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.

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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 Millennials Want Bernie Sanders or, How America Could Have Stopped Socialism


N6YQRW1Bernie Sanders offers free stuff and makes socialism look cool. After all, all the rad kids are down with Democratic-Socialism. I hear tons of 20-somethings are totally dressing as the late Michael Harrington (a famous Democratic-Socialist thinker for you squares out there) this Halloween. What these young whippersnappers need to remember and learn is that they’re not entitled to anything and there’s no such thing as a free lunch. Just because they can #FeelTheBern for free and legal marijuana and Xboxes doesn’t mean socialism suddenly makes sense.

Of course, when we remove ourselves from the rhetoric of Baby Boomers and even Generation X (the last generation to have a shot at the American Dream), the support for Bernie Sanders among millennials does make sense, even if it’s misguided. What people fail to understand is that the world for someone who is 20-something years old isn’t the same world for a 20-something year old 20, 30, or 40 years ago. 40 years ago students could work a full time job at minimum wage and pay for a college education while also paying for rent at an apartment. Back then minimum wage was $2.30 an hour, or about $9 by today’s standards. That’d earn a minimum wage worker $4,784 (give or take) for the year. Going to school full time would have run a tab of about $2,600, or half their income. So even for those who couldn’t squeeze that full amount, a small loan could take care of their education and, even in a worst case scenario, they’d be able to pay it back relatively quickly after graduation. Of course, earning a college education back in 1976 would have guaranteed a middle class job with a middle class income. And the average rent in a big city ran around $220.

Compare that to today’s standards. If a student works full time while going to college at minimum wage, she’ll earn $15,080 a year (give or take). The average four-year degree at a public institution will run $17,500 a year, which is more than her income. Also, the average rent in a big city has jumped to well over $1,500 a month (assuming she’s not in government housing). And all this for a degree that won’t necessarily guarantee a much higher income. And I know, we can say, “Well go get a trade school degree,” aside from ignoring implicit idea of creating a servant class, trade degrees are very susceptible to new technological advances or even market saturation: If everyone has a trade degree, then the value of having a trade degree drops. The overall point is that the economy today for those entering college, leaving college, or who have been out of college since 2000 is in a dire situation.

What’s more is that there’s no hope for millennials. The trend we’re seeing in the economy right now is that as Baby Boomers retire, rather than younger people taking the vacant positions, the positions are either being eliminated, rolled into another position, or shipped overseas. Even those lucky few who do get to take the positions are typically treated to significantly lower wages than their predecessor, because of “experience.” While not typical in all situations – especially in upper management – it’s very true for the average worker. Ideally, as Baby Boomers retire it should create a job vacuum, which would naturally increase wages and decrease unemployment and underemployment. But instead, we’re seeing absolutely no increase in wages or progress for those under the age of 30.

What the above means is as follows: As Baby Boomers retire, the younger generations are not inheriting better jobs and better wages. In fact, already we’re at a point where the majority of Americans are no longer in the middle class. Since 2000, even though Baby Boomers have begun to retire, we’ve seen no real progress in wages and no high demand to fill those jobs. That means over the next 10-15 years, as the last of the Baby Boomers begin to enter into retirement, we’ll watch the complete disappearance of the middle class. People will either be rich, or they’ll struggle. There will be no one who just lives comfortably, who while not rich or wealthy, can still put money into savings and retirement. What that also means is that in the next 10-15 years, the US tax-base is going to shrink considerably. Even if we taxed the top 10% income earners at a 90% rate – which is almost too heavy a burden for most people even in the top 10% of income earners –  that still wouldn’t be enough to fund our government. Historically in the 20th century the United States was able to grow, create highways, run mostly efficient projects because of the large US tax-base. After all, it’s better to collect hundreds to thousands of dollars from hundreds of millions of people than millions of dollars from hundreds to thousands of people.

