Tuesday, June 16, 2015
Economic Equality (Part 2: Widespread, Limited Ownership)
Were we to become serious about restructuring our errant economic system and equalizing wealth, we could go about it in two very different ways. The first would be to redistribute significant amounts of income through taxation and entitlement programs. We are all familiar with this method and its inherent weaknesses, which include breeding a spirit of dependence among the recipients of redistribution, generating resentment among those being taxed, and creating a cumbersome and flawed tax code that will always be subject to manipulation by the wealthy. Because of a half-century of tax cuts, U.S. citizens, particularly the wealthy, have come to expect low tax rates. Indeed, most Americans today would be shocked to learn that the top marginal tax rate in 1953 under Republican President Dwight D. Eisenhower was 92 percent (on any income over $400,000); it then dropped to 91 percent for the rest of his presidency. At the same time the estate tax rate was 77 percent on any inheritance over $10 million. It is not hard to see how these rates helped rein in rampant wealth accumulation and encourage greater equality. The top marginal income tax rate did not change until 1964 when Democratic President Lyndon Johnson signed into law a 20 percent tax cut proposed by President Kennedy a few months before his assassination. The top rate hovered near 70 percent (with an income threshold of $200,000) until Reagan’s initiatives dropped it to 50 percent in 1982 (also lowering the corresponding income threshold to $85,600). Reagan again cut the top marginal tax rate in 1988, this time to 28 percent, and lowered the income threshold to $29,750.1
The high marginal tax rates following World War II helped pay off war debts, rebuild Europe, establish a strong American middle class, and create greater economic equality, but as mentioned, taxation and redistribution produce imperfect results and cause a variety of societal problems. So, if redistributing income, which is only the fruit of productive endeavor, is a flawed approach, what other option do we have?
A Very American Heresy
The alternative is to redistribute ownership, the source of productive endeavor. This is economic heresy in today’s corporate capitalist economy, but it is not so un-American as we might assume. Historian Paul Johnson points out that the Declaration of Independence “laid down what no other political document in the whole of history had yet claimed, that men were ‘endowed by their Creator’ with the right not only to ‘Life’ and ‘Liberty’ but the pursuit of Happiness. By this last, what the Founding Fathers had in mind was the acquisition of property, which they saw as the precondition of human felicity. Without widely dispersed property, true individual independence, and so a sound Republic, was impossible.”2 Limited, widespread ownership is not a new idea. As I mentioned in a previous post, Thomas Paine declared, perhaps naively, that “commerce is capable of taking care of itself,”3 but he also condemned “all accumulation . . . of property, beyond what a man’s own hands produce.”4 This idea of limited, universal ownership persisted well into the nineteenth century. A mid-century labor leader named Robert MacFarlane declared that “small but universal ownership” was the “true foundation of a stable and firm republic.”5 During this era, it was generally agreed that freedom could not thrive in a nation of hirelings.
But a nation of hirelings is exactly what we have become. We have become owned rather than owners, property rather than proprietors. William Greider identifies one fundamental element of freedom that the free market does not disperse very broadly: capital. “The problem,” says Greider, “is not that capital is privately owned, as Marx supposed. The problem is that most people don’t own any.”6 One might wonder how we can even call a system capitalism when only a small minority of the population can be considered capitalists.7 The cause of this disparity in ownership is inseparably connected with certain developments that accompanied the Industrial Revolution, primarily the rise of the modern corporation.
A Corporate Aristocracy
The Revolutionary War liberated the colonists not just from the British monarchy but also from the oppression of British corporations. Consequently, citizens of the new United States and their elected leaders were justifiably suspicious of corporations. In 1816, Thomas Jefferson expressed this distrust: “I hope we shall . . . crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”8
For many years, government chartered these businesses cautiously and kept them on a very short leash, dissolving them if they violated the restrictions specified in their charters. Unfortunately, this sense of caution did not last. According to Kalle Lasn, the Civil War was a great turning point in American economic history. “Corporations made huge profits from procurement contracts and took advantage of the disorder and corruption of the times to buy legislatures, judges and even presidents. Corporations became the masters and keepers of business.”9
“Corporations continued to gain power and influence,” Lasn explains. “They had the laws governing their creation amended. State charters could no longer be revoked. Corporate profits could no longer be limited. Corporate economic activity could be restrained only by the courts, and in hundreds of cases judges granted corporations minor legal victories, conceding rights and privileges they did not have before.”10
A watershed year for corporate rights was 1886, when the Supreme Court decision in Santa Clara County v. Southern Pacific Railroad (a simple property tax dispute) established a rather amazing legal fact: corporations are actually “persons” and are therefore protected under the Fourteenth Amendment. The difference, of course, between corporate “persons” and human persons is that human persons generally don’t have the financial means to exert the same social, economic, political, and even moral influence that corporations do. We now live in a very different sort of society than prevailed in 1886.
