Revolt of the Masses?
For several decades, accelerating after the financial crisis of 2007–2008, we have lived in an age of mass revolt. Leaderless for the most part, the revolt has targeted modern global rentier capitalism, which has evolved into a giant sucking machine, extracting wealth and concentrating it in the hands of a narrow elite, the super-rich. Based on the correct belief that the rules of modern capitalism enrich the already rich through excessive rent-seeking—and taking—and the slim (if any) opposition from politicians, economists, and most of the media, the masses are on the march. The question remains, however: will they march in the same direction?
It all began with the Occupy Wall Street movement, aimed squarely at the financiers who brought us a national, almost global calamity. Occupy Wall Street had great energy, fueled by anger and the feeling of alienation, as well as the fear of a jobless and insecure future. Leaderless, without an ideology, it fizzled and was thought dead. But it turned out that the sentiment felt by Occupy Wall Street was echoed throughout much of the West.
What followed were the indignados (the angry and defiant ones) in Spain and then mass movements in Greece and Portugal. These may have been led by primitive rebels , but millions were politicized overnight. The reason? Taking over a park or a street was not only a way to make a statement, a strategy to challenge power without relying on political parties that didn’t represent a majority of people anyway. It also helped forge an identity that could be shared by millions of others, based on common grievances and a common assault on institutions that served only the elites. In a word, it was possible to articulate alternatives, to participate in mass politics that were deeply personal, and to forge collective identities even while rejecting the very notion of politics and the holding of power.
What emerged were people sharing similar narratives, similar voices of hardship and deprivation, similar stories about losing control over personal destinies, a collective sharing of needs and grievances. It was at least a beginning, a chord of dissent. It was a refusal to pretend that the system was all-inclusive, or that there was no alternative, or that the present relationships were in any way fair. It was an acknowledgment that too many were left out in the cold by institutions and ideas, neoliberalism and rentier capitalism, for example. It was an assertion that getting education and training, often very expensive, for nonexistent jobs, was inherently unfair. The dice were loaded, and the vast masses were not the beneficiaries. It was the beginning of a movement; based on exclusion and the increasing evisceration of democracy, it was an explosion of anger at media that ignored those left behind by de-industrialization, globalization, the victims of Big Money, especially Wall Street and the City of London.
There were, of course, failures. Some of them were acknowledged early on. The refusal to participate in established parties and conventional party politics left the super-rich in charge, with nobody mounting a challenge. Mass refusal left the field open to those the rebels wanted to get rid of. It meant the inability to articulate alternatives, the lack of a coherent ideology. The defense of radical individualism conflicted with the need to act collectively and to achieve collective goals. It was difficult, as it had always been, to square liberty and equality.
Primitive rebels have come from everywhere. They are young and old, urban and rural, educated and uneducated. They are the temps, the contract workers, working in call centers, rotated out so they will never collect benefits. The retail workers, the sales forces, whose lives will always be tenuous and who will never retire. Seasonal workers. Part-timers.
They are especially the young. Youth, with college degrees that have given them debt, but not jobs or income. Youth confronted by elites they will never join. Youth who wonder why they should attend colleges that lead to a lifetime of debt. Youth increasingly doing apprenticeships as baristas, stuck in low-paying jobs with no benefits. Often moving back to their parents’ home.
Altogether these are the precariat , as Guy Standing refers to them. They have precarious lives, precarious living conditions, precarious education and training, precarious health, and precarious futures. They are the first generation to be worse off than their parents, and their children will do even worse. And they know this. They are the ones who bear the brunt of inequality, and they are sinking even further. They are the ones who were told to compete with Chinese workers. They rebelled, and for this, they were accused of being indolent, or even too stupid to get a proper training. Or they were accused of being drug addicts or alcoholics when they reacted to precarious living by resorting to drugs. Ignored by the media, they occasionally made it into popular culture. Danny Boyle’s film, Trainspotting, for example.
The precarious classes come from US families that used to be the factory workers who made cars, or steelworkers working forges in Pittsburgh, or textile workers in the mills of the East and then the South: until the factories disappeared. When factories went and mines played out or were abandoned, so did the historical proletariat vanish, leaving their children behind to join the legions of the precarious.
The precarious classes used to be the small proprietors in small towns and average size cities. They used to be independent and be able to send their children to college. Then, the national chains came in. They put the mom and pop stores out of business. The national chains provided cheap services and products, but only because they were exploiting foreign labor, or American labor forced to compete with low-wage workers in low-wage countries.
Social Democrats and Marxists and fellow travelers on the Left have dismissed the precariat or precarious classes as reactionary because they are difficult to organize, lack a coherent ideology, and have abandoned the Left to vote for Donald Trump in the USA and for Brexit in the UK. Progressive Democrats and New Labor invite the precarious classes to recover their lost and abandoned solidarity and identities. But it is too late. The nineteenth-century and twentieth-century solutions they offer can never work, not in the twenty-first century when the industrial working class has mostly vanished, and the industrial unions no longer have the political clout, money, or will to defend the rights of workers.
Forging a new collective identity will be difficult, but when extreme inequality reached a boiling point after the Great Recession of 2008–2009, the legions losing their jobs and income, their homes, and their futures, soon discovered each other, aided by the social media. They were angry enough, energetic enough, mostly young. They lacked a unifying vision, but they refused to legitimize the given: the establishment, the plutocracy, the financiers of Wall Street and the City of London. They rejected the lies that told them to get an education and the necessary skills to match the jobs that were out there. But the indignant knew the jobs were not there, they were abroad, or nowhere. That was why they were resisting the institutions that surrounded them. Vaguely, they understood they were against rentier capitalism and that somehow the super-rich were conspiring against them. Vaguely, they understood that their fall was a result of the excessive rents that the corporate rich imposed on them in the form of their mortgages, their patents, the intellectual property (IP) rights granted them by government. Increasingly, the precarious classes resented the monopolies the 0.1% established in healthcare and communications, the fake degrees the super-rich offered in business colleges, the way the corporate rich privatized the commons in which publicly owned assets were transferred to wealthy elites by politicians the rich helped elect.
If resistance were to come it would be from this group, those who live precarious lives, who no longer believe in upward mobility, who are staring at permanent unemployment or underemployment, who come out of college, if they attend one, with a degree and a lifetime of debt. Resistance will not come from the salariat , those with a comfortable income and decent pensions , whose income is directly related to corporate profits and who can count on receiving company shares. They are too intimate with the elites, their fortunes too entwined with the super-rich. They will not rebel. Their lives are not precarious.
The proletariat—blue-collar working class—are part of the past, in which they continue to live. They remember a better past, especially when compared to a desperate present. They no longer resist, they are beaten and resentful. Too often they blame the wrong people for their predicament: blacks, immigrants, Muslims, and Jews. They are often prey to right-wing populism and neo-fascist politicians, potential tyrants who know how to manipulate the legitimate grievances of the fallen blue collars.
There are still the independent contractors, the technically skilled, the freelancers who contract out their services, but they also benefit from rent-seeking . They do share insecurity with the precarious classes and that makes them potential allies. They may join, but they will not lead the new rebels.
There is, also, an underclass that is genuinely downtrodden. They have not fallen, they were already at the bottom. They are the genuinely angry, those who cannot articulate their grievances because they have come to prefer their lives to reentry into a society they despise. Some might join a movement. They are not natural rebels. They have ceased to hope for a better future. For any future.
The Party Is Over: Time for a New Party
If primitive rebels are to become successful, they must share beliefs in common, have a critique of why present arrangements are unfair and unsustainable, and have a vision of change that is possible, desirable, and just, for a majority of people, and not only a self-chosen few. They must also have a unified strategy. That will mean a new political party, at the least a movement that captures an existing party (as a few operatives did in the Republican Party, and likewise the Conservatives in Britain). And a motivating principle that can reverse what is now the deepening resentment that has become America and Britain and is spreading to continental Europe.
