When I post on this bog I try to have new material on a new topic. There is nothing more aggravating than reading a re-hash of a blogger's last post. Typically I try to watch the full news cycle, get frustrated with a topic, and develop a comprehensive post to address the issue from my perspective. I start this post in this manner because the topic of this blog is the same as the last. Nothing has changed and the Occupy Wall Street movement has disjointedly been arguing what I have been saying for some time now. The imbalance of wealth in our country is unhealthy, unfair, and unsustainable. We have all seen the charts and graphs of income and asset disparity in the past 30 years. It is no secret that the rich have gotten grossly rich and the poor are bordering on Third World status. There are hundreds of thousands of people all around the world who are fed up and protesting in the streets. The problems that have come about due to the immense economic imbalance are so vast and permeate literally every aspect of societies world wide that the protesters' message can be vague and too broad for the news to accommodate. Instead, the news puts its own interpretation on the sit-ins, usually asserting that the protests are about lack of jobs. Rather, what we are seeing is the people rising up against the established norms of capitalism in a global marketplace.
Last week on 60 Minutes they interviewed the Obama appointed CEO of General Electric, Jeffrey Immelt. Immelt has turned around GE and made them profitable after the company was on the verge of bankruptcy a couple years ago. Immelt proudly told 60 Minutes that GE has moved from 10% of its business being done overseas to 60%. He touted the company's massive expansion into Brazil and toured factories GE has established in Latin America, arguing that producing the goods in Brazil instead of the US makes the company more competitive in the marketplace by lowering costs. 60 Minutes also toured a factory in the US with Immelt, employing about 250 Americans at 13-17 dollars an hour. Asked about why the pay was so low for a high-tech, high education job like building turbine engines, Immelt admitted that at 13 an hour they received 50,000 applications, so the company would have no reason to pay more when they can get labor at such a low rate. This is indicative of the problem in the structure of Capitalism.
The world has gotten smaller. We now live with computers in our hands, able to access the entirety of human knowledge in an instant. Machines have become cheaper and more efficient than most laborers. None of this is anything new. Developing technology has always reduced the need for labor and opened up new marketplaces which require a new workforce. However, as the world has grown smaller and transportation of goods and technology has become instantaneous, the labor force has also become global. Telemarketers in India, shoe companies in the Philippines, car companies in Mexico, and the like is a transition we have all witnessed over the past 30 years. Corporations will always move to the best option for their bottom line, after all, it is their legal obligation to make as much profit as possible for their stockholders. The only way a corporation will expand in the US is if there is economic incentive to do so. This is Capitalism.
The question for the government becomes how to encourage that incentive. Certainly we have the labor force ready to go. People here are still more educated than those in Brazil, China, and India. Consumerism, while down for the past 5 years, is still stronger here than anywhere else in the world, and most importantly, there is no place on Earth where the desire to consume is greater than in the United States. However, with the ease of transportation of goods, free trade, and the increased globalization of corporations, there is no reason to produce products in a place with relatively high labor costs, massive legal exposure, and outlandish medical costs when a simple trip to China can alleviate all those issues. The only people who lose are the American people, as capitalism only recognizes profit and is blind to national identity.
As the unemployment numbers remain high the labor force is forced to take lower wages and fewer benefits. We have passed the point where this becomes problematic for the society to which we are accustomed. About half of working people contribute nothing to the Federal coffers through income tax as they make too little to pay in. These people have seen no wage increase in over 30 years while the prices of commodities has more than tripled in that time. This translates into people working to afford food, clothing, shelter, and a means to get to and from work. There is no expendable income to purchase a new refrigerator from GE. Without expendable income the greatest consumers the world has ever known are unable to do what we do best, buy.
The system as we have it today is completely upside down. The goal of the government in relation to the marketplace should be to encourage consumption across the board in order to grow the economy through demand. No corporation is going to build a new facility because they have lots of money and nothing to do with it, they will only produce what is needed to fulfill demand. In a country where states are co-dependent on each other for success and the borders are sealed by nothing more than signs that say "Now Leaving New York" and "Welcome to Connecticut" there is a vital need for a stronger Federal government. The separation of states has produced things like sales tax and other regressive taxes on goods that directly target the consumer base. Of course, Federal taxes on consumables are just as bad for the economy. When a person making 25,000 a year (like one of Immelt's new hires) they are being disproportionately penalized for most of what they buy. That is to say, the 3 dollar tax per month on their phone bill is a much greater proportion of their income than the same tax is on Mr. Immelt himself. Yes, they may be paying the same amount for the same service, so it seems fair, but in proportion to their income, the tax is imbalanced. The same goes for all sales taxes, gas taxes, and the like, all the way down to registering your car at the DMV. We all know the cost of goods is relative to how much money we each have. A night out at The Olive Garden to some is slumming it, to others is an unattainable dream they hope to satisfy once a year on their anniversary. However, as we persist in penalizing every dollar spent instead of focusing simply on the dollars earned, we end up in the current situation of losing half of the consumer base.
My outlook is that the country desperately needs two paths to correct itself. First, we need a massive national project. Something that gets a million people or more working on one specific thing we can look back on and feel accomplished about. I believe a nationwide irrigation project would be brilliant. We know the storms and floods are going to keep coming, and if channels of water into Texas don't get Rick Perry's support, then he really does think the rapture is coming soon. Second, we need to broaden Federal responsibilities so states don't have to have sales taxes and do not privatize every aspect of government. When private companies take over garbage collection, prisons, fire fighting, etcetera it costs the consumer more and is once again disproportionately targeting those who have the least money to spare. A broader Federal system can eliminate sales taxes altogether, putting more money in the pockets of those who need it most. As the bottom half of the country has more money, they will purchase more goods and services. No, they might not be standing in line at Morton's Steakhouse, but I bet there would be a wait at Outback.
The mobilization of the American consumer will drive demand so vastly that jobs will have to be created to satisfy the needs of the extra 100 million people added to the purchasing class. As the system becomes more centralized it can become more simple as well. Eliminating deductions altogether would be more in line with true capitalist principals, as nothing would be encouraged by tax incentives. Only reinvesting into a business or paying a higher wage to employees would allow the business to take less profit and avoid higher taxes.
To me these solutions seem quite obvious. Lower taxes and penalties on the most amount of people to encourage consumerism, and the people at the top will create more jobs in order to satisfy demand. Unfortunately, the silly idea of supply side economics has permeated our schools and political system for so long that people don't realize it only works on a global scale. Of course GE will build factories in Brazil if we don't require them to pay any taxes here in the US. We should not be surprised or discouraged at that, we need to have corporations that are global. But if the people here in the US have to compete one to one with third world countries, 99% of us will be living in one soon.
No comments:
Post a Comment