Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
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Jeff Smith: What the Left Must Do: Share the Surplus
What would you do if you could work two days and take five off? Write? Play soccer? Tend to the community garden? Time off is an option made increasingly viable by our relentlessly rising rate of productivity. French Marxist and media critic Jean Baudrillard, while still advancing the interests of labor, implores the Left to move on from seeing humans as workers to seeing workers as human beings, with more needs than merely the material. Enabling people to live their lives more fully is an issue made to order for rescuing the Left from the doldrums that descended when “history ended”.

What would single mothers do with enough income to stay home? What would minorities do with the wherewithal to begin their own businesses? What would communities do if they did not leak resources up to an upper class and out to a distant lender or tax collector? What would the elite do without our commonwealth? The means to these ends is an extra income apart from labor or capital (savings), that is, a “social salary” from society’s surplus, a “Citizens Dividend” from all the rents, natural and governmental, that people pay for land and to the privileged, redirected to everyone equally.  Merely demanding a fair sharing of the bounty from nature and modern society would raise people’s self-esteem, a key component for political involvement. Actually receiving an income supplement would transform our lives and restructure society.

Unless humanity needs militarism, corporate welfare, and debt service, it’s fair to say most public revenue gets wasted. Demanding a dividend – similar to Alaska paying residents a share from oil royalties – forces a new dialog on spending priorities. Beyond arguing “bread not bombs,” a dividend replaces expenditures by politicians (necessarily influenced by donors) with spending by citizens, the people who generate the surplus in the first place. With a dividend, citizens get to see themselves as direct beneficiaries from reigning in the wild spending spree on imperial aggression, disloyal multinationals, and on “borrowing” money that never existed until “lent” by the Federal Reserve. ...

The much and justifiably criticized corporation is in essence its corporate charter, given value by limiting the liability of managers, directors, and investors. It’s worth at least the cost of the insurance payments not made by the corporation, which would equal the costs imposed upon worker, customer, and nature. As the “need” arises, legislatures extend limited liability even further: Congress legally lowered the greater risk of nuclear power to benefit Westinghouse, of the Valdez oil transport spill for Exxon, and the Y2K software design bug for Microsoft. Politicians define legally “safe” amounts of polluted air and water for GM and Monsanto, keeping safe the wealth of those responsible.

Not to be outdone by any legislature, the Supreme Court has ruled in favour of compensating landowners for environmental “takings”, but has remained silent about landowners compensating the public for any “givings”, as when site values skyrocket near a new light rail stop. Molly Ivins wrote,
"Henry George must be in his grave spinning' like a cyclotron. We, the people at large, make the land more desirable; and then the landowners want us to pay them because we won't allow them to poison the air or to pollute the rivers." (1995 March)
That’s how great fortunes are made: by sloughing off private costs (which become “negative externalities”) while soaking up public benefits (some “positive externalities”). Land titles, corporate charters, and other privileges – mere pieces of paper – are worth trillions each year. The corporations – from the Federal Reserve to Exxon (both founded by the “oiligarchy”) – that receive these privileges make their owners rich or richer. Their wealth is not compensation for the exertions of either labor or capital, not profit in the market from output, but rent from present lobbying of legislatures or past conquest of others’ lands. Thus laws (“privilege” means “private law”) funnel multi-trillions of dollars each year from the many to the few.  ...

Trillions are enough money that the present beneficiaries spend fortunes on electing their water boys to Congress and state legislatures. Why do public servants agree to let public assets go for peanuts? Partly out of habit, partly because the recipients contribute mightily to their political campaigns, but also.  ...

As taxing land spurs employment, taxing labor and capital does just the opposite. Taxing salaries makes it more expensive to hire people. Taxing earned profits makes it more expensive to invest in firms that hire people. If you want jobs, don’t tax them. Demanding jobs while taxing wages is irrational. When we tax (or in other ways reduce) one’s efforts, most people naturally produce less.  Less output not only shrinks private assets but also the formation of public assets downstream.

