February 26, 2017 at 12:10 pm #6040etilleyKeymaster
Income and Wealth Inequity
Support Middle Class for Power AND The 49% for Prosperity
In golf – “Drive for show; Putt for dough” – is a truism that even the beginning player is sure to recognize. In Canada and the U.S., there is an equal truism that everyone should learn as a high-school student – “Support the Middle Class for Power AND The 49% for Prosperity”.
You might recognize who are the “Middle Class”, but who are “The 49%”?
To begin, let’s understand how the playing field of wealth stacks up today. The top 1% wealthy are “the Rich”, the 0.1% are “the Super-Rich”, “the top 20%” quintile of the population own 85% of all wealth, and “the 51%” is the voting majority who own 99.7% of a country’s assets (these numbers are accurate for America in 2016). “The 49%”, therefore, are those who own nothing; they have families and jobs in most cases, but they own few assets and they are usually stuck within repeating cyclic debt and struggle to make ends meet.
Decent, hard-working, often high-school and higher-educated citizens who – through career choices, lacking opportunities, or bad luck in business, divorce, health or fortune, have come upon a road that is not as easy nor prosperous as others. In Canada over the past 30-years, slumlords retired early as multi-millionaires here while the best-and-brightest computer and automation specialists were outsourced, offshored, fired at age-50, and marginalized in boardrooms and by diversity rules. The outcome of your career will often be determined by the policies your country chooses to run – and not by your ability or effort.
Capitalism suggested that poor citizens should simply “work harder” to get ahead, but The Rich earn $1 million per day (95% of all incomes go to the Top-1% since 2008) – and good jobs for the 49% are scarce as well. The inequity of incomes and wealth is not going to be overcome by working harder – nor taking even three jobs – even if you could find a good job/income/pension/benefits and so on.
Warren Buffet bought a farm with his paper route savings at age 17, but opportunities like that are long gone. When I got out of high school, I could buy a home in Hamilton, Ontario next to the university for $30,000 in 1982. When I got out of College three years later, the same house was now three years older and more downtrodden, and yet it cost $90,000. Local unionized grocery stores paid cashiers $38 per hour at this time and rents were probably $450 per month for 2-bedroom apartments.
Fast forward to today where a new house costs $600,000 and starting salaries are $20 per hour, even for skilled positions requiring two and three-year programs for training; and rents are $1400 for two bedroom apartments – up to $2500 per month in major cities in Canada.
Imbalance in Monetary Systems
Why is there an obvious imbalance between cost of living and reliable incomes today? And why was it so much easier for our 60-year-olds and older citizens?
Cycles – in Monetary Systems are caused by a simple mathematical certainty called annual compound inflation. Try this quick experiment; use a spreadsheet to fill 60-years with randomly generated values for inflations between 1% and 13%. In Microsoft Excel use the following formula “=RANDBETWEEN(1,13)/100” and then sum the products 60-times (for 60-years). 1% inflation in 2019 dollars equals 60% inflation in 1960 dollars – and your spreadsheet will confirm that future changes will be exponential now too. As inflation becomes exponential, any imbalance between incomes and cost-of-living becomes unbalanced ever more quickly. In history, this balance has been lost in thirty recorded mature capitalisms – and you can read about remedies to this problem via “Jubilees” in Leviticus 25:26 (760 BCE)and in the Code of Hammurabi (1763 BCE) easily.
Inequity – is the natural result of healthy capitalism in a monetary system. If you give every citizen $1 million dollars, after 60-years there will be rich, poor, and inequity – for very obvious reasons. Some people aren’t comfortable taking income from the work of others, or they prefer to go to work and then come home to the rewards of raising a family. Henry Ford was the very great exception among industrialists for his time, in that he insisted on paying his workers a strong living wage. Some people make unscrupulous, socially irresponsible decisions to become rich – where others insist on making decisions for moral reasons. If reward systems and government policy don’t regulate irresponsible behavior, everyone suffers as the economic “pie” gets smaller – but it will only be the poorest 49% that will actually feel the hardships of inequity.
At the point that inequity becomes so great that opportunity is denied to The 49%, the productivity of an entire nation suffers – and this is a very, very expensive problem. The United States loses a staggering $38 billion a day, and $13.6 trillion annually as the economy stalls under the burden of so many unproductive citizens. And this loss is not reported – see the SCP Report. GDP Reports were designed to always report positive results only – in fact, in the last 60-years, the World GDP has reported a -1% only once in 2008.
As long as these productivity losses and costs are not reported, politicians can claim they are doing a good job of managing the economy; and universities can claim they are doing a good job of training us to understand how to vote reliably for sustainable communities and nations. The first step in solving a problem, however, is recognizing that you have one.
