensive than its chemical counterparts is that chemically enhanced/protected food is subsidized by taxpayer funds whereas organic food is not. Thus, the government chooses to redistribute the nation’s wealth to corporations rather than to small business owners or local farmers. Continue reading