As it is, we’re looking at a situation where within 20 years the United States is going to struggle to pay for some pretty basic things. Already we’re watching our infrastructure completely crumble because there’s not enough revenue being pumped into necessary projects. Many police departments are underfunded, leading to legalized corruption in civil forfeiture. In the states, most schools – especially low-income schools – are significantly underfunded. Imagine how these things will work 20 years from now. Most government money will likely go to wealthy areas of the country, while the rest of the country is ignored or remains underfunded. As it is, 1 out of 5 Americans is on some form of government assistance, or welfare to use the pejorative term (medicaid, SNAP, housing assistance, Supplemental Security Income, and Temporary Assistance). You can’t just mismanage funds to get on those programs as they’re based on your income, not how you use your income. That means21% of the country earns somewhere around or below the poverty rate. When compared to other industrialized nations, it’s pathetic. If we increase the number to include social security, veterans’ benefits, unemployment, and other social services, that number increases to 49%.

We’re heading towards a nation that, within 10-15 years, more people will be taking money from the government than putting money into the government. Not because they’re lazy, not because they’re “moochers,” but because that’s how we’ve set up our economy to function. Such a government simply isn’t sustainable, so cuts will be made, meaning benefits will be cut. That always leads to unrest and can harm a nation.

So the above is exactly what millennials have to look forward to. And along comes a crazy-eyed, wild-haired, tough-talking guy pointing to other nations using Democratic-Socialism, pointing out how it’s succeeding, pointing out how it works, pointing to a brighter future, and you wonder why millennials are drawn to him? I know enough about the Nordic system to know that what Sanders says it is and what it actually is are two different things. I know enough to know that his plans are really a bastardized version of the Nordic system. And I know enough to know that his plans, while significantly flawed, are still better than our current system. The dark future that awaits us is why millennials are willing to look at Sanders and hold out hope. Personally, I like what Sanders offers and will probably vote for him, not out of hope, but out of, “Well, our current path leads to doom and some of his ideas have worked elsewhere, so let’s try it.”

What’s worse is that all of this could have been prevented. A person who earns a livable wage, who can save up money, who has good healthcare, who has a secure retirement plan, and who knows that they’ll continue to be promoted and advanced with hard work doesn’t want to pay higher taxes, doesn’t want multiple government programs to solve for poverty, and doesn’t want socialism. It’s why Baby Boomers – who have spent most of their lives in the middle class – are so opposed to Bernie Sanders. It’s why millennials – who will never be in the middle class – like Sanders. Not because he’s cool, different, or hip, but because he sees the problem and offers a solution. But if the problem didn’t exist, then they wouldn’t need Sanders’ solution. The problem does exist, and it’s caused by greed.

Contra Gordon Gecko, greed is no good. Greed is a cancer, but worse than cancer. Cancer is random and not celebrated, so everyone fights it. Greed, however, is intentional, chosen, and celebrated, so it spreads and consumed everything in its path. Millennials don’t care that millionaires exist or that corporations have made massive profits; what they care about is that these profits haven’t been dispersed to the people who earned them, the workers.

US-corporate-profits-after-tax-1990-to-2013 (1)

US corporate profits after tax have increased dramatically since the early 90s. But when we look at income…

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Income has failed to match corporate profits. Which, to a certain extent, who cares if a CEO earns millions of dollars a year? I certainly don’t. If I can pay for the necessary things in life and lead a comfortable middle class lifestyle, not worry about my future, know that one day I can retire, why do I care that the CEO makes millions? But when his millions come at the expense of my paycheck? Well, now I care.

See, millennials don’t care that there are rich people, what they care about is that greed has essentially collapsed our society and economy. We’re just waiting on the other shoe to drop from 2008. If you want to know why millennials are turning to a self-avowed socialist, it’s not because they actually want socialism so much as it is they hate greed and what greed has done to our system. Greed is a horrible thing, a destroyer, and it’s causing the collapse of our nation.

Millennials, right or wrong, support Sanders because no one has supported millennials. Because we’ve allowed greed to run rampant, because we’ve celebrated greed, because we’ve created a system where the greediest people reap all the rewards, we’re looking at the decomposing flesh of what could have been a great nation. Greed is killing our nation and the masses are growing restless. This can either be settled through the wealthy giving up their greed and sharing their wealth voluntarily (ideal situation), or it can be given up through a political revolution by electing a far-left candidate (not ideal). Or, if the political revolution is stopped, one can only wonder when people will become so desperate that they’re willing to take to the streets in massive protests and riots (really not ideal). We came close in 2008, so it’s not difficult to imagine another shake up causing a more violent response.