In the 2010 U.S. Federal Reserve budget report, the 49% were the bottom two quintiles shown here to the left. This 40% were recorded to own just 0.3% of America’s wealth, which means that 160-million people here were without the ability to own a home, or afford a prescription, medicine, or pay a doctor’s bill in very many cases. These people can neither run a business nor contribute to exports, and exports is how any country creates its wealth.
In the Netherlands in 2016, every citizen earns $33,000 annually in exports for their country. In the U.S., that number was $5,000. Google and Wikipedia have done a lot of excellent work to table GDP stats (like export-per-capita) from every country, so we can see and compare these online easily.
Supporting the 49%, therefore, clearly results in a lot of economic income.
FDR (Franklin Delano Roosevelt, President of the United States from 1933 to 1945) created the American Dream and addressed the economic resets required to create the largest economy in history. He did this in our last mature capitalism – the Great Depression – and he did it with a handful of policies which included income and wealth distribution (92% income tax/80% estate tax – for 20-years), a strong empathetic social contract (see the Second Bill of Rights), affordable cost of living and home ownership, nationalism, and full-employment.
In his own words …
Hitler used the same policies to turned around the German economy – and his NAZI party’s fascist/authoritarian approach accomplished this more quickly too, but Hitler’s systemic failings of empathy undid any benefit. We cannot allow evil within our societies or they can never prosper; “Good” is essential.
You can find this definition of “evil” in the Nuremberg Diaries, 1946.
Social Contracts and UBI (Universal Basic Income)
Nations with strong social contracts are the most productive economies in the world per capita. The fact that people are “not lazy” once given the opportunity to advance, is proven again and again in the SCP Report.
In a monetary system, the gap between reliable incomes and cost of living (COL) is our freedom. When incomes fall below COL, we lose our Social Contracts and economies stall as social problems rise and populations become unproductive. Policies like Full-employment and Nationalism help to ensure that incomes are available, but even that might not be enough if COL is too high (rents, housing construction costs, utilities). For these reasons, there are several policies required to ensure Social Contract is maintained – and that UBI programs can work successfully.
Like other welfares, UBI is often insufficient, it does little to address inequity, and it tends to be unpopular with our presently-uneducated democratic voters. This was the failing of recent programs conducted in Sweden and in one or two communities in Ontario, Canada. Wikipedia keeps a long list of UBI programs here.
Another consideration is that technology will require fewer redundant jobs in the future, so income supports are essential so that we do not slow down essential automation. We want to get our technology to the point where it provides for our basic Social Contract needs automatically – with as little labor and cost as possible – as soon as possible.
Public Utilities like the Worthwhile Industries‘ Campuses introduced in our thesis “End of War“, can reduce the cost of Social Contracts to zero – with investment and time – and this infrastructure makes nations self-sufficient with reduced reliance on imports too. When a nation is self-sufficient, economic worries are greatly reduced. Another benefit of Public Utilities is that some UBI recipients will be challenged to manage funds each month, substance addiction sufferers might also use their stipend of money for non-social contract purposes of food, shelter, clothing, transport, and so on. Aristotle put it that we should “have the things we need, and not necessarily the things we want”.
The Golden Rule
We discounted the Golden Rule as a religious text that had to be separated from the running of a secular state, but the Golden Rule is not religion – its philosophy – and it’s an important “lesson-learned” from history too. We were not taught in school that it is essential; so I looked at it as a nice-to-have lesson in sentiment and morality. For important reasons, it turns out that this philosophy has been repeated in every religion ever recorded; even in the religions of antiquity which are no longer practiced today.
What the Golden Rule is in fact, is a time-tested Sustainability Model. You might like your neighbor – or perhaps not, but you have to support him and/or her family – or your society will surely begin to suffer; to Collapse. So say the statistics…
In today’s mature capitalism, 72% of all nations are trending toward collapse. record high debt service-loads, sustained trade deficits, record conflicts, increasing social problems, starvation wages; these are the tell-tale signs that an economy, no matter what size, is trending toward Collapse. Collapse doesn’t happen overnight, it can happen over two hundred years in the case of the Roman Empire, or in much less time as with Greece, Venezuela, and Spain today. Canada, USA, UK, and France are collapse-trending nations as well.
Collapsing nations see increases in incarceration rates, mental health and other social problems, Populism, Revolution, and – in a mature nuclear era – even a species-ending self-oblivion by a nuclear World War III is possible. Populist elections are common in mature capitalisms because the down-trodden 49% have now increased in numbers to become 51% of voters. And the 49% of down-trodden, as you can imagine, demand immediate change – because changes are too long overdue.