Although nothing in the law requires a corporation to adopt a particular model of ownership, in most instances the corporate form of business takes on an authoritarian structure with distinct boundaries separating the owners and managers of capital from the workers who create the products but who are also regarded as a cost to minimize.
Huge corporations, says historian and social critic Christopher Lasch, as well as the wage system and a more and more intricate subdivision of labor made it pointless to restore the independence of individual proprietorship. Instead of giving the wage earner a piece of the action (meaning capital), “enlightened social policy” aimed instead to make his job secure, his working conditions tolerable, and his wages equitable. “Hardly anyone asked any more whether freedom was consistent with hired labor. People groped instead, in effect, for a moral and social equivalent of the widespread property ownership once considered indispensable to the success of democracy.” But redistributing income, guaranteeing job security, and turning the working classes into consumers are nothing more than pale substitutes for ownership of capital; for none of these strategies produce “the kind of active, enterprising citizenry envisioned by nineteenth-century democrats.”11
A Philosophical Incongruity
This idea of widespread, limited ownership was also at the heart of the many utopian and communitarian experiments of the nineteenth century, including the failed attempts Joseph Smith and Brigham Young orchestrated among the Mormons. Indeed, our communitarian past makes the current dedication of Latter-day Saints to conservative economics that much more mystifying. What is so ironic about this is that during the same period when the Saints were busy building a theocracy and ignoring the principles outlined in the U.S. Constitution, they were also sporadically trying to succeed at a rather democratic form of communitarian economics—a mismatch, to say the least. But between 1890 and 1920, we flip-flopped, joining the rest of the country in its persistent reverse mismatch. We now support a democratic form of republican government but embrace an authoritarian system of business ownership. We can’t seem to get our ducks in a row with our politics and our economics.
We do live in a democratic republic, which, while imperfect, is better than any other political system humankind has yet devised. Within this democratic republic, we enjoy a wide variety of freedoms as well as having a voice in electing our government representatives. This is a right our forebears and many other oppressed peoples around the globe have been willing to fight for. Does it not seem odd then that we so willingly embrace economic authoritarianism?
A fundamental philosophical incongruity separates our nation’s founding principles from the economic tenets that govern corporate capitalism. This disparity would be of little consequence were its impact limited to the esoteric arguments of scholars. Unfortunately, this is not the case. The incompatibility between our political ideals and our economic realities affects each of us at a very personal level. Indeed, the authoritarian nature of our economic institutions effectively prevents most U.S. citizens from achieving their innate potential as they seek a fulfilling life, an equal share of liberty within the shelter of democracy, and a true and independent sense of happiness. A sobering corollary to this reality is that these authoritarian economic institutions are also permitted to exert so much political influence that for most individual citizens the constitutional ideal of equal participation in the democratic republic is a pipe dream at best.
Free Intraprise and the Competition Myth
Some may choose to discount this argument, insisting that most workers prefer to be employed from eight to five each workday by someone else and are fully satisfied with their work. This argument, however, runs counter to both common sense about human nature and recurring research. A worker survey published in 2010 by the Conference Board, for instance, found that only “only 45 percent of those surveyed say they are satisfied with their jobs, down from 61.1 percent in 1987.” Even though 10 percent of American workers were unemployed at the time of the survey, “their working compatriots of all ages and incomes continue to grow increasingly unhappy,” said Lynn Franco, director of the Consumer Research Center of the Conference Board. “Through both economic boom and bust during the past two decades, our job satisfaction numbers have shown a consistent downward trend.” The survey reveals that the drop in job satisfaction between 1987 and 2009 covered all categories measured.12 Apparently, spending forty hours or more each week performing tasks someone else requires of us is not so enjoyable to most of us—especially when we are paid as little as possible while those who own our time and productive output live in increasing relative opulence.
