Nick and Joe are doing their best to beat back Milton Friedman et al
Nick Hanauer, Joseph Sitglitz videos.
This is the latest presentation Nick Hanauer has made regarding the upside downness of our economy and the backward, selfish thinking that has gotten us here. In this one he is talking to his “plutocrat” friends:
We plutocrats need to see that the United States of America made us not the other way around. That a thriving middle class is the source of prosperity in capitalist economies, not a consequence of it. And we should never forget, that even the best of us, in worst of circumstances are barefoot by the side of a dirt road selling fruit.
He takes on economics and how it is used today by plutocrats to reinforce their positions:
…for thousands of years, these stories were called divine right. Today, we have trickle down economics. How obviously, transparently self-serving all of this is.
Then comes Joseph Stiglitz talking about the cause and fix for income inequality. This is based on his latest book. He lays the cause to the “supply side” economics and thus the results of politics and policy. It was a “disaster”.
The financial sector in recent years has been more active in taking money out of corporations than putting money into the corporations. The flow is going the other way.
It is nice to hear someone talking about the solution in a comprehensive way. A way that reflects understanding society and its economy in the same manor we have come to understand the environment.
Wouldn’t you just love to see them together on one of the Sunday morning shows around at table with say Senator Warren and Sanders and on the other side the Koch brothers and say Paul Ryan, McConnell and Boehner? Maybe a Chicago School boy or girl? Let’s throw in Jack Lew or who ever is the latest to hold that position. How about someone from labor and the US Chamber to balance it out? Better yet, how about simply a table of Nick, Joe, Warren, Sanders, Labor and Robert Reich maybe also Paul Krugman. Forget the fair and balance act.
I am not a big fan of Friedman since he is a monetarist and a proponent of an activist Fed with discretionary powers to manipulate credit and rates, which has been a big driver of inequality in the US since we went of Bretton Woods in the early 70’s. However, I am not sure that Nick Hanauer is really calling it correctly. He got well paid for his risk taking, business acumen, and company creation. Nothing wrong with that. We need more plutocrats like him and America should be doing everything it can to attain and retain them, such as dropping capital gains and corporate taxation and then taxing them once as a reasonable income tax.
Regardless, he worries that if inequality is not corrected there will be blood on the streets and this will be bad for everyone but the plutocrats especially. That is not necessarily true. Plutocrats and the rich in general have options, lots of them actually. And we have seen in cases where the rich get driven out of the country, the economy worsens/collapses and people that remain are made worse off. Those with money move elsewhere and continue to be sources of economic growth in their new homes. America in its past benefited from economic refuges that fled such populist nonsense. And now other countries are benefiting as Americans move elsewhere, Singapore comes to mind with a few high-profile defections there but other places will benefit. There is no downside to having rich people move to country and found businesses. This trend will continue to the detriment of the middle class in the States and the government.
Kai-HK, No, I guess I don’t see it. Are you saying that wealth extraction is just or almost as good as reinvestment? Do you think the current direction that is addressed in these videos is more or as healthy as sharing a bit of the prosperity? I’m afraid I am just not clever enough to see how the country (meaning we-the-people) can succeed if it’s wealth and investment is in a few people who would move to the Caymans thumbing their nose at the devastation they leave behind.
But, what is to be done?
The “defining issue of our time” is inequality = the “defining issue of our time” is re-establishing labor unions as the prime economic and political actors.
But the Republicans have locked out virtually every legislative path. Prime example: Wisconsin:
“Of the 99 Assembly districts, 62 are more Republican in their makeup than the state as a whole … It means that Republicans begin the election process with a partisan leg up in 62 seats, while Democrats begin with an edge in only 37 seats. The result is a “structural” GOP advantage of 25 Assembly seats, simply due to the way the lines are drawn [in a state that usually votes Democratic for president – and doesn’t split votes much].”
Republicans can use the US Senate filibuster to lock out an labor market reform nationally even when they don’t control the body.
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I am becoming more convinced that prosecuting union-busting (specifically firing organizers – and then firing them again when the NLRB reinstates them) under the federal RICO statute is the only effective way left to go and that it is a very realistic way to go.
RICO has been invoked against groups involved in law breaking of every kind from prolifers blocking access (I am prolife) to teachers changing marks on tests – the latter for profit ($500,000 for one teacher); the former not for profit, which is why they slipped off the RICO hook.
Legally, an employer may fire an employee without a contract for having a spot on his tie – also may hire replacement workers (fire the employee) if on strike (my possibly imperfect understanding). Legally, an employer may not fire an employee for following the federally prescribed steps for establishing collective bargaining (nor fire again when reinstated). Though there is no criminal penalty (may not have been any criminal penalty for changing Atlanta test scores – wouldn’t matter), employers are forced to pay (sometimes large scale) back wages to re-instated employees.