So stop with the belief that millennials want free stuff. They don’t care about stuff. They just want a future. And if the wealthy business owners and CEOs don’t see fit to give them that future, they’ll vote for anyone who can promise it to them.

Finding Social Justice in Farming: The Importance of Local Ownership


DSC01993Being that we’re in election season, there’s quite a bit of discussion over social justice issues, namely food stamps, “welfare programs,” and an increased minimum wage. People on both sides will argue back and forth with some stating we need to decrease aid to encourage people to find better jobs, with others arguing we need to increase aid because better jobs aren’t available. What is often ignored in such discussions is that no matter what, the system is established in such a way as to fail the poor, but there is a solution: Farming.

We’ve fought to make ourselves an industrialized nation, to move beyond an agricultural nation, and for the most part we’ve accomplished what we set out to do. Even our farming is done via factory methods, attempting to achieve “efficiency.” We’ve reduced our farming populace to less than 1% of the US population. We’re told that our industrialized farming has done many things to end world hunger, that we’re just a few years away from ending it completely.

Of course, the reality is vastly different from what we’re told. Worldwide, the number of those hungry has remained relatively the same for 50 years. What is worse, according to the same source (the UN Food and Agricultural Organization) is that about 3 billion, or a little under half the world’s population, do not eat well.

Even within the United States, 14% of our population is food insecure, and that number is up since 2000 (when it was around 10%). Of course poverty is directly linked to food insecurity, especially in the United States. According to the same government study, 61% of those who are food insecure partook in the SNAP program or some other food stamp program the previous year. On a greater level, Americans are among the most malnourished people in the “rich” world, despite the average American consuming 2700 calories a day, we consume pointless calories, or food devoid of the needed nutrients to aid the body in growth and maintenance. While the United States has one of the worst hunger rates among rich countries, ironically we’re also one of the fattest; both stem from incredibly poor food practices.

All the problems we’ve had forces us to ask exactly how factory farms are efficient. They certainly aren’t efficient in protecting the environment or the soil. They’re not efficient in feeding the world or even the United States. They’re not efficient at providing healthier food. They’re not efficient at providing jobs as they’ve basically taken all the jobs in rural America, forcing farmers to move to the city to find work. The only thing factory farms seem to be efficient in is in making money. We’re told that factory farms are “efficient” simply because they’re efficient at making money; but by using an adjective to describe factory farms, we falsely imply that they’re efficient, at least more efficient than local farms, at producing food for the community or feeding the world. The truth is the only thing a factory farm can accomplish better than a local farm is it can make a bigger profit.

But what this entire conversation betrays is that we look at economics in terms of being “economical,” or “efficient,” which are all words for “Do the costs justify the results.” The better results at the lowest possible cost, the more “efficient” a system is. The question no one asks, the question it seems economists always fail to ask, is, “But is it right and good for society?” Is it good that we’re making a huge profit if such a profit comes with other costs?

The problem with economists – who are worse than weathermen for predicting the future in their respective field – is they tend to think along linear and isolated lines when it comes to the economy, especially farming. A (the producer) begins the line and B (the consumer) ends the line; in-between are costs. So long as A is cheaper than when B purchases it, the system is “efficient.” But such a system, when taken holistically and when asked, “But is it good for society?” becomes absurdly inefficient. After all, the producer could use slave labor to make a trinket, meaning the consumer purchases the trinket at a market-driven rate that is almost guaranteed to achieve a profit; but the end result (a profit) is gained through horrible means (slavery). Likewise, with factory farming, while a profit is gained in the end, the means and costs associated are actually quite horrible.