A popular argument in favor of our current form of capitalism is that it works in tandem with the “free market,” in contrast to the command economies of communism. But the free-market system is misnamed, as is free enterprise. In the free market, freedom exists only between businesses, not within them. And free enterprise is not the same as what Gifford and Elizabeth Pinchot have called “free intraprise.” Of course, even between businesses, the free market itself is a misnomer, because in a world of mammoth corporations, the exchange of goods and services in the marketplace is anything but free. Not only do individual consumers have very little bargaining power in their relationship with corporations, but a careful examination of corporate behavior shows that these large institutions do not actually favor unfettered competition in a free market. As David Barash explains, they prefer the current corporate welfare system, with its bailouts, special benefits, tax breaks, and behind-closed-doors deal-making for government contracts. The only competition corporations really desire is competition among the wage earners, because this sort of competition results in lower wages and a more submissive workforce.13
Unlimited ownership of capital is based on flawed reasoning anyway. The rule most capitalist businesses have always followed is that the entire harvest of profit should go exclusively to those who supplied the seed. But what about those who planted, weeded, watered, cultivated, nurtured, harvested, packaged, and delivered the produce? In reality, pragmatic concerns may soon make the legal and ethical questions irrelevant. If we continue down the corporate path of increasing inequality, we will find ourselves in a land of shrinking employment opportunities and declining real wages for an increasing number of workers, as well as deteriorating public services for everyone. If we truly wish to solve our economic problems, we must reshape the system so that it creates greater economic equality, and the most sensible method of doing this is to share ownership of capital with those who through their efforts actually help create it.
A Third Alternative
Hugh Nibley exposed a fallacy in the two-dimensional thinking most people employ—which is also one of Lucifer’s most common ploys. Said Nibley:
When I find myself called upon to stand up and be counted, to declare myself on one side or the other, which do I prefer—gin or rum, cigarettes or cigars, tea or coffee, heroin or LSD, the Red Rose or the White, Shiz or Coriantumr, wicked Nephites or wicked Lamanites, Whigs or Tories, Catholic or Protestant, Republican or Democrat, black power or white power, land pirates or sea pirates, commissars or corporations, capitalism or communism? The devilish neatness and simplicity of the thing is the easy illusion that I am choosing between good and evil, when in reality two or more evils by their rivalry distract my attention from the real issue.14
The problem with the easy economic choice most people see—between corporate capitalism and communism—is that it does indeed distract us from a third alternative that is more consistent with scripture and with our American social and political ideals than either of these two corrupt systems, both of which are authoritarian in their economic practices and both of which concentrate capital in the hands of people who do not do the productive work or create the product. Plainly stated, the only way people can experience freedom and representative democracy in all facets of their lives is by possessing a share of ownership in their places of work and having a voice in the decision making, including the opportunity to choose their organizational leaders.
Ownership of capital is the central factor that defines and differentiates economic systems. Under communism, ownership supposedly resides in the hands of the people as a whole, but in practice the Party elite control capital. Corporate capitalism also concentrates ownership in the hands of a small but elite group. The law of consecration, however, offers a very different ownership model. Granted, we cannot resurrect the United Order without divine direction, and we certainly cannot expect the entire U.S. population to embrace the law of consecration, but perhaps we can find viable principles in the Lord’s revelations to guide us in reforming our economic system.
A thorough analysis of the law of consecration as applied under Joseph Smith and Brigham Young is beyond the scope of this series of posts, but such an examination can be found in Working toward Zion: Principles of the United Order for the Modern World, by James Lucas and Warner Woodworth. Some of their analysis needs to be updated based on new information coming from the Joseph Smith Papers and other historical studies, but they do offer some fascinating possibilities. After outlining the history of the United Order, Woodworth and Lucas suggest ways in which we might apply principles of the Lord’s preferred economy in our modern organizational world. They conclude that worker-owned businesses or cooperatives are the form of enterprise most consistent with the principles the Lord has revealed.
In short, if workers own their time, efforts, and produce, they will not pay themselves as little as possible. They will pay themselves as much as possible with a sense of equity absent from typical corporate pay structures. They will not fire themselves or move production to a low-wage country or eliminate their own health insurance or pension plans or other benefits. If more people receive a direct share of the profits instead of a marginal wage, they will have more disposable income to spend on the products generated in the marketplace. Conversely, if fewer people are reaping exorbitant profits from the labors of others (what Gandhi would label “wealth without work”), then there will be less excess capital to invest in unneeded productive capacity or speculative financial instruments. Overcapacity will correct itself, as will the exaggerated economic growth multinationals require to reap the unrealistic rates of return demanded by out-of-touch financial markets.