The current system of rentier capitalism is irredeemable, beyond salvation. It has failed utterly to create a society that is fair for the majority. It has failed to provide equal opportunities for all. It has failed to distribute income and wealth in a way that is even close to just. It has failed to provide equal access to education. It has rewarded the rich with even more wealth, and it has taken away from those who have the least wealth to pay for the concessions of the elite. It has plundered the Earth and sold the falsehood that unlimited economic growth is a religion. And the reason all this has happened is what we have observed: a rentier economy in which the rich extract rents from everybody else. In a word, the prime motivation for change must be to transform utterly a system that relentlessly distributes wealth vertically, upward bound to the 0.1%, while arguing there is no alternative.
Meanwhile, mass forms of organization and protest have been whittled down. Professional craft guilds and craft unions have weakened or disappeared altogether. The industrial union is in serious decline as its membership and manufacturing have diminished. The right of assembly has been challenged by nervous states and the elites that guide them. Somewhat ironically, churches remain as places where congregants can pool grievances, find fellowship and common ground, and pose moral alternatives to institutional degradation and political tyranny.
Political parties no longer have a unified platform, or even a stable constituency. Everywhere they are flattened, the more they change, the more they resemble each other. They squabble but in power they serve the same masters, invariably the 0.1%. They recruit from the same elites, the same upper classes that serve people mostly like themselves. Everywhere they have moved to the right, often in search of the very same citizens they have helped to marginalize, mostly by ignoring their grievances, often by catering to rentier capitalists such as the Street and the City. Even center Left parties have participated in this fraud. The Third Way Social Democrats in Germany, Blair’s New Labour, and Bill Clinton ’s Democrats in the USA have mostly abandoned the working class in pursuit of a middle- and upper-class constituency. In doing so, they have ignored the wage stagnation of workers, the excessive inequality that has driven their despair, the increasing inability of even the educated to secure employment in the areas in which they have trained and studied. Proponents of the Third Way have even celebrated the affluent as the great creators of jobs and wealth. It doesn’t matter how they acquired their wealth, or that they largely use it to extract even more wealth for themselves, rather than investing it in their employees and research and development (R&D).
It remains to be seen where Labor will go as Jeremy Corbyn takes the reins. He has appealed to the precarious classes for support, a kind of left-populism. But Labor is bitterly divided between moderates and progressives, an indication of the split in its electoral base. The same for the Democrats, split between Bernie Sanders ’ progressive supporters and backers of the Clintons and moderates. In the meantime, virtually all major parties in the USA and the UK are dominated by dynastic politics. They have become less and less democratic themselves. Donald Trump is an exception, but he became president by running against the Republican Party, by catering to the resentment toward the elitism of both parties, which brought him the support of working-class voters angry at conventional politicians and parties.
Once political parties stagnate and represent the interests of elites, they may well be beyond repair. Once they stifle critical debate, they cannot be part of the exit from the past. Once they become incapable of imagining an alternative future, or of offering a route to that future, they cannot represent the majority of us because they are beholden to the special interests that keep them in power. And when that happens they inhibit genuine public discussion, reinforcing the inequalities that already exist in education and in control of the media. The result is confusion, higher education that increasingly is vocational training, media that obscures or fails to clarify the difference between truth and propaganda.
When established parties do not represent significant segments of a population, when they are beholden too big money to help them to attain and remain in power, then they become increasingly irrelevant. In their place, new political parties begin to emerge to give a voice to the voiceless, to the multitudes of the precarious. To the left and the right, these parties will grow while conventional parties diminish. We have significant illustrations.
Beppe Grillo ’s Five Star Party , or Movement as he has called it, has had notorious success appealing to precarious populations in Italy. But Grillo and his movement have also been incoherent, blending populist messages, anti-globalism, and tirades against the corruption of political elites, with more conventional narratives that accept neoliberalism , or at least fail to oppose it. There is also Podemos in Spain, the “we can” party, that followed the mass protests of the indignado, the angry or indignant ones, against inequality and corruption of the political establishment. Podemos emphasized the full implementation of the 135th article of the Spanish Constitution, which stresses that all wealth, regardless of its ownership, must be subordinate to the people’s interest. Anti-NATO, opposed to austerity budgets and neoliberal policies that benefit the elite rich, Podemos has polled more than 20% in national elections.
Syriza has had a similar profile to Podemos and even inspired the latter by opposing austerity measures, neoliberalism , and global finance, producing an electoral triumph that put Syriza at the helm of Greece. The Scottish National Party has also revived by invoking a similar agenda, taking seats away from New Labor after the latter had solicited support from the establishment.
Progressive parties have emerged for a reason. Old left parties have moved to the right, resulting in the mass desertion of its supporters. This has been virtually self-evident in the USA and the UK, where Bill Clinton and the Democrats, and Tony Blair and Gordon Brown and New Labor abandoned traditional working-class constituencies while appealing to a broad middle. But too many compromises with the financial elites and Big Business, too much adulation of wealth, too little concern for the groups they had abandoned, their insecurities and aspirations, created openings for populist parties, of left and right, signifying the end of the old left.
So far so good. Yet the broad detachment from party politics, the frustration that has exploded onto the streets from New York to Madrid, to Athens and elsewhere, have only fitfully had political success where it really matters, at the polls. Guy Standing may be correct that this is to be expected in the initial phase of mass discontent as popular resentment has erupted into symbolic days of protest. 1
But there may be more to be worried about than merely symbolic protests. That is because the new wave of politics and protest since 2010 is a “rebellion” without a cause, or an ideology or project. As Ivan Krastev put it, “Protesting itself seems to be the strategic goal of many of the protests.” 2 It is mostly about moral indignation, not a set of issues but a public performance. Many protestors are both anti-institutional and mistrustful toward the market and the state. They participate in demonstrations but disavow a politics of representation. They avoid established political parties and distrust the mainstream media. They reject all formal organizations. They prefer the Internet and local assemblies for decision-making. They not only mistrust leadership, they mistrust authority of any kind, including their own. Rhetoric and ideology are considered passé and distasteful. And here the revolts run into an obstacle. By mistrusting institutions and authority, protestors are reluctant to take power themselves. The longing for community conflicts with the desire to preserve individualism and personal autonomy. 3
It will be difficult to transform primitive rebels into genuinely progressive political parties, especially when rebellion takes the form of right-wing populism, as it has in Denmark , in France, Germany, the Netherlands, Poland, the UK, the USA, and elsewhere. In all these nations, deep resentments are often fueled by nativist sentiment, distrust of elites, including left-leaning parties, and antagonism toward immigrants and migrants, who are typically seen as intruders, criminals, and freeloaders living off established welfare systems paid for by native-born citizens.
There are, however, energizing factors that have made possible the resurgence of progressive left movements. Globalization and the dominance of global finance and financial interests, neoliberalism run rampant, have helped to spark more than 800 mass demonstrations just between 2011 and 2015. The coincidence between the financial meltdown of 2008 and 2009, disrupting global financial markets and causing a massive shift of wealth toward the global financial elite (rent seekers), has inspired a number of these demonstrations. Many have turned into outright rebellion and rejection of the new global order, which seems everywhere to be run by the same financial elite we have observed throughout this book. Syriza in Greece swept to power because it alone was willing to confront and reject the power stranglehold of global finance, including the European Central Bank (ECB) . A similar narrative happened in Scotland, where resentment still festers against the City of London and the political domination of financial interests, producing an overvalued exchange rate that has decimated industrial production and employment in manufacturing. Similarly, the independence movement in Catalonia has been sparked by hostility to global finance, this time in Madrid. The community behind this challenge is about more than nationalism. It wants security and the chance to be free of rent-seeking finance. 4
There are several factors driving these fledgling parties and movements. Rights long fought for by unions, workers, and engaged intellectuals and the parties representing them have been diminished by states and elites almost throughout the West. These include fundamental rights such as the right to vote, under systematic attack by elites and Republicans in the USA and by Tories in the UK. They include the right to organize unions, under assault in the UK since Margaret Thatcher , and in the USA by a movement to expand right-to-work states. The right to assemble is increasingly shrinking and is under assault.