There are many reasons we ought to prefer local farms over factory farms, and here are a few:

  1. Property Ownership: A factory farm is, by default, a monopoly over capital producing property. A healthy society is one in which the majority of workers own and control (or at the very least hold heavy influence over) the means of their labor. Put another way, to quote from G.K. Chesterton, “Too much capitalism does not mean too many capitalists, but too few capitalists.” If three companies ultimately control 99% of the food production for a nation, it’s safe to say that their wishes hold more influence than 3 million people. A truly free society is one in which the majority of people own capital producing property (property that can make money). A prevalence of locally grown farms where 20-30% of the population owns a farm would create a society where land use is diversified and decentralized.
  2. Low Skill Labor: Farming jobs require hard work, but very low skill labor. For anyone who’s grown up in a rural area in the past 70 years, they can tell you that their first job was on a far. That’s because much of farming is so simple that a 13 year old can do it. But in factory farms such jobs just aren’t available. This means that people who would live in a rural town and contribute to the economy there must now travel into the cities and look for low-wage jobs in the city, living hand to mouth, and praying to God that the next paycheck will feed them. Of course, if they owned their own parcel of land and knew how to grow things on that land, they would be in a position to not only feed themselves, but then sell their produce for a profit. While they would by no means lead extravagant lives, they’d be in a better position. They’d live in a rural area instead of a cramped city, work on their terms, and if all else failed they’d at least have their own food to eat rather than praying for the first of the month to hurry and arrive.
  3. Meaningful Work: Along the same lines of providing jobs for low skill labor, farming labor is work. A factory farm does all it can to reduce the cost, which means they hire only what is needed and mechanize the rest of the labor. Those who work for the factory farm often do so under horrible conditions, conditions that dehumanize them and make them focus on one aspect of the job. Local farms, however, require farm hands to understand multiple aspects about the farm. A local farm would provide meaningful work for someone with low skills in other jobs. A kid or (as is more often the case today) adult down on his luck finds no meaning in flipping a burger or tossing french fries into a cardboard canister. They do find meaning, however, in growing things, in creating things, in seeing and reaping the fruits of their labor. There’s no utilitarian reason to it, no other explanation than that’s just how humans are; we’re typically okay working when we can see that our work has meaning.
  4. Reduced cost to the tax-payer: Factory farms are cheap and efficient in cost only because the government subsidizes them; remove those subsidies (especially for gas prices) and you’ll watch the cost of factory-produced food leap higher than locally grown food (even organic food).  Why? Because Farmer Fred down the road lives in the community, can deliver his goods to the community, and therefore doesn’t have a high overhead cost. Of the nearly $100 billion in subsidies we give out, 74% go to the top 10% of farms. While farm subsidies are necessary for smaller farmers, the cost drops due to the lower overhead cost of a smaller farm.
  5. Viability: Most factory farms also use GMOs, which isn’t bad in and of itself. The problem is that if the patented crop isn’t immune to a certain fungus or insect, an entire field could die instead of a percentage of that field. Under a local farmer – who lacks the equipment to engineer his food – his field holds diversity, allowing for at least some of his crop to survive. Even if a farmer loses his entire crop, the amount of diversity among the crops from all the farmers would be enough to ensure that an entire crop isn’t lost for the local community.
  6. A local economy: Local farms keep money within a community, allowing the community to grow. A local farm also needs a hardware store, a mechanic, and the list goes on and on. Some mega-factory receives all the repairs and keeps all the money. There’s a reason that as the farmable land has been eaten up by corporations people from small towns have moved into the city. Not everyone leaving a rural area is a farmer, but simply lose business because an “efficient” agribusiness has come into town. Whereas a local farm doesn’t have such a luxury due to financial constraints. Thus, they place their money in the local economy. They’re more likely to have the mechanic come out to the farm and work on the equipment, to hire local teenagers to work the fields during harvest time, to sell to the local grocer, and so on.
  7. Ecological sustainability: The hustle and bustle of modern life that we seem content to thrust humans into destroys our spirit and our connection with nature. Notice how most factory farms are also some of the biggest polluters out there, but local farmers tend to be quite the environmentalists. The reason is simple: The CEO and executive board sitting in New York and Chicago only sees numbers and profit; they don’t care one bit for the ecological consequences. Yes, the whole, “But they rely on the land for profit, so why ruin it?” might be logical, but such an argument assumes that greed allows men to be logical. There are thousands of instances where it was in a company’s best interest to be environmentally conscience, but they chose not to because it could save them a few bucks. The local farmer, however, is more connected to nature because he’s surrounded by it and works it everyday. Where a factory farm might not care if it ruins the soil – it has other soil it can plow – the local farmer deeply cares for his land because it’s all he has. He doesn’t see numbers first; he sees his livelihood first.