Unlike taxing earned incomes, which shrinks the pie, collecting rent grows the pie. While taxes on effort lessen the motivation to produce, charging people rent for what’s already been provided, by definition, does not diminish the motive to produce. Instead, recovering rent removes the private profit from speculating in land and resources. And once we redirect revenue from sweetheart deals (e.g., Pentagon contracts), tax breaks (e.g., depletion allowances), and subsidies (e.g., agri-business support) into a general dividend, then why bother currying favours from the state? Finding rent-seeking from both nature and the legislature less profitable, investors would turn to improving production: new technology and worker re-training, providing society more from less.  ...

Given the collateral damage by most taxes, the Left must make clear that the extra income is to come not from taxes upon people’s legitimate earnings but from rent, making it a social salary from society’s surplus. While opponents will cry “redistribution”, the Left can point out that sharing the commonwealth is actually “predistribution.” Acting like a REIT (Real Estate Investment Trust) for the public, government would merely recover and disburse rents before the elite or their friendly politicians have a chance to misspend society’s surplus. Read the whole article

Jeff Smith: Subsidies at Their Worst: Privileges
Money is the mother's milk of politics. Yet the milk invested by lobbyists and those they represent is a drop in the bucket compared to the flow they get back from the public tit, thanks to the milkmaid state. Politicians grant well-connected big businesses:
a. direct cash outlays, such as cash to corporations for advertising overseas,

b. lucrative contracts, such as with weaponeers et al campaign contributors, and

c. tax breaks that burden would-be competitors, such as tariffs that protect GM and Ford but not autoworkers. Even if we were to abolish subsidies (a) and taxes, eliminating the advantage of tax breaks (c), and negotiate responsible contracts (b), that'd still leave in place

d. seven subtle privileges, mere pieces of paper that government grants its customers at nowhere near market value, positioning the privileged to claim all the surplus value of society.

1. The corporate charter's salient feature is to limit the liability of those choosing to profit by putting others at risk. ...

2. Pollution permits, performance waivers, land use exemptions -- whether granted by bureaucracies, legislatures, or courts - are worth much more than however much government charges and business pays. ...

3. Patents protect the basement inventor, right? Wrong....

4. Utility franchises create monopolies in exchange for some public service, such as providing electricity, phone communication, etc. ...

5. Communication licenses for TV, radio, cell phones, and the like are given away for free or for far less than market value, turning recipients into "instant billionaires" (the business press gleefully notes). ...

6. Resource leases for public oil, minerals, forests, and grazing land, are often let at "fire-sale" prices. ...

7. Land titles do protect the average homeowners but because they cost virtually nothing (a paltry filing fee often about $2.00), they also protect enormously wealthy absentee landlords. ... 

Land titles are the granddaddy of all privileges. Historically, titles preceded all others and created a class of elite owners with the power to win the six other indirect subsidies, along with the more direct ones – grants, contracts, and tax favors. To undo and reverse this history, it's necessary to collect and share the natural rents from all seven inconspicuous privileges.

For these pieces of paper, government should charge full market value. ... 

Getting a Citizens Dividend would not only eliminate poverty, it'd also erase any rationale for subsidies - direct or indirect - to the poor or to the privileged. Repealing the free ride of privileges would be like repealing capitalism. Without those subtle detours imposed upon public revenue, owners would have to work to amass a fortune, and work is one of the worst ways known to strike it rich.

What you can do: Dry up the milkmaid state. Dispense with the notion that the state must meddle in enterprise. Dispense the notion from others, too. Focus government on its lone raison d'etre - defend rights. Demand your right to a fair share of natural revenue. ...  Read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

And it’s not just regulatory agencies that have been captured. Congress itself, which oversees the agencies and writes their controlling laws, has been badly infected. According to the Center for Public Integrity, the “influence industry” in Washington now spends $6 billion a year and employs more than thirty-five thousand lobbyists, some two hundred of whom are former Congress members who enjoy easy access to their erstwhile colleagues.