Today, the levers of power have shifted toward a rentier minority, and that shift has been accompanied by unprecedented inequality and the concentration of income and wealth in a distinct minority. None of this is sustainable, yet the modern state, a captive of the 0.1%, increasingly reduces the means of redress, which, in effect, vitalizes the movements that are challenging the financial and corporate elites.
What do the precarious classes need and want, whether overqualified college students preparing for jobs that don’t exist or former members of the working class who have lost their employment permanently? Or minorities, or immigrant families deprived of access to income or status or rights? Or the underclass that has long abandoned hope?
They want income security, currently denied them by the rent-seeking paradigm dominated by finance. They want access to education that is not merely vocational training. They want education that is uniform and equal. Education that is public and not for profit, not controlled by the rentier class. They want public access to financial information and knowledge, and regulation of credit providers. They want work commensurate with their education and skills. They want dignity that includes universal healthcare. They want decent pensions for their retirement. They want a government that protects them, not a government in tow to the elites. Moreover, they know all this is possible! Social democratic countries in Europe have accomplished all this and more.
Abolish Undeserved Rents Collected by the Super-Rich
Rentier income is an undeserved income. It is a rent on all those not part of the 0.1% and those who serve them in managing the transaction economy. Taken together, the rentier class and those who serve them represent 10% of the population, but they control roughly 80% of national wealth in the USA and roughly half the national wealth in the UK. As the wealth of the 1% is increasingly concentrated, the lives of the middle class, including many former blue-collar workers, become more precarious: more job risk; more health risk; more pension risk. Increasingly insecure, the precarious classes—the precariat —will avenge themselves by voting for the likes of a Donald Trump . Or they will simply be in permanent revolt. And as they rebel, the USA and the UK will become countries in which economies become even less efficient. The East will rise, and its rise will accelerate. The West will continue its decline.
So what can be done?
Healthcare
It is getting late, but it is time to take rents out of healthcare: healthcare is inefficient and unfair when run as a business. Healthcare must be a universal right. Begin by limiting IP protection. Restrict the patent system dramatically. Twenty-year regimes for drugs are too long. Too many patents are granted for products that are not innovative: quite the contrary as we have seen with the development of drug therapies. Drugs and other products based on government research, or government-sponsored research, should benefit the public, and not just the holder of a government-approved patent.
Impose a higher tax levy on drug profits. Do not allow drug companies the right to count their marketing costs as expenses. Marketing is not research. Do not allow drug companies to advertise as they routinely do on television, and then pass the cost of advertising onto the consumer.
Regulate drug prices: Congress can do this. Let Medicare negotiate the cost of drugs. This would save at least $50 billion per year in rents currently and needlessly going to drug companies. Extend Medicare for all by creating a single-payer healthcare system.
Dramatically revise healthcare in the USA and in Britain so that it is not privatized. None of it. Healthcare should not be an opportunity for the super-rich to collect rents on medical consumers. This makes us all sicker as well as poorer. It means ultimately less access to healthcare and more bankruptcies.
Don’t believe the rhetoric that single payer does not work because it is too expensive. The USA has the most expensive healthcare system in the developed world. And it is because of excessive rent collection by the super-rich. We don’t need them.
Here is how to get rid of their rents. In a single-payer system, the government collects tax revenues from everybody, based on all income, corporate and individual, and administers the entire healthcare system. This is effective and inexpensive. Getting rid of for-profit health insurance companies would save roughly $400 billion per year in the USA. And removing corporate responsibility for healthcare will make corporations more competitive as well.
Not-for-profit hospitals? They are really for-profits. They just are not allowed to sell shares. Start levying taxes on them. Or force them to reduce their costs. Hospitals argue that they have to charge excessive prices to patients who have insurance so they can serve those who don’t have insurance. But here is the point. In single payer , we are all insured, we have universal coverage, there is no need to worry about who will do the paying. The government will. Cost control? Again, single payer means hospitals have to negotiate prices with the government: that is how single payer works.
Intellectual Property Rights
Speaking of patents, government should not be licensing companies by allowing them to patent life, and then supporting trade agreements that extend these patents to other countries. Granting patents for transgenic seeds should also be carefully restricted, and this is a license for companies to control too much of the world’s food supply. At the least, products derived from transgenic seeds should be labeled as such. At the least, life in any form should not be patented. Such patents do not represent advances in science, just examples of predation. And many patents are the result of knowledge generated by government research. They should not be windfalls for private gain, but benefits for the commons, from whence they came.
Agribusinesses should not possess monopolies on anything occurring naturally. Whatever occurs in nature should remain part of the commons, not an opportunity for profit. Patenting the IP embedded in seeds is another example of pure predation: it is a technique for extending monopoly. It does not contribute to food supply as much as to profit.
Subsidies for corporate farms should be eliminated, they are billion dollar companies. Not necessary to coddle them. Coddling the British gentry landed class is a subsidy clear and simple for millionaires and billionaires, some of whom have inherited their estates from a remote past.
Corporations, contrary to public knowledge, have not developed many of their so-called innovations. They have often relied on publicly funded research, yet they retain IP rights for themselves. Here is an illustration of rent-seeking (and taking). Between August 2012 and March 2015, Apple Incorporated “returned” more than $112 billion to investors, mostly hedge funds and private equity firms, neither of which had put a penny into Apple’s original technology or productive assets. They had nothing to do with the underlying innovations that enriched Apple. That was because most of the innovations were developed by the federal government which created the bulk of the technologies that made the smartphone smart, including touch screens, GPS, voice activation, and even the Internet. Investors also had nothing to do with engineering and assembling the final devices. This was done by engineers in Silicon Valley and factory workers in China . 5
I am not suggesting that Apple be nationalized. Only that since much of its wealth is based on the commons, it should be paying much more in corporate taxes: it should share the harvest. Instead, it incorporates subsidiaries in tax shelters, where it collects profits based on IP . The result is a minimal tax bill in the home country. In fact, Apple claims there is no home tax country, enabling it to ramp up its rent collecting.
And while we are on the topic of Apple, let us remember that Apple could generate tens of thousands, really hundreds of thousands of jobs, by assembling its iPhones in the USA instead of China . According to Apple, what would the additional cost be for the US consumer? Readers might recall the sum of $65. But Apple refuses, never mind that it, like many high-tech corporations, already has cashed in on the commons, enabling it to use technologies developed by the US government to make many billions for company executives and its investors, prime examples of rent-seeking and taking. Can the precariat change any of this? Yes, elect a government committed to taxing Apple on the immense profits it makes right here in the USA. Don’t give free access to Apple products in the USA if it avoids taxes here. Sound like protectionism? Maybe, but it is one way to create many jobs in the USA and to make Apple into a responsible corporate citizen.
Finance
Rentier capitalism thrives in the finance and banking sector. Here are a few measures to reverse that. Criminalize insider trading and enforce the law. Write tighter laws specifying what insider trading means. Do not allow corporations to spend unlimited amounts of capital to buyback shares. This enriches the holders of shares, and it consumes trillions of dollars in buybacks better spent on human capital in the form of wages and R&D. Ultimately, insider trading costs jobs. It costs tax revenues too because under current rules the value of the shares granted to executives can be deducted against corporate taxes. These are all rents paid by everybody else.
When executive recipients of corporate shares sell these shares, the income they collect is called capital gains. These are taxed at about half the rate of earned income. This is a clear rent for no particular advantage except to the recipient of a corporate gift. Tax capital gains the same rate as earned income, which is how most of us are taxed.
Stop federal government support of derivatives. Knowing that large investment banks are too big to fail only encourages risk taking, while collecting bailout money such as in 2008–2009 was the biggest rent taking in history. And don’t allow the big banks to have access to pension funds. This fuels the greed of the funds and also means that banks have to be bailed out when they fail.
Restore usury laws. Otherwise interest rates rise even when money should be cheap—and remains cheap to banks. Payday loan companies should not be allowed to levy interest rates that are often 100% and above. Renewing usury laws would stop this.
To avoid the problem of corporations hoarding cash abroad, levy taxes on companies at the point where profits are actually earned, at the point of consumption. This may amount to accounting adjustments, but it will prevent corporations shifting losses to high-tax countries and earnings to low-tax countries.
Start a Development Bank. Such a bank was used by the Roosevelt administration for big projects, such as bridges. Such a bank can be capitalized by floating bonds or a wealth tax . The projects that are subsidized by the bank can pay for themselves through tolls, such as on bridges (Golden Gate).
Tax Reform
Taxes are a huge super-rent levied by the super-rich on virtually everybody else, contrary to the rhetoric of the super-rich themselves. We have already mentioned capital gains taxes. They are a virtual gift to the ultra-wealthy, who receive a disproportionate share of their income as lower-taxed capital gains. At the least, these should be taxed as earned income. Remember that as much as 80% of capital gains go to the top 10% of the population in the USA, and more than 40% goes to the 1%.
Income tax rates should be capped at 60–70% as recommended by some economists not beholden to the 1%. There is no reason why a family earning a half million dollars per annum, or a half billion pounds sterling, should pay the same earned income tax rate as a family earning “merely” millions.
An increasing percentage of federal revenues come from payroll taxes, which fall predominantly on the middle and even poorer classes. Payroll taxes are not levied on most of the income of the 1%. Even in the case of earned income, there is a cap set at $127,000: any earned income above that is not subject to the payroll tax. Any unearned income also escapes payroll taxes. Yet payroll taxes undergird Social Security and Medicare . The solution seems obvious: raise the cap dramatically. Even better, tax all income, earned and unearned. This would make Social Security solvent. And it would be fair. A means to redistribute income and wealth, reducing inequality and risk.
Inheritance taxes? This amounts to one of the top rent-seeking areas. That is because a person can inherit the right to collect rents whether in the form of IP , land or physical property, or financial property, and this can be heritable eternally. This is one of the chief areas of inequality and a big corruption of democracy. For example, financial wealth and/or wealth in IP enables the super-rich to distort political campaigns and to buy influence. One thing to change in this area? Roll back and revoke Citizens United , a primary source of the distortion of American democracy. Also, as in the UK and in Europe, limit campaign spending, and limit the length of the political campaign season. And only allow individuals to donate campaign funds.
Wealth tax ? This is a tax that has been levied to advantage in Europe. It is a redistribution device, necessary in a time of unparalleled inequality. It is also a device that can put capital to productive use that might otherwise be used only to collect more rents.
Protect Workers from Rentier Predators
The trend toward “workfare ” has been pronounced in both the UK and the USA. Not only is it coercive and humiliating, it neither helps develop the economy nor does it help poor families. Forcing anybody to take a make-work job that pays little—or nothing as in the case of the UK’s zero hours contracts, for few and dwindling benefits, does not contribute to anybody’s well-being. Telling people they are unemployed because of their own fault—wrong training, indolence, no talent, or poor behavior—hardly contributes to developing real jobs. Subjecting individuals to means tests is quite simply mean; punishing the victim for technological change or for government ineptness or corporate indifference or malfeasance is also unfair and vindictive.
Raising the minimum wage or insisting on a “living wage”—as the British do—can help, but setting wages higher by fiat generally induces more automation, or outsourcing, or avoidance or even wage theft by deliberate job misclassification. In Britain, where the minimum wage has stagnated, as it has in the USA, it has been used as an excuse to limit employment, or to restrict or eliminate benefits.
In the UK where employers are obligated to pay a living wage since April 2016, which is really a higher minimum, employers have resorted to more flexible work paradigms—reduced overtime, bonuses, and benefits. The result is that employees are hardly better off. 6 Since almost half of “living wage” workers work in the hospitality or retail sector, it seems almost self-evident that these are and will be lower skill level jobs, difficult to organize, and easily replaceable. The “living wage” is not likely to be a long-term solution for hospitality workers and the vast majority of service workers.
So what can be done? Let’s begin with education. The more equal the access to education becomes, the greater the equality in jobs and income. This seems self-evident, but in the USA especially, and in the UK, there is no such thing as equality in education. A good start would be to fund all schools equally and to put funding on a national basis. One way to do that? Integration of schools. A national public school system that is attended by all students. Sound impossible? Maybe! But the only way to get affluent whites to support quality education for everybody is to insist their children go to school with poor white and black children. And then maybe there will be equal opportunity after all. And not just in theory, not the equal opportunity to become unequal.
Equality in education will be a difficult mountain to climb. The reason? Once again, the rentier class has known for decades that education can be a tempting for-profit opportunity. But the rentier sees education as much more important than a place to make money. It is the place where the young are schooled in how to see the political cosmos. It is the locus where students can be taught that for-profit healthcare is a good thing, that government intrusion into the so-called free market is a bad thing, that government regulation portends the authoritarian, repressive state, that the distribution of income and wealth is a true measure of individual ability. Or to put it bluntly, education is the ideal place to legitimize the rentier and a rent-seeking economy—and to marginalize consideration of alternatives. The corruption of democracy begins in the schools.
Guy Standing once again provides an apt illustration of how education, in this instance in Britain, has been used to promote ideology, not critical thinking. In 2007, the Financial Times sent a correspondent to a state secondary school, Tower Hamlets in London’s East End, one of hundreds of schools encouraged by New Labor to form school–business partnerships. Tower Hamlets had indeed formed a partnership with an American investment bank. A bank executive was the chair of the school’s governing body and bank staff helped in classes and in mentoring of students. As the headmistress put it, for the school–business partnership to work there had to be a shared culture. A few months later, the bank went bankrupt after speculating with the money of millions of people and losing, precipitating the world’s financial crisis that ruined tens of thousands of lives. The name of the bank? Lehman Brothers. 7
Lehman Brothers is only a single example of what is becoming increasingly global: the commodification of education, transforming learning as critical thinking into vocational training. In a country such as the USA, where tuition inflation has been accompanied by a shift from government grants to private loans—another opportunity for Wall Street rent-seeking firms—students have to be concerned with income potential. Fixated on future income, dependent on student loans, increasingly drawn to high-income professions like banking and finance, students forfeit knowledge of public policy, history, politics, culture, and ultimately critical thinking, easy prey for the predators and their distorted view of the universe.
This is precisely the kind of issue that should consume the media. Government should be actively involved in providing free higher education for all qualified students. Industry should be much more committed to apprenticeships and to their future labor forces instead of looking abroad for cheaper labor, or importing skilled workers on special visas, punishing Americans with the same skills. And public schools should not be an opportunity for predation, as they are (increasingly) in the USA and UK.
A well-educated workforce presumes there will be jobs at the end of the academic ladder. However, we know this is not the case in the USA and UK, and even in some continental countries, as illustrated by France. So what can be done? It is tempting to agree with Guy Standing and others that in this post-industrial age, we are mostly post-union as well. And that other forms of worker protection and wage protection will have to be discovered in which workers can act in solidarity with each other. This will be difficult, even in an age of mass protests. We know some of the reasons: distrust of authority, of institutions, of leaders of all stripes, of the media, of any form of representation. But in an age of labor fragmentation, when large numbers of workers no longer work in massive factories, when unions are repressed or bypassed, as in right-to-work states in the USA, and when outsourcing is more common—and often used as a lever of negotiation, employee organization and solidarity is more difficult to accomplish than ever. Unless of course the government assists workers enough to help them negotiate with employers as equals. And that presumes that there is a political party—or parties—that actually believes in relative equality, and that has a chance to come to power.
Today, there is no such party in the USA. The possible exception is the progressive wing of the Democrats, led by Bernie Sanders , and he is vigorously opposed by the wing of the party that defends the rentier , not the population sinking into the precarious classes, which explains why so many voters abandoned the Democrats and committed political suicide by voting for Donald Trump . Moreover, Sanders is not even a Democrat, he remains an independent. And how could this be otherwise? His very sensible proposal to make universal healthcare accessible by expanding Medicare has been opposed by most of the Democratic establishment.
Over in the UK, it is much the same. Conservatives and so-called New Labor support the rentier class: New Labor cast its political future with the City of London. It never considered reversing Mrs. Thatcher’s anti-union stance; instead, it supported workfare . And the Conservatives are largely funded by the rentier class in the City and beyond. Yes, Jeremy Corbyn can make a difference, he has sympathies for the precarious classes and understands the need for a new politics to represent them, but he is roughly in the same predicament as Sanders: despised by many Labor moderates.
Pessimism and even surrender need not be inevitable. The massive protests of the last decade or two, the vote for Brexit , the victory of Donald Trump , what are these but protest votes, protests that will become ever more violent as the precarious classes become the new dangerous classes if they remain as marginalized and forgotten as they are today. The political successes of Sanders and Corbyn represent the visible part of the future, and the power the precariat can obtain once they find their own political voice.
It’s difficult not to see a determined campaign to dismantle a broad societal bargain that served much of the nation well for decades. To a historian, the agenda of today’s conservatives looks like a bizarre effort to return to the Gilded Age, an era of little regulation of business, no social insurance and no legal protections for workers. 8
Professor Keyssar has a point. All that is necessary is to take a quick look at a number of other developed democracies and we can see that they have not experienced nearly the income and wealth divides of the USA and the UK, though they are equally or more exposed to globalization than America. Denmark , France, Germany, and Sweden , for example, are far more exposed to global integration and also at risk of competition with China and other developing countries, yet none of these countries experienced the erosion or stagnation of wages that the USA is still facing almost a decade after the Great Recession . According to OECD figures for the years 1985–2008, measuring the growth in total compensation for manufacturing workers, the USA failed to register any gains at all over a period of more than two decades (and very little since 2008). For the same years, however, France registered a gain of more than 150%, Germany and the Netherlands just under 200%, and Denmark achieved gains of greater than 200%. 9
The difference between the USA and European countries like Germany, the Netherlands, and Sweden is that the latter embrace government regulation as a good thing. They understand that corporations will do everything they can to establish monopoly and to limit competition, even while they employ the rhetoric that the government should honor competitive capitalism by leaving the market alone. Germany and other developed countries in Europe put a premium on long-term productivity growth, which means that profits should be reinvested in the real economy—remember the $3 trillion US corporations spent buying their own stock to pump up income of executives? Many Europeans advocate limiting corporate influence on government. They put a priority on long-term growth in wages—to accompany growth in productivity. This is the key to family prosperity, and family prosperity is the key to national prosperity. And they believe in protecting unions as the surest route to protecting jobs. They even promote worker membership on corporate boards of directors. This not only means the democratization of corporations, but it is the surest way to retain the social contract between workers and their employers. Give everybody a voice at the table, and capitalism can work because it is based on a social contract that benefits everybody.
But the USA and the UK have chosen to abandon the social contract, while developing a rhetoric that promises good things if only we stop an overly intrusive government. The 0.1% soldiers on, accusing would-be reformers of practicing class warfare, even as the super-rich scuttle the social contract that worked so well for decades. Armed with outlandish resources, from money to media, the super-rich spread myths to offset the growing consensus among the 90% that maybe it is better to have universal and affordable healthcare, or that the super-rich have too much, or that it is not globalization that is robbing the 90%, but rather US and British corporations that have been shifting risk to everybody else by suppressing wages, limiting the minimum wage , reducing food stamp eligibility in the USA, reducing or eliminating pension benefits, downsizing, outsourcing, hiring temps, opposing personal bankruptcy, lending fraudulent loans, and wage theft , all the while rejecting equality in education and converting learning itself into a for-profit opportunity for Wall Street banks.
Co-determinism: Protect Jobs by Democratizing Corporations
British and American corporations are unfair, divisive, selfish, and as a result unproductive. They have played a leading role in dividing their societies in ways that recall the rhetoric of Marx, even though they abhor that kind of language when they hear it in the words of their former employees. Corporations in both countries take a short-term view geared to raise share value and executive salary, but too often at the expense of their employees. What was once a more collaborative management style in both countries has been replaced by a more hierarchical command structure that discourages loyalty and concentrates only on the bottom line. By emphasizing top-down management styles, and deemphasizing long-term employment, by assuming that company knowledge is concentrated only at the top, and by believing that shareholders matter much more than workers and the communities in which they live, USA and UK corporations have ignored human capital investment, resulting in American and British loss of the productivity edge that both countries once enjoyed. The consequence of short-sightedness and short-term strategies has been disastrous for the USA and UK corporation, and especially so for their employees, as MIT economist Paul Osterman has argued: “The path of least resistance is not to invest in your workforce, not to invest in a career ladder, to squeeze on wages and benefits, to make your workforce more contingent and flexible.” 10
It is widely believed that the American model has lagged behind because it fails to harness the skills, knowledge, and capacity for innovation of its employees into a process of coordination and collaboration, integrating the collective abilities of all employees. Productive growth as it turns out requires sustained investment in research and innovation and long-term commitment to workers. It requires solidarity, mutual commitment, and a sense of common purpose.
Some American and British high-tech firms have acknowledged the value of their employees. But generally corporate executives in the USA and UK have treated their employees as expendable, ignoring the truism that an insecure workforce is unlikely to lead to sustainable well-being for most people, including the executives who run the corporations. Job satisfaction, long-term commitment to workers, supervisors who respect those they supervise are indispensable elements of company success. Working in harmony and with mutual respect assures psychological benefits such as job satisfaction, meaningful work, and collectively pursued goals, as has been widely recognized in Scandinavia, Germany, and elsewhere in Europe, though this has not been the practice in the USA or the UK.
A widely practiced system in Europe, co-determination, has embraced a much more congenial version of capitalism than American and British managerial bottom-line, short-term capitalism. In Scandinavia and Germany, where co-determination is widely practiced, non-management members routinely sit on hundreds of boards of directors of all the largest corporations. In Germany, half of the directors of German boards are rank and file employees. That means that Germany has the most democratized corporations in Europe. The result has been transformative: Germany does not pursue short-term gains at the expense of innovation. Because it values its employees, utilizes their knowledge, includes them in long-range planning, invests in them as apprentices—at company expense, and is committed to lifelong employment—and lifetime retraining where necessary, German innovativeness and competitiveness are second to none. The reason for all these transformations is because employees sit on boards, not as tokens but as equals. The boards become more responsive to their employees, who are not seen as temporary or seasonal or commodities, or as expendable: after all they represent a huge investment for companies. Boards do tend to be more contentious, but that is what makes companies more innovative. They work better than top-down management because knowledge is in the heads of employees at all levels, with the result that a company is more competitive. Co-determination implies a long-term perspective, and that means putting shareholders, employees, and the communities in which corporations are embedded ahead of executive compensation. It has also meant maintaining high wage levels and long-term employment, ensuring also compatibility within firms because of shared management and mutual commitment long term, including the reduction in costly labor strikes.
Ironically, co-determination was imposed by the Western Allies on Germany following the defeat of the latter in the wake of World War II. In retrospect, the reason seems obvious: prewar industrial and financial elites had supported Hitler and the Nazis. The antidote was to include employees on previously compromised boards of directors. And that was precisely what happened, first in the British zone and then in the US zone in West Germany. The strategy was endorsed by the Christian Democrats and later by the Social Democrats: the result was that a third of the boards of public companies with a workforce between 500 and 2000 contained non-supervisory personnel, and half of the directors of all larger enterprises, like Siemens and Daimler, included employees who were not in management roles.
