Trickle down does not work

Greed is the religion of the billionaire  class

Greed is the religion of the billionaire class

No business which depends for existence on paying less than living wages to its workers has any right to continue in this country. — Franklin D Roosevelt (1933, Statement on National Industrial Recovery Act)

The first TED talk by venture capitalist and entrepreneur Nick Hanauer was banned by TED. It was claimed to be mediocre. Could it be because he told the truth? It also raises a big question mark against TED.

Forbes published a garbage piece, which I will not even lower myself to address, in which it was claimed, not mediocre, but a display of ignorance.

A couple of weeks ago, the French Economics Minister told the truth on failed French economics policy, austerity, tax breaks for the rich, cuts for the poor. The reaction of the unpopular French President (20% approval rating) was to fire the entire government. Should it not be the President who resigned?

Across southern Europe, austerity is not working.

Pay the rich more and they work harder. Pay the poor less and they work harder. Strange that.

We have seen wages flat line for nearly a decade, ever since the economic crisis hit, wages were not much better before. If we take account of inflation, then wages have gone down.

When productivity goes up, we either need fewer people or we need to consume more.

If we increase productivity year on year, such that after ten years, productivity had doubled, we are either producing twice as much stuff with the same number of people or half the number of people are required to produce the same amount of stuff.

Stuff in general we do not want or need, stuff that has environmental costs of extraction, manufacture, shipping and distribution, stuff that we possess for six months, stuff that then has to be disposed of, incurring yet further environmental costs. These externalised costs, which are not reflected in purchase price, we all pay for.

The rich do not create jobs for the simple reason there is a limit to the amount of money they can spend, how many yachts, mansions, luxury cars.

Quantitative easing has been a massive failure, for the simple reason it has gone to the bankers and the rich.

We need wealth redistribution, but the reason why we do not have wealth redistribution, is because we would be redistributing the wealth of the rich, and they being rich and powerful own the politicians.

Had money been given to the poor, they would have, if only because they are living on the breadline, spent that money in the economy.

We need higher minimum wage, better welfare payments, free health care, free higher education. All of which benefit everyone, but disproportionately benefit the poor.

We also need progressive taxation where the rich pay a higher rate of tax, not as we have at present a regressive taxation system, where the rich pay less tax than the poor, where a banker in the City of London pays less tax than the cleaner who cleans his office.

We need to hit hard, the tax-dodgers.

We need to move away from a tax on personal income, to a tax on corporations, a tax on resource depletion, a tax on waste generation, a tax on pollution.

Too many are currently getting a free ride. When the rich dodge tax, they are getting a free ride. When corporations externalise their costs, pollute our air water, destroy our natural resources, exploit the poor, they are getting a free ride

At a recent meeting at Davos, Bill Gates, one of the richest men on the planet, argued vociferously for not increasing minimum wage.

The prevailing theory is trickle down. The poor sit below the rich man’s table, and if they are lucky, a few crumbs fall off the table.

At times of growth, everyone sees an increase, the rich a lot, the poor a little, but that little, is enough to keep the poor oppressed.

When there is zero growth the rich still get fatter, leaving less of the pie for the rest of us.

During the recession, there has not been the mass layoffs we have seen in the past. That is because productivity has gone down, there is a lowering of demand, the workers still employed are put on short shifts, reduced hours, paid less. One reason why wages are shrinking.

There has been a increase in jobs, but these have been McJobs, mind-numbing de-skilled, low-wages, part time, temporary, zero hours jobs.

The wealth creators, the job creators, are the small companies, the ones who do not have the political clout.

The big companies destroy jobs. Each time they destroy jobs, their share price rises, more for me, less for you.

Wages at Walmart, McDonald’s are so low, they have to be subsidised by the state. Yet another mechanism to transfer wealth from the poor to the rich. Companies that argue they cannot remain in businesses without paying low wages, do not deserve to remain in businesses.

There is though a flaw in the argument put forward by Nick Hanauer, that of continued growth.

The society Nick Hanauer describes has been true for some time, certainly the post war period when we saw real growth, car manufactures for example, would pride themselves that they paid their workers a decent wage, such that they could afford the cars they made. This is no longer true.

The reason it is no longer true, is that we have hit the limits of growth. Banks have been criticised for not lending to businesses, but when banks are looking for a return of 10% or more, they are not going to lend when the economy is not growing.

We have exhausted what we can loot from the commons then sell back.

Nick Hanauer hints but no more, at the gift economy. He dismisses the rationale actor, out to maximise self interest, more for me is less for you, and says we are irrational, emotional, that we reciprocate.

An economy where we reciprocate is the gift economy, the sharing economy, where we all contribute to the commons, more for me becomes more for you.

He is also compares the economy with an ecosystem, where we have closed loops, feedback. On a finite planet, an economic system, has to be embedded within the planetary ecosystem, a part of Gaia, not apart from Gaia.

We cannot have unlimited growth, unlimited growth is where a cell becomes cancerous.

We are moving increasingly towards a Police State, in a crude attempt to maintain inequality.

Why has the Mayor of London decided he needs water cannon on the streets of London? You do not need water cannon for happy people?

Nick Hanauer was one of the first private investors in Amazon, he co-founded a company which was sold to MicroSoft for $6.4 billions, he together with his friends owns a bank. He has his own yacht, a private plane. He was co-author of The Gardens of Democracy. He was also instrumental in pushing for an increase in the minimum wage in Seattle.

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4 Responses to “Trickle down does not work”

  1. jeffmowatt Says:

    “Capitalism is the most powerful economic engine ever devised, yet it came up short with its classical, inherent profit-motive as being presumed to be the driving force. Under that presumption, all is good in the name of profit became the prevailing winds of international economies — thereby giving carte blanche to the notion that greed is good because it is what has driven capitalism. The 1996 paper merely took exception with the assumption that personal profit, greed, and the desire to amass as much money and property on a personal level as possible are inherent and therefore necessary aspects of any capitalist endeavour. While it is in fact very normal for that to be the case, it simply does not follow that it must be the case.

    Profits can be set aside in part to address social needs, and often have been by way of small percentages of annual profits set aside for charitable and philanthropic causes by corporations. This need not necessarily be a small percentage. In fact, there is no reason why an enterprise cannot exist for the primary purpose of generating profit for social needs — i.e., a P-CED, or social, enterprise. This was seen to be the potential solution toward correcting the traditional model of capitalism, even if only in small-scale enterprises on an experimental basis.”

    “Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further by at least some companies, past profit, to people. How profits are used is equally as important as creation of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity.”

  2. TheProgressiveParadigm Says:

    Exactly! As you see since Raegan, income inequality has spiked.

  3. TheProgressiveParadigm Says:

    Reblogged this on The Progressive Paradigm and commented:
    This is a superb illustration about why trickle down economics has failed. I have written about this in various articles including A Perspective On Progressivism. Please read. Great Post.

  4. keithpp Says:

    Should You Be Paid As Much As Your Boss?
    http://wp.me/pEcZI-8by

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