A dramatic improvement in living conditions will be needed in any economy that has permitted salaries and cost of living to slide into too great of an imbalance.
ROI – Return on Investment
So, if Social Contract is costing the United States $13.6 trillion annually, and the costs for providing a social contract are estimated at around $3.5 trillion, the return on investment (ROI) business case for Social Contract is $4 for every $1 spent; and the opposite is true too – every $1 denied to Social Contract costs the economy $4.
When it comes to policy, you don’t avoid a cliff by slowing down and you don’t initiate change in a non-positive direction either. Transition Economics studies the Policy proven to sustain strong economies and to restore balance. It turns out – this is the easy part.
As to the question of why the status-quo policies that worked early on in the 1960s and 70s but no longer work today, conservative policy changes as monetary system cycles mature. In the 1950s, a high-school kid could have a job, pension, family, home, benefits, and a good life in a family-friendly community – at the age of 20. Young Russians had it even better as they could attend university and have all this – and a cottage (dacha) too.
But we can’t Vote for this
Our bigger problem is the education of voters within our large democracies. Large populations usually mean diverse economies – and also it means that every individual industry is a minority that the majority can ignore. I think we have all come to expect imperfection from politicians – but what do you do when the University-trained Economics experts have gotten it wrong for so long also?
ACT Parties solve this problem by giving Voters a guaranteed non-theory-based Transition Economics-proven policy solution at election time. ACT-American.com is the U.S. ACT chapter that explains how to change your fortunes with just a vote.
Enter the Marketing Teams and Spin-doctors …
The “Middle Class” is an election term that means little and describes most of us. Within a healthy economy, you hope to see the middle-class comprise a majority of voters as well. Female Inequality, Low-tax, Small Government, Death-Tax, Open Markets – are all market-tested advertising messaging with the corresponding policy that is designed to keep 95% of all incomes flowing to the top 1% rich; and economies stalled and collapse-trending.
When a Democratic Party tells you that they want to Support the “Middle Class” – without bolstering “The 49%” at the same time, two things are true: First, this group has little more depth than a marketing team that seeks to tell the largest body of voters – exactly what they want to hear – and in the interest of giving their party the higher-probability of retaining Power, and second; your country’s economic and social troubles will worsen – with scientific certainty.
Educating citizens, therefore, is an important discussion whenever voters have yet to learn the economic importance of leaving no-one behind. In the G7, we have yet to learn the importance of supporting the 49% who are without a voice until millions upon millions of voices must be raised in populism and revolution.
Enter Education …
Having millions of oppressed countrymen would never be allowed if educated voters fully understood the costs to their economy as explained by SCP Reporting for permitting so many to be unproductive. Nor would political parties survive, with exports-per-capita levels at just a fraction of what they should be. Why are our politicians not promising to double exports? Because we have not been taught to insist on it – just as they have not been taught how to deliver it.
This is why smaller population countries like the Netherlands, Norway, Sweden, and many others – with populations of just five to sixteen-million, made socialistic policy corrections 20-years ago – and this is also the reason why most of these countries’ citizens are still living the American Dream today. There is a compelling case made here, to design much smaller economic electorate areas into future Democratic Reform discussions, for this reason.
The real costs of inequity will surprise you – the number is in the hundreds of billions, and even trillions, of dollars lost annually. All that we have to do to see this lost revenue is to adjust our American, or Canadian or any other, Export-per-capita statistic to Holland’s $33,000 – and then multiply our current exports by that amount. This is the real cost, in just lost exports-revenue and tax, for 160 million people being unable to contribute to the economy. See this math in more detail here in the article The Business Case for supporting the 49%.
A middle-class majority that is terrified to lose their jobs means that no-one can stick their neck out or say “No” to short-sited corruptions like tax evasion, to socially irresponsible gender inequality policies, to firing 20-year-staff members in order to evade a pension obligation, to eliminating experience-rich middle management, and piling work onto fewer workers for the sake of meeting executive bonuses. We simply cannot make decisions for moral reasons under these circumstances, which lets evil enter our society systemically – and we cannot promote by merit; instead, promotions have to be based on ever narrowing, even just monthly financial measures – which are about as dumbed-down as targets get – and these financial measures are incomplete as they externalize (ignore) any accounting for the much larger Opportunity Costs lost to the nation in Export.
Populism, which is the Revolution that JFK (John Kennedy) quoted about so famously, is a clear and overdue call for turn-around and proven economic reset.
To Support Prosperity and to support the Middle Class, you must support The 49%.
CSQ Common Sense 101 is the High-School Course for training democratic youngsters about Sustainable Communities, Economics and much more.
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