Interestingly, even though there are only about 350 worker-owned cooperatives with a total of 5,000 worker owners in the United States,15 a variety of religious and secular perspectives have promoted this very economic form for many reasons. From a historical and social angle, Christopher Lasch argues that worker ownership is consistent with capitalism as Adam Smith and other early economic thinkers conceived it. In his economic treatise Adam Smith’s Mistake: How a Moral Philosopher Invented Economics and Ended Morality, Kenneth Lux arrives at a similar conclusion. So does William Greider in his examination of the global economy, One World, Ready or Not: The Manic Logic of Global Capitalism, when he attempts to prescribe a cure for what he sees as the inevitable shortcomings of globalism. In his tour de force When Corporations Rule the World and his more recent Agenda for a New Economy, David Korten argues persuasively for worker-owned businesses. Although farmer cooperatives are not an exact parallel to worker-owned enterprises, there are overlaps, and Ezra Taft Benson, as U.S. Secretary of Agriculture, promoted farmer cooperatives as an alternative to the government subsidies, price supports, acreage allotments, and overproduction that prevailed in the United States during his years in Washington.16
Ultimately, there are many forms worker-owned businesses might take. In the next couple of posts, I’ll explore a few options, including the famous Mondragon Cooperatives of Spain and a model devised by Indian philosopher Prabhat Ranjan Sarkar for restructuring an entire economy based on worker ownership.
1. Top U.S. Marginal Income Tax Rates, 1913–2003, http://www.truthandpolitics.org/top-rates.php#fn-2. Although it is true that U.S. presidents do not have the ability to reduce tax rates—this power resides with the House of Representatives—they are generally given credit for them, since Congress usually acts on a president’s economic initiatives. Hence, we speak of Reagan’s or Bush’s tax cuts.
2. Paul Johnson, “An Awakened Conscience,” Forbes, September 14, 1992, 183.
3. Thomas Paine, The Political Writings of Thomas Paine (Granville, Middletown, N.J.: George H. Evans, 1839), 398; http://books.google.com/books?id=42AaAAAAYAAJ&printsec=toc#PPA398,M1.
4. Moncure Daniel Conway, ed., The Writings of Thomas Paine (New York and London: G. P. Putnam’s Sons, 1895), 3:340, http://books.google.com/books?id=1ToPAAAAYAAJ&printsec=titlepage.
5. Christopher Lasch, The True and Only Heaven: Progress and Its Critics (New York: Norton, 1991), 205.
6. Greider, One World, 416.
7. The fact that I may own a little stock through a pension plan or mutual fund does not make me a capitalist. Being a capitalist has more to do with the control of capital.
8. Thomas Jefferson to George Logan, 1816, http://etext.virginia.edu/jefferson/quotations/jeff5.htm.
9. William Kalle Lasn, “The Uncooling of America: The History of Corporations in the United States,” http://www.thirdworldtraveler.com/Corporations/Hx_Corporations_US.html; excerpted from Kalle Lasn, Culture Jam: The Uncooling of America (New York: William Morrow, 1999).
10. Lasn, “Uncooling.”
11. Lasch, The True and Only Heaven, 207–8, 224–25.
12. “U.S. Job Satisfaction at Lowest Level in Two Decades,” The Conference Board, January 5, 2010, http://www.conference-board.org/utilities/pressDetail.cfm?press_ID=3820.
13. David P. Barash, The L Word: An Unapologetic, Thoroughly Biased, Long-Overdue Explication and Defense of Liberalism (New York: Morrow, 1992), 176.
14. Hugh W. Nibley, Approaching Zion (Salt Lake City: Deseret Book; Provo, Utah: Foundation for Ancient Research and Mormon Studies, 1989), 163.
15. See “About Worker Cooperatives,” US Federation of Worker Cooperatives, http://www.usworker.coop/aboutworkercoops.
16. Gary James Bergera, “‘Rising above Principle’: Ezra Taft Benson as U.S. Secretary of Agriculture, 1953–61, Part 1,” Dialogue 41, no. 3 (Fall 2008): 85–95.