There can be no argument about the profit motive – derived directly from the employees lost incomes because denied the legal power to collectively bargain. A small individual owner acting alone who does not hire a consultant might slip off the RICO definition – my understanding, Mike Milken didn’t. But, states can make firing organizers a felony – which will automatically fit union busting under federal RICO.
The “defining issue of our time” is re-establishing unions =
the “defining issue of our time” is finding away around the omnipresent Republican legislative road blocks =
the “defining issue of our time” may be can we crack down on the continuing crime of union busting with RICO prosecutions?
Thanks for the response.
You ask, ‘Are you saying that wealth extraction is just or almost as good as reinvestment?’
Not sure what you mean by this question. The wealthy generally either invest their money, or save their money (which gets lent to investors, etc) in greater degrees than do the middle class or the poor. Real economic growth comes from this savings and investment. So to what wealth extraction are you referring? And to what reinvestment are you referring? Just to clarify, thanks.
You continue, ‘Do you think the current direction that is addressed in these videos is more or as healthy as sharing a bit of the prosperity?’
I think the current direction is better than ‘taking’ (you use the word sharing) others people’s legally earned money and property. All that will do is make them leave and take their money with them. I do not view income inequality as a problem and in fact see it as a healthy indicator that an economy is moving in the right direction. Want low income inequality, move to Cuba…although theirs has been increasing greatly the last decade, as a has Sweden and others as they improve their economies with more capitalist initiatives. Greece has had declining income inequality over the last few decades as has France…how are their economies doing?
You continue, ‘I’m afraid I am just not clever enough to see how the country (meaning we-the-people) can succeed if it’s wealth and investment is in a few people who would move to the Caymans thumbing their nose at the devastation they leave behind.’
I totally agree…so stop forcing them to flee to the Caymans, Singapore, Monaco, Switzerland, Hong Kong etc. Instead of being a hater and seeking to take from them what they honestly own, why don’t you welcome their wealth, savings and the investment and jobs it creates. Labor gets its higher value from more capital. That is why capital-intensive economies also tend to have high median wages (US, Switzerland, Sweden, Singapore, Japan, Hong Kong, etc)…more capital chasing relatively less labor. Force capital to flee and you end being no different than any other labor-intensive economy, China (though they have welcomed capital back and are benefiting from it), Bangladesh, large parts of Africa, etc. You need and want that capital…so stop penalizing people who have it from bring it to the States or keeping it in the States.
well yes, by all means, eliminate the “fair and balanced” act.
the (arguably) Democrats know how to talk to the intelligent and well informed (you and me)
but the Republicans know how to talk to the ignorant if not stupid.
guess who “wins” the debate. or at least whose soundbites are remembered.
hell, even i can’t seem to learn how to talk to the ignorant.
I am curious on this line of attack. How would RICO be used against companies. From my understanding it requires illegal conspiracy or coordination in the committing of a federal crime.
But companies acting alone or even in legally hiring a consultant who helps them union bust would not be subject to this, right?
Secondly, I am not a big believer that unions are the solution anyway…they tend to make companies uncomeptitive relative to the open market place for labor, forcing companies to either divert resources from other uses to support them (which undermines their competitiveness), or they need to relocate, or dig a grave and climb in.
In today’s competitive labor market (and improvements in logistics and communications) where the owners of capital have a lot of choices where they can invest their capital, why should they invest or stay in a place where labor will make them uncompetitive?
A conspiracy to do something illegal fits — doesn’t necessarily have to be a criminal violation as long as the intent is to take what they shouldn’t. The organization is not the defendant — just the person(s) who use the organization.
In a word it’s tricky. It’s the kind of thing you are not likley to get a 9-0 out of the USSC over. I’m slowly trying to get my head around the multiple definitions. There are 8 state laws that fit under federal RICO and of course if any state makes firing organizers a felony punishable by one year that will automatically fit under RICO. There are 33 very varied state RICO statutes. Fun.
According to Justice Steven’s dissent in the prolife cases: “For decades federal judges have uniformly given the term “property” an expansive construction that encompasses the intangible right to exercise exclusive control over the lawful use of business assets. The right to serve customers or to solicit new business is thus a protected property right. The use of violence or threats of violence to persuade the owner of a business to surrender control of such an intangible right is an appropriation of control embraced by the term “obtaining.”
Obtaining by illegally (under federal labor law) firing could fit the definition of racketeering. Should be no problem getting progressive states to make it so a crime once the issue heats us as it should. I’m pretty sure I know how the Warren Court would have handled it. Working on it.
If that doesn’t work I don’t see any other way out — unless Americans really wake up to see what is happening them.
I look at labor unions — especially working under one contract with similar firms — as the turning firms into the equivalents of cooperatives: where the price demands of labor and capital are both input into the price tested with the ultimate consumer — instead of only the firm’s price demand with labor relegated to what I call subsistence plus prices, essentially set against other labor not what the consumer would be willing to pay. I call that a truly free market for the old invisible hand to work in.
Also without the equalizing campaign finance and the equalizing lobbying provided by unions along with the 99% of the vote the country is going to be ever more endlessly looted: $84,000 Hepatitis C cure, predatory for profit phoney colleges, workers kept on short hours and just in time schedules, etc. — and its only going to get worse and worse for most of us until and unless we get our union advocates minding the many, many stores.
Thanks for the clarification, I am not convinced such broad interpretation of the law would hold at the Supreme Court level but, hey, who knows…
You then state this, ‘the firm’s price demand with labor relegated to what I call subsistence plus prices, essentially set against other labor not what the consumer would be willing to pay. I call that a truly free market for the old invisible hand to work in.’
So what you are saying is that the issue of wages is really between what labor is willing to take and consumers are willing to pay. This is also my understanding, with the firm really being the pass-through mechanism. If that is the case, why are you so eager take the side of labor against consumers. Consumers vote with their wallets and it is the most democratic of all economic and political processes. Why are you denying them that democracy and freedom of choice? Finally, consumers of labor both at the final transaction level (the ultimate consumer) and the pass-through level (the firm) have other options. They can do without or substitute. In the case of US consumers, they can buy foreign products. In the case of US producers they can move to robotics or relocate.
This problem with increased unionization is that most producers in the US now get most of their revenue from overseas now and that they compete with other global producers. Although labor is only one input, it is a substantial one and one where producers have a high degree of sensitivity to it. GM’s revenues are 60% foreign and the margins of cars in the US either slightly positive (or negative once all costs taken into account) and they generally make most of their profit from financing the purchase of cars, not in the production of cars. How would increased labor costs work in a company like that? They have global competition and a very price sensitive consumer who has other options?
Isn’t that Hep C cure a bargain considering the huge 6 and 7-figure bills that sufferers of Hep C usually pay for their care without it (liver transplants are expensive, no)? Sounds like those greedy capitalists are doing us a favor. For-profit colleges are no worse than not-for-profit colleges both overcharge because they can…the government provides free money. Get government out of education and watch colleges start failing and reducing prices.
I don’t see labor squeezing the consumer for the max they will pay as any different from ownership doing. That’s why I compare union firms to coops where both labor and capital squeeze the consumer. What that does actually is put pure consumer preference in charge of what the economy produces. It’s the truly free market.
If union GM were competing with union (southern state) Honda then GM would be competing on a level playing field. People have to buy cars at some point — the market will keep everything in fair check.
You state, ‘I don’t see labor squeezing the consumer for the max they will pay as any different from ownership doing.’
Who is ownership squeezing against their will? Not labor. If they were and labor was ACTUALLY worth more they would go elsewhere. And certainly not consumers. Consumers have a broad range of alternatives and are the ones that, ultimately, decide if the owner and their workers get paid at all. Owners have very little power to squeeze either since they must react to the market for both labor and consumers. Case in point, if my company underpays me to what I am really worth, some other greedy capitalist knowing that it could still pay me more and make profit will bid me away quickly. Being economically rationale I will go where I can make the most. It is almost impossible for employers to underpay labor relative to their real worth in the market. The question then becomes what is their real worth…and that is determined by consumers and their preferences. You will note that companies with high margins (Apple, Microsoft, Goldman, etc…pay well for their labor relative market) as do those with low margins (Wal-mart, McDonalds, etc)…the difference is that the margins determine what both types of companies can pay. Microsoft employees are more productive and worth more and get paid more. This is not because Bill Gates is a nice guy (though I am sure he is), but rather because he knows that labor as an input into his business is worth a lot in terms of margin…Wal-Mart less so. The Waltons take home less than the Gates do in their respective businesses yet the Waltons are evil and the Gates are benevolent?
You then state, ‘That’s why I compare union firms to coops where both labor and capital squeeze the consumer.’
We have all three: union-heavy stores, coops and corporate run stores (Wal-Mart); and the consumers have chosen Wal-Mart by-and-large so does that mean you want to force all companies into a Wal-Mart like structure to meet consumer preference?
You state, ‘If union GM were competing with union (southern state) Honda then GM would be competing on a level playing field.’
But that is not the company they compete with. They are now MOSTLY global and compete globally. The US is not their only market AND they must sell everywhere to be competitive with other manufacturers…so…? Honda Kentucky is not their only competitor right? So???
You state, ‘People have to buy cars at some point — the market will keep everything in fair check.’
Sure they do…but whether they buy them from US GM or China GM is now the question?
I’ll give them credit for this – our plutocrats have made us into the world’s premier manufacturer in this field :