A glimpse at the corporate lobbying game shows just how rewarding it is. MBNA, the nation’s largest credit card bank, spent over $17 million on lobbying between 1999 and 2004. This is pin money compared to the sums it will reap from an industry-drafted bankruptcy overhaul, passed in 2005, which precludes all but the very poor from wiping out their debts and starting anew. (The great majority of Americans who file for bankruptcy are middle-class victims of job loss, huge medical bills, or family breakup.) A New York Times reporter described this scene as the bill was being marked up: “Lawyers and lobbyists jammed Congressional hearing rooms to overflowing. . . . During breaks, there was a common, almost comical pattern. The pinstriped lobbyists ran into the hallway, grabbed tiny cell phones from their pockets or briefcases, and reported back to their clients, almost always with the news they wanted to hear.”

Or consider the biggest influence group in Washington these days, the pharmaceutical industry, which boasts more than two lobbyists for every member of Congress. “You can hardly swing a cat by the tail without hitting a pharmaceutical lobbyist,” says Senator Chuck Grassley, chairman of the Senate Finance Committee. And with good reason: billions of dollars in drug company profits ride on actions taken — or not taken — by Congress. In 2003, for example, the industry won coverage for prescription drugs under Medicare, while blocking the government from negotiating prices downward. It kept Americans from importing cheaper medicines from Canada, and protected a system that uses company fees to speed the drug approval process.

Numbers can be put on this sort of thing, and Kevin Phillips, a former Republican strategist, has done so. “The timber industry spent $8 million in campaign contributions to preserve a logging road subsidy worth $458 million — the return on their investment was 5,725 percent. Glaxo Wellcome invested $1.2 million in campaign contributions to get a 19-month patent extension on Zantac worth $1 billion — their net return: 83,333 percent. The tobacco industry spent $30 million for a tax break worth $50 billion — the return on their investment: 167,000 percent. For a paltry $5 million in campaign contributions, the broadcasting industry was able to secure free digital TV licenses, a giveaway of public property worth $70 billion — that’s an incredible 1,400,000 percent return on their investment.”

The reason our political system works this way isn’t that our politicians are particularly venal. Rather, the cause is structural. Industries that benefit from government favors are wealthy and well-organized. They earn high and immediate returns from lobbying expenditures and campaign donations. And just because the money isn’t spent on outright bribes doesn’t mean there aren’t quid pro quos. Politicians and corporations have a symbiotic relationship. Politicians need money and corporations want favors. Neither side is dumb or shy. Politicians who hope for long careers won’t often offend money suppliers. At a minimum they’ll give them access, and in politics access is nine-tenths of the battle.

By contrast, ordinary citizens are cash-poor, unorganized, and ill-informed. They amble to the polls a few times per decade, if that. Of all the players in politics, they’re the easiest to fool. And though politicians do read opinion polls, these rarely concern the arcane favors corporations seek. Hence, disciplined cash-rich corporations easily prevail over ordinary citizens.

There’s even an economic theory explaining this: Mancur Olson’s logic of collective action. Olson, a Harvard economist, argued that unless the number of players in a group is very small, people won’t combine to pursue their common interests. For example, if the CEOs of five major airlines decide they want a $500 million government bailout, they pool their resources and hire a lobbying firm. Together they tell Congress that without the $500 million, their companies won’t survive, and the consequences of their collapse will be dire.

Who lobbies against them? No one. The reason is that, while the five airlines will gain about $100 million each, the average taxpayer will lose only $5 each. It’s thus not worth it for ordinary citizens to get off their duffs and fight.

On top of this, there’s an even deeper problem. Democracy responds at best to voters and at worst to money. Both voters and donors are living humans. Not even seated at democracy’s table — not organized, not propertied, and not enfranchised — are future generations, ecosystems, and nonhuman species. James Madison and his brethren could scarcely have foreseen this defect. In their day, politics was about the clash between living factions, not between living humans and their heirs, or between our species and the rest of nature. But that’s no longer the case.

The implications of Adam Smith’s quote at the beginning of this chapter are thus even graver than he thought. If government’s inherent bias is toward property owners, the losers aren’t only the poor. The losers are also future generations, ecosystems, and nonhuman species, none of whom own any property at all. The only positive news here is that the converse might also be true: if future generations, ecosystems, and nonhuman species did own property, they might have some economic and political power. ... read the whole chapter


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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper