Ever since human beings began trading with each other, some people have taken advantage of others in order to increase their wealth and power, whether it be in land, stock (animals or shares in companies), personal property, business property, money, or positions of authority over others. Many people believe this is part of the selfish nature of human beings. Yet the percentage of people who have more advantages than others is usually quite small. In most unequal societies this percentage is the smallest while in more egalitarian societies the differences in wealth and income are less. Thus most people do not perpetrate unfairness but rather are more likely to suffer from the greed of others.
Primarily through European culture capitalism has been developing for the past five centuries. The system of capitalism has been gaining control over people by subtly monopolizing land, technology, money, and information while using the rhetoric of free markets as propaganda. Natural resources were cornered by private ownership of land, national territories, and their colonies. Capitalists then used the wealth produced from this exploitation to gain control over new technology. Governments coined money and credit notes (paper money and checks) which were used to make more money for individuals and corporations by manipulating markets and trading with people in poor countries and devaluing their currencies. Printing and other media were used to promote the myths of capitalism and free trade. Capitalists make more money for the wealthy by exploiting the production of workers. To make higher profits many business owners prefer to hire workers for low wages and so do not want government helping the poor. They oppose regulation of their businesses that protects the environment or benefits workers.
Since the 15th century Europeans have conquered countries to gain gold and silver and natural resources and to exploit the cheap labor of the conquered people, enslaving millions. From 1503 to 1660 about 185,000 kilograms of gold and 16 million kilograms of silver were transported from Latin America to Europe. Yet Europeans rarely paid native Americans for this ore. If these stolen riches were considered loans at 10% interest compounded, they would now amount to the weight of the Earth in gold and silver.
In the 18th and 19th centuries the industrial revolution and mercantilism were used to control the means of production, pay low wages or the mere upkeep of slaves in order to accumulate more wealth which even included slaves who were considered property. Adam Smith in An Inquiry Into the Nature and Causes of the Wealth of Nations wrote that the interest of dealers in trade or manufacturing is “always in some respect different from, and even opposite to, that of the public.” He also wrote about “men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”1 One voice for sanity in the late 19th century was Andrew Carnegie who in his article “The Gospel of Wealth” in 1889 wrote that one has an obligation to live modestly and use one’s wealth to benefit humanity.
For five centuries capitalists have been using mercantilist trade policies, financial markets, interest collected from debts, and military power to exploit most of the world. Poor people who tried to revolt from this system, which ignored their needs, were usually crushed by the military or economic power of the first world, which consists mostly of western Europeans and Americans whose ancestors came from Europe. Laws in colonies and developing nations imposed a class system favoring the wealthy that enabled the profits of the economies to be shifted into the hands of the capitalists. Since 1990 the nations of the former Soviet Union and its former satellite countries have become capitalist also along with that trend in China and Vietnam.
In the 21st century the wealth accumulated by the rich has multiplied as billionaires now have more wealth than many poor nations. In the world the number of millionaires and billionaires more than doubled between 2000 and 2012 when there were 29 million millionaires and 1,226 billionaires. In 2015 Forbes reported there were 1,826 billionaires with a total wealth of more than $7 trillion, up from $5.4 trillion in 2013. India has the fastest growth in millionaires and the most people in poverty.
As of 2005 the 60 poorest nations had paid $550 billion in principal and interest in the previous three decades on loans of $540 billion, but they still owed $523 billion. Of the 39 poorest countries needing debt relief 33 are in Sub-Saharan Africa. About one-fifth of the money borrowed was spent on weapons. The World Bank reported that at the end of 2010 the developing nations owed $4 trillion. That year the United States had a gross external debt of $14.3 trillion to people and institutions in other countries, and the European Union owed $13.7 trillion. These figures expose how much these powerful nations are under the influence of the capitalists.
This economic power is being used to manipulate politicians and governments in order to create even more wealth for the capitalist class. This concentrated wealth controls mass media, governments, transportation systems, and gigantic transnational corporations that dominate the world economy while devising ways to pay low or no taxes that could take care of the human needs of the unemployed and low-wage workers fostered by the capitalist system. During this process of unrestrained greed in quest of greater profits the labor and resources of poor people and poor nations have been exploited; the natural environment is being polluted; species are becoming extinct; and the continued short-sighted use of fossil fuels to drive their machines is causing the global climate to heat up so much that human civilization is in danger of suffering increasingly massive disasters, droughts, famines, epidemics, wildfires, and wars that multiply misery and could kill off a substantial portion of the human race in coming decades. As a last resort military power is used to try to destroy any nation or people who attempt to develop a more humane system of sharing wealth in order to meet human needs.
Thus capitalists have been exploiting human labor and natural resources while ruining the natural habitat. People are led to believe that they have freedom and just laws while they are conditioned by propaganda and advertising to consume more and more material goods. The result is that more people have become slaves to low wages. Yet even now when so much wealth has been created by human labor and production, a large percentage of humans still live in abject poverty without clean water or adequate employment that can help them earn their way out of poverty. Even more people do not have sufficient education or health care. Yet ironically if these people were given the opportunity to have the resources they need, they would have the funds to spend and help the world economy prosper even more. However, the lifestyles in wealthy nations are using up natural resources and increasing the pollution that is threatening to doom so many people. As developing nations adopt the decadent ways of the rich countries, the Earth will be polluted even more. Thus the wealthy and those becoming more prosperous need to learn how to live more in harmony with Nature so that human life will become sustainable in the future.
Under the influence of capitalists governments have neglected to plan rationally to meet human needs, protect the environment, and provide for the future. Even now that it is known that solar energy and windmills can economically provide needed energy, governments are still refusing to tax carbon emissions from fossil fuels in order to prevent worse disasters from global warming. Capitalism has proven itself to be a self-destructive system that fosters international conflicts and devastating wars that humanity cannot afford and should not tolerate. As competition and greed cause overproduction and economic downturns that result in added unemployment and recessions or depressions, more people are coming to realize that capitalism is essentially an unjust and unsustainable system that uses persons as if they were objects in order to increase profits for the wealthy few. People are forced to compete with each other in order to survive, and most of the rewards from the work done by most in obedience to bosses and others is taken by the capitalist class which does little real work. Capitalism, like a cancer, aims at growing uncontrollably, and those who reap its benefits care little for those who suffer from the resulting misery. In today’s capitalistic society a few people are allowed to accumulate much more wealth, some of which is needed to help support the people who are left poor.
Humanity needs to correct the wrongs of capitalism by using wisdom and compassion to find better ways of meeting human needs and protecting the Earth’s bio-systems in order to create a harmonious life for all. Human beings should be treated with dignity as ends in themselves, not as a means for helping some people to achieve more self-gratification. Markets for consumer goods can be free for efficiency and quality control, but excessive profits can be taxed to provide needed governmental regulations to prevent abuses and to help provide for the human needs of those who are otherwise its neglected victims. Compassion for the good of all can moderate the excesses of capitalism by valuing all people and by taking care of them because we are all part of the human family. By reducing the conflicts promoted by excessive capitalism people will be able to live in peace and justice. Ending poverty by helping the poor fulfill their basic needs will give them money to spend and a better chance of contributing to society to help the overall economy. Then with fewer people in poverty less money has to be transferred from the wealthy.
Mahatma Gandhi believed that nonviolence needs to be the first law of society. He suggested that more equal distribution of wealth should be the second law because these two principles will end poverty, wars, revolutions, and bloodshed.
In the United States the incomes of the top one percent have increased from 10.8% of the total in 1982 to 22.5% in 2012. That year the incomes of the top one percent increased 20% while the incomes of the other 99% increased only 1%. The top ten percent in 2012 took in 48% of all personal income, and this increased to 50.5 % in 2015. These incomes by the top one percent and ten percent in 2012 broke the previous records set in 1927 and 1932 respectively. Supreme Court Justice Louis Brandeis in 1941 said, “We must make our choice. We may have democracy, or we may have great wealth concentrated in the hands of a few; but we can’t have both.”
The disparity between assets (total wealth) is much larger than with incomes. According to the 2014 World Wealth Report by the Credit Suisse Institute the top one percent in the world owns 48% of all assets, and the top ten percent owns 87% of the total wealth which has reached $263 trillion. North America with 34.7% and Europe with 32.4% together hold more than two-thirds of the world’s assets. The total wealth of Africa is about $2.8 trillion, and India has $3.6 trillion; together they have about 2.4% of the world’s wealth for more than a quarter of the world’s people. Latin America has 3.5% of all assets. China has 8.4% of global wealth and has the largest middle class by far with the top half of the people holding most of the assets while its top ten percent holds much less than North America’s, Europe’s, and the Asia-Pacific’s top tenth. Since the year 2000 India has increased its total wealth by about 300%, and Latin America, Africa, and China have all made substantial gains of more than 245% while the gains in the rest of the world were less than 100%. The report estimates that global wealth will increase 40% by 2019, reaching $369 trillion. If the recent trend continues, most of that increase will be captured by the top earners. Two-thirds of all adults in the world have assets worth less than $10,000 and account for only 3% of global wealth. The 2016 the World Wealth Report stated that the bottom half of the adult population owned less than 1% of the total wealth, and the share of the top ten percent increased to 89%.
In the 18th century the economist Adam Smith analyzed personal income as coming from wages, profit, and rent. Profit-seeking invests wealth to increase income while the concept of “rent-seeking” has been used in the last forty years to describe the use of influence on social and political institutions to steal wealth from others without creating new wealth. Joseph E. Stiglitz in The Price of Inequality described the forms of rent seeking as
hidden and open transfers and subsidies from government,
laws that make the marketplace less competitive,
lax enforcement of existing competition laws,
and statutes that allow corporations to take advantage
of others or to pass costs on to the rest of society.2
Although markets operate by supply and demand, they can be affected by other factors such as monopolies, subsidies, government regulation, or lack of it which can result in dangers and damage to society. Policies of corporations and businesses can affect people as badly or worse than those of governments. In 1955 sales by the Fortune 500 corporations accounted for one-third of the US gross domestic product (GDP), but by 2004 the top 500 corporations had doubled their share of the American economy to two-thirds of GDP. More than a thousand new billionaires have emerged since 2001 while the real earnings of one hundred million workers in America were less in 2007 than they were when Ronald Reagan was elected in 1980. Then in 2008 workers were hit by the Great Recession while financiers on Wall Street got bailed out.
According to a survey by the Pew Research Center, in 2009 the average Black (African-American) household had assets worth $5,677, and the average Hispanic (Latin-American) family had $6,325; but the typical White (Euro-American) household had assets valued at $113,149.
The distribution of income is affected by personal income taxes. Under Republican President Dwight Eisenhower in the 1950s the maximum US income tax rate was 91%. In 1964 President Lyndon Johnson reduced this tax rate to 77% and to 70% the next year, but in 1968 he raised it back to 77% to help pay for the Vietnam War. President Richard Nixon reduced the maximum income tax rate to 70% by 1971. This marginal rate remained above or at 70% until President Ronald Reagan got it reduced to 50% in 1982, to 38.5% in 1987, and to only 28% in 1988. The top rate was then increased under President George H. W. Bush to 31% in 1991 and by President Bill Clinton to 39.6% in 1993, creating a temporary surplus in the federal budget; but under George W. Bush it went down again from 39.6% to 35% in 2003. In a compromise President Barack Obama approved an extension of this tax rate in 2011 for two more years, and then the 39.6% rate was reinstated in 2013. Under Reagan and the Bushes the reduced revenues combined with high military spending caused large deficits and greatly multiplied the national debt which was less than $1 trillion when Reagan was elected in 1980. The capital gains tax rate was reduced to 15% on income that is not even earned by work. In the United States 10% of the people receive more than 90% of all capital gains while 50% of all capital gains go to only the top one-thousandth of one percent (about 3,200 people).
In 1912 the Italian statistician Corrado Gini created a coefficient to describe the inequality of income in a society which runs from 0 where all are equal to 100 where one person has all the income. In the past quarter of a century the Gini coefficient for people in the United States has risen from 35 to 45, in China from 30 to over 40, in Russia from the mid 20s to the low 40s, and in the United Kingdom it went from 30 to 36. In the past 25 years the income of the top one percent in the United States has doubled from 12% of all US income to 24%. Larry M. Bartels in his 2008 book Unequal Democracy showed that in the previous six decades the real income of American middle-class families grew twice as fast under Democrat administrations as it did under Republicans, and the income of working-poor families increased six times as fast under Democrats. The average income of chief executive officers (CEOs) was twenty times their workers in 1965, but in 2015 this ratio was 303 to one.
The tremendous disparities in inherited wealth can be moderated by progressive estate taxes which were first imposed in the United States in 1916. Since 2001 the estate tax has been drastically reduced every year from a maximum tax of 55% on wealth after $675,000 was excluded until it was down to 45% on wealth over $3.5 million in 2009. This was repealed, and there was no estate tax at all on Americans who died in 2010. A new estate tax in 2011 excluded $5 million with a maximum rate of only 35% on assets beyond that. As a result in 2012 revenues from the estate tax in the US were only $8.5 billion out of the $1.2 trillion passed down to heirs. The United States in 2016 had 540 billionaires, and the wealth of the richest 400 individuals was about equal to the entire wealth of the bottom half of the population. America is supposed to be the land of opportunity; but when great fortunes are inherited, a permanent upper class has been established. At the same time the chances of those born into poor families rising out of poverty during their lifetime have diminished especially for Afro-Americans and Latinos. The median household net worth of Afro-Americans fell from $19,200 in 2007 to $11,000 in 2013, and Latinos dropped from $23,600 to $13,700 while Euro-Americans went from $192,500 to $141,900.
Sales tax is considered regressive because everyone pays the same rates regardless of their ability to pay. The most regressive tax is the US tax for Social Security. In 2014 the Social Security payroll tax was only on income up to $117,000 which resulted in those making the 14% of wages which were over that not paying any more from their greater incomes than those earning $117,000. Thus all rich individuals earning up to billions of dollars pay only $7,254 per year in Social Security tax.
Nations like the United States with large financial sectors have more economic inequities because capitalists use their wealth to create even more riches while those in the financial sector charge high fees to manage money and speculate by trading stocks and bonds without even paying any sales tax on these speculative deals. The Telecommunications Act of 1996 gave away the public’s digital television spectrum that was worth an estimated $70 billion to broadcasting companies.
After the Glass-Steagall Banking Act of 1933 was repealed in 1999, bankers were allowed to gamble with deposits guaranteed by the government. Then they either “win” much money if they are successful or the “losses” are bailed out by taxpayers to prevent the banks that are too big from being allowed to fail. This deregulation was advocated by President Clinton’s Secretary of the Treasury Robert Rubin. Then in October 2008 Rubin as chairman of Citigroup met secretly with President Bush’s Treasury Secretary Henry Paulson (who had been Goldman Sachs chairman) and Federal Reserve Chairman Ben Bernanke. As a result the United States Government purchased $45 billion in Citigroup preferred stock and guaranteed $365 billion of their threatened debt. The gigantic insurance company American International Group (AIG) received the largest bailout so that it could pay its $17.2 billion debt to Goldman Sachs and another $45 billion from $441 billion in collateralized debt obligations (CDOs) they insured. The US Federal Reserve Bank bailed out AIG with $85 billion in credit.
During the recession from 2008 to 2010 employees of culpable companies received $300 billion in bonuses. During those three years General Electric, Verizon, Honeywell, and Boeing took in $171 billion in profits without paying any federal income tax while receiving $2.5 billion in government benefits.
In 2010 the Dodd-Frank Wall Street Reform became law in 2,300 pages, but according to reporter Matt Taibbi in its first two years “the banks have just about succeeded in strangling Dodd-Frank.”3 Several banks, which were “too big to fail” and “too big to jail,” now are even larger, and the financiers keep relentlessly lobbying for amendments, using loopholes put in the huge bill, and finding ways to avoid or get around regulations.
In 2010 those in the FIRE sector (finance, insurance, and real estate) paid more than $475 million to lobbyists and nearly $480 million the next year. In 2012 the four biggest banks (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) held 36.6% of all US deposits, and in 2016 this reached 45%. Between 1974 and 2009 US manufacturing declined from 22% of GDP (gross domestic product) to 12% while the FIRE sector rose from 15% to 21%. In 2009 Washington had 11,195 registered corporate lobbyists who spent on their efforts six times as much as all the other noncorporate ones including those working for environmental, consumer, and labor causes. Corporate lobbyists spent about $100 million in 1975, but this annual expenditure had increased to $3.5 billion by 2010. That year the US Supreme Court opened the floodgates to corruption with its Citizens United decision by equating political bribes with free speech. In the 1970s about 3% of exiting Congressmen became lobbyists; but recently more than 50% of retiring senators and at least 40% of House members have become lobbyists after leaving office. Billionaires and others donate millions every year to finance the propaganda that comes out of right-wing “think-tanks” such as the American Enterprise Institute, American Legislative Exchange Council (ALEC), Cato Institute, Council on Foreign Relations, Heritage Foundation, and several “family” foundations.