Ultimately, factory farms are only “efficient” if one considers profit, which is a very linear A to B way of thinking. Of course, such a type of thinking doesn’t function well in the real world where everything is connected. If we want to achieve true social justice, part of what we must do is begin returning a larger portion of our population back to farms that they own and control.

What About Morality in Economics? or, Virtue Capitalism and Wage


DSC02073One of the biggest arguments concerning homosexual marriage is that the government cannot allow such an immoral action to occur. Now, I have made my views known (that the government ought not be involved in marriage to begin with), but there are those who believe homosexuality ought to be banned because it is immoral. Likewise, they want to ban abortions due to their immorality, which is something I support. Yet, when confronted with the idea of instituting a just wage for unskilled workers, we’re told that it’s a bad idea. When we point to a multitude of Scriptures that speak of standing up for the rights of the impoverished, we’re told that it’s not our job to push our morality on businesses.

What I’m curious about is why we’re so quick to push morality on some issues, but not on others. After all, study after study after study has shown that low-wages lead to (1) higher unemployment, (2) more government aid in terms of welfare, food stamps, etc., (3) a weaker economy, and (4) the eradication of the middle class. In other words, this is a moral issue that has empirical negative effects; the low wage of the worker down the street does ultimately impact me (unlike homosexual marriage).

Proverbs 29:7 states that the righteous understand the rights of the poor, but the wicked have no such knowledge (the Septuagint goes further and says, “For [the wicked] has no understanding heart for the poor man”). What is interesting is that verse 14 says that a king who faithfully judges the poor will have his kingdom established forever. In other words, the Biblical command for aiding the poor doesn’t stop at private charity (as many conservative Christians claim), but is extended to the government. It is not only extended to Israel, God’s representation on earth, but to all governments. Numerous times in the Old Testament prophecies do we see pagan nations condemned in part for their treatment of the poor; in fact, based on Israel’s multitude of condemnations, it seems that with paganism an apathetic view of the poor often developed.

Now, I’m not advocating that we go out tomorrow and support the government increasing minimum wage to $16 an hour. Good people who care about the poor can differ on the practical applications of such concern. The problem, however, is that many Christians have fallen into the conservative myth about the poor; that the poor and unskilled laborers are in such a position because they are lazy, stupid, and unambitious. If they would only work harder they would earn more. We even point to anecdotal examples where someone we know (or ourselves) started in a minimum wage job and worked our way up. Not coincidentally, such people are typically white and come from a lower to middle class background. That is to say, such people often didn’t suffer under years – generations – of oppression where a fatalistic attitude took hold. We also ignore that upward mobility is declining in America so that even hard workers who earn raises typically stay within reaching distance of the poverty rate for decades.

What I am advocating is that we recognize the issue of hourly wages, or more broadly the widening gap between rich and middle class, as a moral issue and not an economic issue. The Bible also condemns those who gain their money via oppression of others. The Bible never does condemn wealth in itself and even says that God blesses some with material gains. Thus, no one is arguing that we all earn equally, merely that we earn fairly. When you look at places like Walmart where the CEO bring in over $17 million in total compensation (mostly from stock options) while the average employee brings in $22,000, how can a Christian think such a system is just? It becomes even worse when you realize that the stock options and bonuses come from boosting profit gains, but cutting labor costs is the easiest way to boost profit; thus, the CEO’s total compensation reflects the low wage of his employees. Such a thing is immoral.

From the Christian perspective, while there’s nothing wrong with having wealth, there’s everything wrong with having wealth at the expense of others. When CEOs make so much money that they earn at a ratio of 796:1 (in the case of Walmart), we are faced not only with a blatant immorality, but something that is dangerous for a society. 44 million Americans live in poverty. That’s 14% of our nation that lives below the poverty line. That doesn’t seem so drastic until we consider that 80% of Americans face near-poverty. This isn’t the result of economic fluctuations or a boom vs. bust economic model, this is the result of a country facing moral bankruptcy.  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.