Wednesday, July 4, 2012

Dear Jon Stewart (and Marco Rubio by proxy)

Dear Jon Stewart (and Marco Rubio, by proxy),

Even though I'm Canadian, I watched your interview with Senator Marco Rubio four times. I have struggled for several years to understand why smart people with similar goals see economic issues from different universes. Why does so much of what Senator Rubio says make sense to me, while I fundamentally know his approach will destroy what I love about freedom.

You said, “you’ve removed spending from value.” Ah, ha! A light began to bubble into the murk.

Senator Rubio said, “the economy must grow, we agree on that.” BOOM! That's when I understood - he sees the economy as Ever-Rising Dough.

When I was a kid, there was a popular phenomenon where housewives would pass each other the ever-rising dough. Basically, you can take this ball of dough, feed it every day as it grows, split it up, make your own loaf of goodness, and pass the other four loaves-worth along to other lucky housewives. The original dough just keeps reproducing itself in household after household. It's like free bread! If you don't count the stuff you have to add to it every day to keep it alive, the time and effort of remembering and doing it, and the hassle of making your own bread.

In any case, what Senator Rubio suggests is that the Economy is Ever-Rising Dough, so he's telling us to feed it. Public Resources feed it - low wages, low taxes, low-cost natural resources. Grow the dough. But does he feel that the public should receive a fair portion in return for their investment?

Capitalism provides a partnership in which initial resources (dough) are provided by the Public (Housewife #1) to a private citizen or corporation (Housewives #2, 3 and 4). The resources are transformed into value (four loaves worth of dough) by private citizens.

In Capitalism, however, the goal is no longer to feed ourselves with free bread. The goal is to sell the bread for a profit. In this model, the created value is provided to all citizens at a price the market will bear. The sale of value provides revenues to split among the private citizens involved in the transformation to value - the shareholders who backed the venture financially, the employees who did all the work, and the suppliers and distributors. Those private citizens can then use their share to purchase created value, in a virtuous cycle.

Of course, if no public resources had been provided in the first place, the virtuous cycle could not begin. In order for a virtuous cycle to begin, someone needs to put something in and take nothing out - someone needs to make the starter-dough. So the publicly-owned resources were put in, and "The Economy" was created - dough plus what we put into it every day.

There is only one economy. In a town that is running out of flour, yeast, sugar, salt and water, that dough is the only dough we have. It has two key stakeholders:  Public Citizens who collectively own all Public Resources, and Private Citizens, who are the same people as Public Citizens, but playing a different economic role by contributing to value creation through investment or direct effort. Public Resources consist of everything that exists within the boundary-lines of the territory citizens live on together - for example, a township, country, province or reservation. All land, water and other natural resources, as well as the time and labour capabilities of humans living there, represent Public Resources.

My thoughts aren't new, but perhaps now is a moment to re-iterate. It is becoming increasingly clear that governments the world over and at every level do not extract an adequate price in exchange for resources, if they want to advance a goal of steady overall improvement in the quality of life for most citizens. Because governments have sold resources cheaply, they have depleted public citizens’ commonly held resources, including their time and health, without replacing those resources in revenues.

Cut-throat competition among governments creates a false race to the bottom price for everything from electronics to wheat, to human time. This system serves no one except those who own and accumulate Private Resources. Worse, it is inhernetly unsustainable since the true costs of production and distribution are higher than the revenues received, yet the transformations still earn profit. Those costs are externalized outside Corporations, where they land on governments (representing Public Citizens) and, ultimately, on Private Citizens, in order that Private Resources can be accumulated. Yet, Governments have done very little to ensure those Private Resources get reinvested into the economy as a whole. Quite the opposite.

Governments have made a deal with private corporations to indenture all citizens.

By giving public citizens’ share of the resources away, governments create an environment where each private citizen must submit their body, mind, labour and time to a larger system that is controlled by private interests, as a cost of participating in the society in which they are born. This larger system is meant to drive innovation and the transformation of resources into value in human lives, but has instead been accumulating the value into the Private Resources of a small percentage of people, primarily through speculation and the provision of cheaply produced mass preferences, rather than humanity-serving production.

As more of the total economy moves from public ownership to private ownership over time through the transfer of under-valued resources, governments continue depleting our public resources, leaving most people dependent on obtaining and keeping a job in order to meet their basic needs, even while corporations are directed by shareholders to divest themselves of paid employees as fast as possible.

The need to begin the virtuous cycle with cheap/free resources and labour was met long ago. The public sector is in no position now to be feeding the starter-dough. It may be time for corporations and shareholders to feed it, by paying the true cost of value creation and extrating less profit. Not no profit, just the right amount. If resources are valued appropriately, it's true that many businesses could not be sustainable. They are not sustainable. Maybe we should be making only products that can earn a profit when the true value of resources is included, if we really want a free-market economy to work.  So businesses won't be encouraged to take the lazy way out and make 79 kinds of gum instead of solving real problems.