They are responsible for other people. They are responsible for running the firm. They make up a powerful leadership class that represents the kind of people–low income, low education—who don’t have much of a voice in the affairs of other industrialized countries. 11
But do not take Geoghegan’s word for it. The vast majority of German firms have embraced co-determinism because it works. It enhances profits, spurs growth, and increases innovation and productivity. Co-determination improves employee loyalty and company intercommunication. It encourages company investment in employees because of long-term commitment to workers. Plants with works councils , which consist of employees elected by their co-workers to negotiate labor issues with management, have tended to be 25–30% more productive than those without works councils . 12
Geoghegan’s conclusions help explain the decline of productivity in the USA, which definitively abandoned a model of collaboration for one that diminished labor by treating it as a commodity. During the postwar era, 1949–1980, productivity growth, how labor, capital, and innovation come together, averaged 1.6% per year. During the following period, 1982–2009, the Reagan–Thatcher era of short-termism driven by share price and golden parachute cashouts, productivity grew about 1.1% per year. 13
Nor has co-determinism hurt Germany’s trade balance. By stressing R&D and innovation, by emphasizing long-term growth, and by sinking significant corporate sums into apprenticeship programs that add value and increase competitiveness, Germany has not been hurt by the China trade. It has been a net exporter to China , reversing an earlier profile that put Germany in the red in its trade with China . In the year 2007, Germany ran a $3.3 billion deficit, but that was transformed into a $12.7 billion surplus by 2011, largely through the sales of capital equipment—a strength of Germany—that also helped China raise its productivity. 14 By 2016, Germany became the largest exporter in the world, surpassing China , though its positive trade balance with China was later reversed because of a prolonged slump in the Chinese economy.
Co-determination is not only significant because it is efficient and profitable, but because it is about what economies should always be about: supplying work for everybody, enhancing satisfaction of all employees, and promoting the well-being of all members of society. This is the greatest virtue of co-determination: when companies understand that the value of any corporation is in the knowledge of its employees, then they are willing to support and consult those employees. After all, the value of any company is in the heads of those they employ. In the words of Robert Bosch, founder of the giant eponymous German engineering and electrical firm Bosch, “I am not paying high wages because I have a lot of money, but I have a lot of money because I pay high wages.” 15
Which is precisely the point. Germany has avoided becoming a low-wage country—as the USA has not—by adopting an industrial policy which is inclusive, and that acknowledges the advantages of industrial peace and prosperity by investing in its own employees, rather than discarding them to maximize short-term earnings. This means an active apprenticeship program and huge investments in future employees, producing a high employment ratio for youth compared to the UK and the USA, and even some European countries. In America, for example, where there is no strong commitment to the training of youth, who are mostly on their own, and convinced they have to go to college—at their own expense—fewer than 5% of young people train as apprentices, and almost all of these are in the construction trades. In Germany, the number of young people being apprenticed is closer to 60%—in areas as diverse as advanced manufacturing, IT, banking, and hospitality. Moreover, in Europe, what’s often called “dual training,” learning practical skills in a work environment, in addition to academic training, is a highly respected career path. Just as significant, the bulk of the funding for German apprenticeships comes from corporations.
The alternative in the USA is quite the contrary: abandoning communities and long-term employees for right-to-work states, reducing the workforce to minimize the wage bill, and transforming full-time jobs into part-time work, or contract work—the better to avoid benefits, such as health insurance . In the USA and the UK, without a clear industrial policy to promote the well-being of workers and their communities, without serious apprentice programs, without corporate willingness to participate in worker training—instead of complaining about the lack of skilled workers—neither country is a net exporter, both have high youth unemployment rates, and neither has a strategy to employ workers long term.
Establish Sovereign Wealth Funds: An Alternative and Better Future
In Chapter 1, we saw how Norway put oil revenues into a fund that serves the common good. Britain did the opposite, privatizing the revenues from oil, because the British state was a captive of the rentier class, intent only on extracting income for private accumulation and use.
In effect, Norway became a rentier state, but that meant it was not a captive of the rentier class. Notably, Norway was at least as efficient extracting oil and gas as Britain. The Economist described the Norwegian fund as possibly the most impressive instance of long-term thinking of any Western government. In 2017, the fund surpassed $1 trillion, making it the largest sovereign wealth fund in the world. 16 So far, Norway ’s fund has invested its oil and gas earnings mostly in foreign stocks, but it could easily ramp up investment in Norway —putting a share of earnings into reducing inequality and insecurity. But Norway does not need to do this for the obvious reason that it does not have the kind of inequality and insecurity that are all too pervasive in the USA and the UK! Why? It puts a brake on its rent seekers, the same predators coddled by the USA and UK. In Norway , for example, healthcare is universal, affordable, and efficient, perennially ranked well ahead of the USA. Norway does have a deductible of about $300 annually, after which physical and mental healthcare is free. Norway does not rely on private for-profit health insurance , sparing it one of the highest costs for healthcare in the USA. In a word, Norway ’s healthcare system works well because it excludes rent-seeking by the rentier class. Healthcare is not-for-profit but a citizen’s right.
Norway ’s example demonstrates that where there is the political will, and responsible government—not captured by the rentier class—the public good can be served. Inequality need not be tolerated. Predation need not be a norm. The Norwegian sovereign fund means that the entire population can be and is economically secure, and not just the 1%. Britain could do the same, it could protect the British and not just the British super-rich. Had it done so it would now have a sovereign fund worth £450 billion in assets, more than Kuwait, Qatar, and Russia combined. 17
If Russia can have a sovereign fund (as it does), then every country with any kind of resources could also establish a sovereign wealth fund. It is a matter of simply sharing rental income, whether by taxing it or granting concessions with the stipulation that profits must be shared with the public for the common good. After all, granting a concession for the extraction of mineral wealth to a corporation is already removing wealth that belonged to an entire nation. That wealth should be shared with all citizens, as was formerly done with drugs developed in the USA using government and government-funded research. Likewise, rental income of all kinds, IP for example, could be subject to fees and royalties. Or a stake could be taken in a failing bank, or for that matter in almost any company, especially those profiting from rent-seeking, by investing sovereign funds directly in such companies. Finally, it hardly needs repeating, governments could actively enforce existing anti-trust laws to ensure competition, preventing the kinds of monopolies that have occurred from drugs to telecommunication.
Establish Basic Income
Sovereign wealth funds can have another fundamental use. They can support a basic income mostly or entirely based on the wealth fund. This would have several desired effects. It would be emancipatory because an income would be provided to every citizen from birth, at least partially reversing economic insecurity that plagues a majority of British and American populations and many others in Europe. A basic income would also make it more likely that recipients would accept paid work that would supplement the basic income . For many, this would enable them to escape the poverty trap. It would also contribute to a kind of moral economy. Since all would have a basic income , there would be no stigma such as now exists in welfare states, where there is always a sense of shame attached to receiving welfare benefits. And since basic income would not be means tested, that signifies it would be a fundamental right, an entitlement to income that should be in the public domain to begin with. In a word, revival of the commons, or putting a priority on public wealth as opposed to its extraction by the rentier class.
The idea of a basic income has been around for a while, at least since Thomas Paine proposed it in 1797 in Agrarian Justice. His idea was “to create a national fund, out of which there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property.” 18 The justification for this fund, said Paine, was that “every proprietor … owes to the community a ground-rent” on land and that payments should be made to “every person rich or poor” because land is “the common property of the human race.” 19 All personal property accumulated by anybody, beyond what he produce with his own hands, “is derived to him by living in society” and he “owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.” 20
Paine was an early defender of the commons. The payment to each and every person was no more and no less than a restoration of that part of the commons originally deducted by a previous generation. Paine thought of the payment as a kind of dividend on the collective work and wealth of all previous generations. In a word, the payment was a return to the “common wealth” that had been unfairly captured by rentiers .
A modern counterpart to Paine’s proposal was introduced in the USA by Bruce Ackerman and Anne Alstott in 1999. They argued that all Americans should have the right to share in wealth accumulated by preceding generations and that “a single innovation once proposed by Thomas Paine can achieve what a thousand lesser policies have failed to accomplish.” 21
In the 1960s in the UK, Cedric Sandford proposed a negative capital tax payable on adulthood. 22 In 1989, Julian Le Grand and David Nissan took up Sandford’s idea by proposing a start-up grant for young people. 23 In 1986, the Basic Income European Network (BIEN) was established to promote research and advocacy; it later evolved into the Basic Income Earth Network as its ideas became popular and its membership grew. 24
Since the 2008 crash, the basic income has increasingly been touted as the antidote to rising inequality and insecurity, and to meet the challenges posed by rentier capitalism, which promises even more inequality and insecurity. In 2017, Guy Standing published Basic Income : A Guide for the Open-Minded, advocating for a basic income to remedy unsustainable and unfair growth in inequality. 25
The idea of a basic income has always drawn critics. A basic income , they argue, diminishes the desire to work. It rewards the indolent. It unfairly taxes wealth producers whose capital is required to make a basic income possible. It slows economic growth by reducing productive capital that can be better invested in the economy. It is unsustainable because it would attract populations living in countries that do not have a basic income . It would be impossible to fairly determine eligibility: who would be included and who would not. In a word, a basic income gives the least deserving something they don’t deserve, it gives them something for nothing.
Fair enough. So what can and should be done. Let’s start with what we have: a system that already rewards the rentier , to such an extent that more and more wealth is concentrated in ever fewer hands. Inequality that is so extreme that it is growing the precarious classes to the extent they vote for demagogues, authoritarian leaders willing to exploit insecurities by pursuing extreme measures to fuel their own and others’ xenophobia, a dangerous mixture as we know from the past. What we have is inequality that is extreme, precisely because super-rich rentiers have taken so much for themselves. In a word, they have been given a great deal for nothing, as we have seen throughout this entire book, whether in the form of undeserved patent rights, unearned IP rights derived from the commons, monopolies unchallenged by anti-trust laws, and tax regimes that favor the 0.1%.
Any criticism of basic income ideas should consult what we have in Western societies today: social assistance schemes that are fundamentally flawed because they are costly, inefficient, and inequitable. In fact, much of the money that goes into assistance programs actually is spent on the administration of those programs, not the recipients of the aid. Moreover, many if not all forms of social assistance are inadequately funded, and many are even punitive, stigmatizing those who must rely on these benefits for their survival. Then, there are the ubiquitous means tests to determine eligibility, and the humiliation of applying and then being rejected for assistance.
Too often, the most vulnerable of us don’t even apply for assistance because of the too stringent rules for eligibility, and the meager sums of assistance on offer when eligibility is established. And as is widely known in the community needing assistance, receiving it too often does not mean that recipients will escape poverty. Workfare does not establish a career path. In the USA and the UK, especially, where workfare is common and is also harsh and punitive, the most vulnerable of us are forced into training for jobs that don’t exist, and that offer no entrée into a future work path. What social assistance schemes ignore is that societies are unequal from birth: unequal education, unequal access to housing, anything but the equal opportunity theoretically offered in liberal societies. Low inheritance taxes seal the bargain. Much wealth is still inherited. And so is much poverty. With a basic income much of the poverty trap could be reversed. The least of us would have a platform on which to stand and an incentive to accept work to supplement the basic income .
Who would be eligible? Guy Standing proposes that “basic income or social dividend would be paid, individually, as a modest monthly sum. … The income would go to every legal resident, with a minimum residency requirement for non-citizens of … two years.” 26 The income would be unconditional regardless of family status, work status, or age. Children would receive a smaller payment. Standing does not advocate a lump-sum capital grant because that would invite ill-advised splurge spending. 27
Basic income should be universal because that is much more efficient and solidaristic. It would include the rich, they would simply give more back as taxes. A basic income scheme need not replace a current assistance regime, both could be run in tandem as means testing and behavior testing were phased out and basic income phased in.
Basic income is realistic. It can be thought of as a modest social dividend on the collective efforts of pervious generations who built the wealth we have inherited. Basic income would be paid for by capturing rental income, which is largely undeserved. Since rental income contributes little if anything to investment, innovation, or sustainable growth, basic income would be an alternative way to increase all three. That is because it would produce much more demand, leading invariably to rising investment, employment, and sustainable growth. And there is an added advantage: financial policies would be taken from the hands of the bankers and given back to elected governments willing to employ a basic income regimen.
Resorting to basic income would reduce social inequality and redistribute income and wealth in a more fair and sustainable way. Basic income would redistribute political power and increase personal freedom. It would decrease social insecurity. It would mean healthier people. And it would likely make them more tolerant of each other.
Basic Income: The Only Way Forward
Three major problems face Europe and the US today: slow growth or stagnation, unprecedented inequality, and dangerous populist reactions to migration, especially to non-European migrants and immigrants. Both the European Union (EU) and the USA (and beyond) have reacted to slow growth and stagnation in the wake of the housing and financial crises of 2007–2008 by employing quantitative easing (QE) policies. The ECB and the Federal Reserve Bank (FED) in the USA pumped billions of euros and dollars respectively into financial markets by purchasing mortgage-backed securities and government Treasuries. The plan of the ECB was to increase liquidity and to invest €315 billion in infrastructure. In the USA, the idea was to increase the liquidity of commercial banks so they would be encouraged to lend more.
In both Europe and the USA, liquidity increased, yet in the short run, and in the long run, QE was a failure, except for the rentier class. QE buoyed stock markets, and it pumped up the housing market, but the greatest beneficiaries of these policies were the super-rich, who held much of their wealth in market shares and physical property. In both Europe and the USA, growth remained slow, inequality widened to unsustainable levels, and migration continued to fuel populist reactions in populations whose social protections were under assault and whose economic futures were tenuous and unpredictable.
All these problems have seemed intractable in Europe and America. Inequality endures as a hindrance to growth because it constrains demand. It also contributes to government deficits because the super-rich can easily avoid taxes—remember their use of tax havens —while the poor don’t earn enough to pay them. Inequality also contributes to migration from the South and East to the North and West in Europe. Although many EU countries need migrants because of low birth rates and aging populations, migration to the wealthier parts of Europe is inducing populism and xenophobia. Simultaneously, poorer countries are losing many of the youngest and most skilled of their populations. 28
What is happening in the US parallels its EU counterpart, with some obvious exceptions since the USA is not part of the EU. Growth has been slow, even in the supposed uptick in the decade following the Great Recession . Wages for most of the population have stagnated. The unemployment rate is at 4.1% in late 2017, but that hardly reflects the reality of the job market where much of the population labors involuntarily in part-time jobs, many are over-educated for the work they are in, and the minimum wage has remained well below a living wage. In the USA, also, QE has helped inflate the stock market—and the rich who control much of the share wealth, while bankers new-found liquidity may be financing yet another bubble in the real estate market. All this has fueled xenophobia and overt racism in the USA, based on the precarious classes’ perceptions that foreigners and minorities have been coddled by a protective welfare state.
According to Mark Blyth and Eric Lonergan, and a long list of economists stretching from John Maynard Keynes to Milton Friedman and beyond, the FED in the USA and the ECB in the EU should transfer money directly to people, not unelected bankers. Pumping money directly into lower-income families would address inequality, fuel demand, boost economic growth, and reduce migration in Europe where funds could be earmarked for low-income regions with high out-migration and low aggregate demand. 29
Unfortunately, this alternative to QE has not been considered in the USA and the UK. Instead, the FED put $4.5 trillion into QE that increased asset bubbles and boosted the stock market, but also did nothing to mitigate inequality or to boost growth. It might have done better to give $56,000 outright to every household in the USA. 30 Much the same could be said of the UK, which diverted £375 billion to QE , but witnessed increased debt, asset bubbles, rising homelessness, and the spread of food banks. For the same capital, the UK could have provided some £50 to every legal resident in Britain every week for two years. Had the UK done so, claims Guy Standing , “Inequality would have been reduced, economic security improved, growth boosted.” 31 He might have added that when it came time to get the UK’s newly acquired assets (debt) off its balance sheets, inevitably spending cuts followed, and these in turn have driven public anger toward traditional political parties and the financial elite.
Most reasonable people, including many economists, have concluded what is obvious: traditional monetary policy and QE have not worked and an alternative is needed. In fact, a number of pilot programs implementing basic income paradigms have been implemented. One such scheme took place in Cherokee, North Carolina, a small town on a Native American reservation, when the tribal council decided in 1996 to distribute half its casino profits each year to all tribal members. After a modest start the fund grew until by 2015 each person was receiving $10,000 per year. Research found that this sum did not induce indolence. On the contrary, children of recipient families performed better in school than non-recipients and were less likely to commit crimes. 32
Several pilot projects in India have produced similar results. Even a small basic income can improve nutrition, health, and healthcare. Children perform better at school. Adults become more productive. And basic income has produced a feeling of greater liberty, even liberation. Reduced risk and greater security do not produce rising indolence. On the contrary, they produce greater security and happiness, a sense of well-being and solidarity, hardly characteristics resulting from QE , or low interest rates, or the neoliberal, rentier model that we are all enduring today. 33
Conclusion
What is needed today is a profound moral transformation. We need to repudiate the kind of selfishness that is justified by orthodox neoliberalism . We need to bypass political parties that bow to the 1%, especially the 0.1%. We need to recover our hijacked democracy. We need to rebuild the commons and to remember that the sky, the rivers and the oceans, the minerals in the ground, the land and Earth itself, once belonged to all of us: they can and should belong to us collectively again. We should reject monopolies. We should advance the public good over private greed. We should remember that public institutions like libraries, schools, museums, and parks serve all of us as equals, that they are part of the commons, that the knowledge in books, the art in museums, the grass and trees in our parks, the learning imparted in our schools, is part of our common heritage, an integral part of the commons, an indelible part of our identity, and that they should not become commodities for private gain any more than our children should be commodified (as consumers) for profit. For there can be no freedom, no liberty, no genuine emancipation, no democracy, if the common good is splintered into private gains for the advantage of a few. The latter is what we have, and it has failed.
Notes
- 1.
Guy Standing , The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay (London: Biteback Publishing, 2016), 289.
- 2.
Ivan Krastev, Democracy Disrupted: The Politics of Global Protest (Philadelphia: University of Pennsylvania Press, 2014), 3.
- 3.
Ibid., 3–4.
- 4.
Standing, Corruption of Capitalism, 290–91.
- 5.
Rana Foroohar, Maker and Takers: How Wall Street Destroyed Main Street (New York: Crown Business, 2017), 123–24.
- 6.
Sarah O’Connor, “UK Companies Look for Loopholes Around Living Wage,” Financial Times, March 30, 2016.
- 7.
Standing, Corruption of Capitalism, 264–65; especially Michael Skapinker, “How to Run a School-Business Partnership,” Financial Times, December 3, 2007.
- 8.
Alexander Keyssar, “The Real Grand Bargain, Coming Undone,” Washington Post, August 21, 2011.
- 9.
Bureau of Labor Statistics, Inflation-Adjusted Total Labor Costs Per Hour in Dollars, Chart 1.2: International Hourly Compensation Costs for Production Workers in Manufacturing (wages, all benefits, social insurance expenditures and labor-related taxes) (Washington, DC: Bureau of Labor Statistics, 2011), online at http://www.bls.gov/fls/pw/ichcc_pwmfg1_2.txt; see also Organization for Economic Cooperation and Development, “Private Consumption Deflators,” Economic Outlook 2011, no. 1 (Paris: OECD, December 2011), online at https://doi.org/10.1787/eco_outlook-v2011-1-en.
- 10.
Cited by Steven Greenhouse, “The Challenge of Creating Good Jobs,” New York Times, September 7, 2011.
- 11.
Thomas Geoghegan, “Consider the Germans’ Codetermination and Works Councils ,” Harper’s Magazine, March 2012, online at https://coto2.wordpress.com/2010/03/23/consider-the-germans-co-determination-and-works-councils/; Thomas Geoghegan, Only One Thing Can Save Us: Why America Needs a New Kind of Labor Movement (New York: The New Press, 2014), 104.
- 12.
George R. Tyler, What Went Wrong: How the 1% Hijacked the American Middle Class … and What Other Countries Got Right (Dallas, TX: Benbella Books, Inc., 2013), 169–71.
- 13.
Organization for Economic Cooperation and Development, Economic Surveys: United States 2012 (Paris: OECD, 2012), Figure 15, online at http://www.oecd-ilibrary.org/economics/oecd-economic-surveys-united-states-2012_eco_surveys-usa-2012-en; Tyler, What Went Wrong, 162, chart 7.3, Annual average growth rate.
- 14.
Floyd Norris, “China Trade Numbers Bear Watching, Up or Down,” New York Times, September 16, 2011.
- 15.
Cited by Daniel Schafer, “Keeping the Lights On,” Financial Times, November 10, 2009.
- 16.
The Economist, “Norwegian Blues,” October 10, 2015, https://www.economist.com/news/business/21672206-now-easy-times-are-over-norway-must-rediscover-its-viking-spirit-norwegian-blues. See “Norway’s Sovereign-Wealth Fund Passes the $1 Trillion Mark,” The Economist, September 23, 2017, online at https://www.economist.com/news/finance-and-economics/21729458-5m-odd-norwegians-own-more-1-all-shares-world-norways.
- 17.
Caroline Wedmore, Funding the Future, How Sovereign Wealth Funds Benefit Future Generations (London: Intergenerational Foundation, 2013), online at http://www.if.org.uk/wp-content/uploads/2013/11/A-British-Sovereign-Wealth-Fund.pdf.
- 18.
Thomas Paine , Agrarian Justice, 2nd ed. (London: J. Adlard, 1797), 15.
- 19.
Ibid., 12, 15.
- 20.
Ibid., 24.
- 21.
Bruce Ackerman and Anne Alstott, The Stake-Holder Society (New Haven: Yale University Press, 1999).
- 22.
Cedric Sandford , Economics of Public Finance (Oxford: Oxford University Press, 1969).
- 23.
Julian Le Grand and David Nissan, A Capital Idea: Start-Up Grants for Young People (London: Fabian Society, 2000); see also Anthony B. Atkinson, Inequality: What Can Be Done? (Cambridge, MA: Harvard University Press, 2015).
- 24.
For a number of experiments in basic income provision, see basicincome.org.
- 25.
Guy Standing , Basic Income : A Guide for the Open-Minded (New Haven, CT: Yale University Press, 2017).
- 26.
Standing, Corruption of Capitalism, 309.
- 27.
Ibid.
- 28.
Ibid., 312. I am grateful to Guy Standing for much of this discussion. He has been a modern pioneer and advocate for social justice and the basic income .
- 29.
Mark Blyth and Eric Lonergan, “Print Less but Transfer More,” Foreign Affairs, September–October 2014, online at https://www.foreignaffairs.com/articles/united-states/2014-08-11/print-less-transfer-more.
- 30.
Ibid.; Jeff Cox, “Fed economist: ‘No Evidence That QE Works’ as Central Bank Starts Unwinding Program,” CNBC, September 19, 2017, online at https://www.cnbc.com/2017/09/19/fed-economist-no-evidence-qe-works-as-balance-sheet-unwind-starts.html. Saint Louis FED economist Stephen Williamson declared that QE produced bubbles, inflated the stock market, but didn’t contribute to growth or the reduced inequality.
- 31.
Standing, Corruption of Capitalism, 314.
- 32.
John Sutter, “The Argument for a Basic Income ,” CNN, March 9, 2015, online at http://www.cnn.com/2015/03/01/opinion/sutter-basic-income/index.html.
- 33.
Charlotte England, “Indian Government Survey Says Universal Basic Income Could Combat Poverty,” The Independent, January 31, 2017.