The wealth and income of the rich provide less stimulation for economic activity and jobs because they save more than the poor and middle-class who spend most of their money. The theory of the 1920s which suggested that increased income for the wealthy will somehow “trickle down” to the middle class and poor has been disproven by the Great Depression of the 1930s and the years leading up to the Great Recession that began in 2008. Government limiting spending by imposing austerity was tried by President Herbert Hoover and caused the Great Depression. Yet conservatives still often try to limit government spending when it is most needed to help the poor and middle class to stimulate a recovery.
Between 2004 and 2008 the price of oil increased from $40 a barrel to $147. As a result the price of rice, wheat, and other commodities doubled and tripled, causing food riots in 27 nations. The recession that started in 2008 caused the loss of 27 million jobs in the world. The remedy for unemployment proposed by John Maynard Keynes of stimulating the economy by increasing public or private spending has been validated by experience especially when it is directed toward those who will more likely spend it. However, bailing out the banks and big financial institutions, as the United States did with $700 billion in 2008, did little to improve unemployment or help millions of homeowners who were the victims of the bank frauds during the housing bubble.
President Obama’s stimulus bill passed after that did help the recovery somewhat but was not enough. Less than $200 billion of it was for jobs over three years, and only $26 billion was allocated to creating jobs in 2010. The Chinese launched a stimulus in 2008 that was nearly 20% of China’s GDP compared to America’s stimulus of 4% of GDP. Of the $787 billion in the US stimulus bill about $300 billion was tax cuts, which like the previous tax cuts of G. W. Bush stimulated few jobs. In the first decade of the 21st century the number of jobs in the US economy did not increase for the first time since the Great Depression; yet productivity in that decade went up more than in any decade since the 1960s.
The savings-and-loan scandal was exposed in 1986. Over the next decade more than 1,600 banks needed assistance from the Federal Deposit Insurance Corporation (FDIC) as failed institutions lost about $405 billion. The banks were bailed out with $160 billion of which American taxpayers contributed around $130 billion. About 1,600 people were given prison sentences. Yet the crimes of fraud and malfeasance that caused the Great Recession of 2008 were much greater, and only a very few cases of inside trading have resulted in such sentences. So far not one banker has gone to prison for fraud. Banks and credit-rating institutions found guilty have usually paid small fines after making huge profits or receiving gigantic loans to keep them afloat. In 2011 the New York Times reported that the Securities and Exchange Commission (SEC) found that 19 companies committed fraud again after promising not to do so.
Banks were also bailed out in Mexico in 1995, in Indonesia, Thailand, and South Korea in 1997-98, in Russia in 1998, and in Argentina in 2000. The International Monetary Fund (IMF) made these crises worse by demanding severe stabilizing programs while promoting the elimination of capital controls, the very policy which had caused the crises. By 2007 the large debtors Brazil, Argentina, and Indonesia ended their loan agreements with the IMF by paying them off early so that they would be free of the IMF’s harmful economic control. In Mexico the average wage of a blue-collar worker in 1981 had become worth half as much by 2000, and the minimum wage was worth only one-fifth of its 1976 value. Giving money to the financial sector during hard times tends to increase the incomes of the wealthy rather than those who need it most. Capitalists like to keep inflation low so that their wealth does not lose value; but they are not bothered by high unemployment because it makes desperate people more likely to work for low wages, increasing capitalists’ profits.
Businesses in the financial sector hire many lobbyists and contribute large amounts to political campaigns so that they can influence legislators to pass laws which help their financial interests by lowering their taxes, reducing regulations, and giving them subsidies and advantages in predatory lending and bankruptcy cases. Charging high interest rates for loans has been condemned by religions as usury. In the United States access to colleges and universities has been restricted by ever-increasing tuition fees which have created so much student debt that the total passed one trillion dollars in 2011 and reached 1.1 trillion in 2014, making it much larger than all credit-card debt which went down to $855 billion. By 2016 student debt was more than $1.4 trillion owed by 44.2 million borrowers. The average debt of the class of 2016 was $37,172.
Billionaire Warren Buffet has admitted that the wealthy are winning the “class war” in America. With decreased spending on social programs for the poor in the past thirty years, the chance of those born into poor families rising out of poverty or becoming wealthy has greatly diminished. Between 2000 and 2009 the number of American children in poverty increased by a third. The United States needs a sales tax on stock deals but has not yet passed one. New York State has a transfer tax on the sale of stocks ranging from one cent to five cents per share which collects about $15 billion per year, but since 1981 Wall Street lobbyists have persuaded New York’s state government to rebate these revenues back to brokerage firms.