The economy (aka the Private Sector) cannot grow without being fed by diminishing public resources, or by using those resources more effectively (getting more value for fewer resources), or by creating or bringing in new resources (mining minerals from meteors, alchemy, some quantum magic). 

In the absence of adding resources into the earth system, we have only one finite-sized economy. We can shift the balance between public and private ownership within the single economy, but it will only ever be as big as the potential value of the world’s resources. As long as governments continue to undercut each other and sell resources to private interests at a loss, competition is a joke. Nothing is "valued" at its actual value. Everything is too cheap, including our time, the most precious thing on earth.

The practice of low-cost/no-cost resource provision, including incredibly poor return on human hours, continues. Governments continue dragging us into a destructive cycle by competing with each other. It’s like not letting go of the kite soon enough. The moment has come and gone to catch the wind. We keep running, holding on, and now comes the big JERK back.

Can we take another run at this, work together to catch the wind?

A U.S. Republican argues that lower taxes and cheap resources for corporations allow corporations to include more people in the creation of value (ie. “create jobs”) which spurs the private-sector economy and reduces the government’s responsibility to people. As Sen. Marco Rubio said, when you lower corporate taxes, they create jobs and “you’ve got yourself a tax payer.”

What that means to me is:  let corporations have the public resources cheaply, and they will distribute them to the people as they see fit, by extracting labour that they need, in order to innovate for the human race (or in this case, the U.S.A.). This would make sense to me if corporations didn't extract a high percentage of the value created from previously public resources (trees, water, energy, land, human time, human labour) into very few hands through low pay for citizens who are now dependent on participating in the labour force in order to meet their own needs. U.S. Republicans seem content with the idea of private interests controlling the resources of the country in a type of benevolent dictatorship, arbitrated by the free market (which strikes me as letting the kids vote for candy every supper).

From my seat in Canada, U.S. Democrats, on the other hand, seem to say that government must gain back the value of the cut-rate resources through taxation in order to help with quality of life, since that is the only way the government can raise funds if the government is selling resources below the actual value. Even Democrats do not, however, seem to question the practice of giving resources away. Competition with other governments depletes the world's resources, but seems the only path considered.

In the meantime, employee Stakeholders are not treated as equal, investing humans, but instead as indentured labour that has no choice but to work for the company’s interests for their livelihood (and lucky to have a job). Corporations, by law, focus on only select groups of stakeholders, keeping “costs” down through labour reductions and below-Living Wages in order to move more of the pie (or dough) to small groups of senior leaders and shareholders. Labour is treated as a cost of transforming  value, but the private citizens who provide the labour using their time are actually investors, creating an ongoing benefit that accrues solely to the employer and far exceeds the pay received. Even so, employees are not entitled to any portion of the profits in exchange for their risk and investment in the value creation, beyond meager pay for an hour of labour. This is not a system of cooperation, because it exploits human “resources” in just the same way as it exploits our other resources. We have a system that exploits one group of stakeholders for the benefit of another and calls it economic growth by relegating those stakeholders to the category of "cost." We have a system that equates human labour with machine labour.  

Governments must regulate and administer the inputs and outputs from businesses, but they are not the ones who will grow the private-sector economy. The only real way the private sector economy can grow is if the private sector innovates in ways that increase our natural resources, reduce our dependence on them, or do more with less. They need to create value without using as much stuff. Period. Any other "growth" is just moving resources to the U.S. sub-economy at the expense of other countries, or moving their value from public to private hands. The resources of our planet are currently finite - nothing’s coming in, nothing’s going out. So growing the economy means finding ways of using what we have better so more people can participate in high-quality lives. Anything else is just a fancy shuffle.

Government is responsible for the quality of life of its citizens. Governments expect citizens to provide for themselves but have not provided people with adequate return on investments from the trade of our natural resources. For the private-sector economy to thrive, it currently feeds off the public's teat through low wages and taxes, instead of mining minerals from asteroids or investing in smart cars and innovative distribution. If the economy (aka Private Sector) grows, it does so by shrinking what is commonly owned because that’s easier and less risky than innovating. That’s what we encourage with our current taxation and regulatory approaches.

I believe every human is born entitled to their share of the earth. I think we all deserve a share that allows us to participate in achieving a high quality of life. That's the point of the ever-rising dough, and it's the only way it will work - put in, pay forward, put in, pay forward. For generations to come. We can't have our dough and eat it, too, Marco Rubio. There is only one economy and we all share it.