Tuesday, November 20, 2012

Follow The Money

Let’s talk about wealth transfer, since that seems to be a hot topic. Everyone’s complaining our government is transferring too much money out of the pockets of working people, and putting it into the hands of the shiftless poor. But what happens to that money once the poor receive it, and why are their hands so empty in the first place?

When it comes to governmental transfer of wealth, the primary beneficiaries have long been the wealthiest 10% of Americans, whose net worth has doubled over the past twenty years. Meanwhile, the net worth of the remaining 90% has barely risen, or – in the case of the poor – has declined. But why, since so many insist lower taxes on the wealthy increases hiring (thus wages and savings) is this so, since tax rates have been on the downswing for many decades?

Over those same decades, the government has been supplementing a steady decline in wages that resulted from the triple consequences of globalization (which enabled corporations to hire foreigners at lower wages) industrialization (which replaced workers with machines) and technological innovations (which reduced the need for brainpower in the workplace.) In a free market system, when demand for any commodity – in this case, human energy – declines, and when supply (our global population) increases, the price of that commodity declines.  This holds especially true when the commodity is labor, which is inelastic. Workers can’t just pull themselves off the market because wages have fallen below their liking. They must work, or their families starve.

The declining need for labor has been concealed by the growth of industrialization, which triggered an offsetting (albeit temporary) acceleration in global development. As we settle into this new reality, however, what’s becoming clearer is that the world doesn’t need billions of humans working forty hours each week to manufacture everything we need. In fact, growth is becoming a problem. Today we’re producing – and wasting – more than is healthy for us, or our planet, to make more jobs just so people can earn a living.

Over time, government spending rose to help offset the steady erosion of wages. Money the government provided to the poor flowed directly to business owners (the 10%) who sell merchandise to the poor. Those same owners receive favorable tax treatments on their business income, as opposed to higher rates paid on ordinary wages.  That places the burden of caring for the poor on laborers, instead of on those who benefit most from all that government spending.

Lately, because taxes no longer generate adequate income for our expanding government programs, our government has been borrowing money to meet its obligations. That borrowing also comes via the wealthy, while wage earners pay interest on that debt through income taxes.

The alarm being sounded about our need to impose fiscal austerity reflects a growing realization that this massive scheme of wealth transfer from the 90% to the wealthiest 10% cannot continue. The middle class is slowly going broke. Meanwhile, the wealthy have discovered they can earn better returns by investing their excess in exotic financial instruments, which disproportionally cost workers additional money when they fail.

Current discussions about our need for fiscal austerity seem disingenuous at best, immoral at worst. That’s because they’re focused on blaming the poor for all our problems, to justify the sanctions being proposed. Many propose to reduce the deficit by reducing or eliminating transfers to the poor, while opposing tax increases on the wealthy – ironically, the very people who’ve benefited most from this multi-decade supply imbalance of labor. Some are even enlisting middle class support for their ideas by inciting outrage against the “lazy” and “shiftless” un- and underemployed. The struggling middle class can hardly be blamed for seeking any excuse to reduce its financial burden, which has been extreme. The trouble is, we’re being seduced into looking the wrong direction. We won’t salvage society by obliterating the poor, not without destroying the best in ourselves. We can only save our society by embracing equal access to life’s necessities, which involves reversing the flow of wealth redistribution – this time, from rich to poor.

The challenge is that we no longer need all the labor hours that are in existence today, so to some the poor seem increasingly expendable. That’s why we’re hearing banal chatter about the “need” to reduce the world’s population by as much as 50%, as if we’re talking about equipment, not living people. That’s no accident; it’s easier to feel righteous about refusing to help the poor once we’ve declared them to be society’s useless garbage. However, what we may be missing in our refusal to stand up for the poor is that the middle class is next on the hit list in this brave new, amoral and high-tech economy. Is demonizing the poor truly a better solution than reducing the average workweek and paying people living wages, at the expense of higher profits for the wealthy?

“First they came for the communists, and I didn't speak out because I wasn't a communist. Then they came for the socialists, and I didn't speak out because I wasn't a socialist. Then they came for the trade unionists, and I didn't speak out because I wasn't a trade unionist. Then they came for me, and there was no one left to speak for me.” ~Martin Niemöller