Less than 8% of American workers in the private sector are currently in unions. Since 1980 the median wage of American workers has barely kept up with inflation while those in the financial sector increased their wealth as stock prices went up more than tenfold. Former Labor Secretary Robert Reich has explained how the middle class tried to continue consuming by moving women into the work force, working longer hours or more than one job, using up savings, and borrowing money. Between 2002 and 2007 Americans borrowed $2.3 trillion from their houses, and the savings rate fell from 7% in the late 1980s to 2.6% in 2008.
Inequality has increased in the United States, and social mobility in America has fallen below the greater opportunity in the nations of Europe. A 2011 study by the Bertelsmann Foundation of social justice measured by poverty prevention, access to education, labor market inclusion, social cohesion and non-discrimination, health, and intergenerational justice found that of the 31 advanced nations belonging to the Organisation for Economic Cooperation and Development (OECD) the United States ranked 27th ahead of Greece, Chile, Mexico, and Turkey. The latter three countries are the only nations that have lower tax revenues per capita than the United States among the OECD. Since the Bush tax cuts of 2001, the four hundred richest Americans have been paying an average effective tax rate of only 17%, which is about half of what they paid in the early 1990s. Some of the biggest corporations such as General Electric (GE) pay no federal income tax at all because they use clever bookkeeping to mask their profits. In 2012 the Tax Justice Center reported that a study estimated that the richest people on Earth have at least $21 trillion in foreign tax havens and maybe as much as $32 trillion in financial institutions abroad.
The housing bubble was promoted by unfunded credit derivatives which were sold to unsuspecting speculators as credit default swaps (CDSs) and total return swaps (TRSs) while funded credit derivatives were sold as credit linked notes (CLNs) and collateralized debt obligations (CDOs). These were intended to be insurance against bankruptcy; but unlike other kinds of insurance such as for one’s life, home, or car in which disasters tend to be randomly spread out allowing other investors to pay the costs, during a financial melt-down many of these come at the same time. Thus when the housing bubble burst, so did the derivatives, leaving home borrowers stranded as the government bailed out the bankers to keep the financial system afloat. Under real free-market capitalism the speculators should have lost their gambling investments, and generally speculators are more financially capable of withstanding that. Instead the corrupt gambling system was sustained by the politicians with the taxpayers’ resources while millions of Americans found their homes being foreclosed or going “underwater” with debt greater than equity. The debt of the American family has risen to 130% of their average annual income.
Warren Buffet has called derivatives “financial weapons of mass destruction.” In October 2008 the CDSs were estimated to be $35 trillion out of the notional $65 trillion in the unregulated derivatives market. Why were the big banks and the gigantic insurance company AIG bailed out by taxpayers with many billions while the middle-class homeowners were left holding the bag of debt? Currently the trading of derivatives each day has a volume of about forty times all of the daily trades in the world’s stock markets combined, and the value of the derivatives is now estimated to be thirteen times the value of all stocks and bonds on Earth. Derivatives are 82% based on interest rates, nearly 11% on foreign exchange deals, and 6% on credit derivatives; but less than one percent are based on the value of actual commodities.
Financiers have argued that high-speed computer-aided trading is good for liquidity; but Joseph Stiglitz considers this “fake liquidity,” and it has been described as “gambling.” The daily trading of capital now exceeds the total of all reserves in the central banks of all the advanced nations. From the year 2000 trading in derivatives increased an average of 65% per year until the crash of 2008 as US banks made about $35 billion per year in profits. Campaign contributions and lobbying have prevented the regulation of the banks on these deals which are so complicated that only a few experts understand them.
By 2012 the Bank of International Settlements estimated that the value of derivatives has doubled from $600 trillion to $1,200 trillion. This $1.2 quadrillion is about twenty times the size of the world economy, the annual GDP of which is now between $50 trillion and $60 trillion. JPMorgan Chase has assets over $1.8 trillion with more than $69 trillion ventured in derivatives; Bank of America with $1.4 trillion in assets has $44 trillion exposed in derivatives; and Goldman Sachs with only $114 billion in assets has more than $41 trillion in derivatives. In April 2016 trading in foreign exchange markets averaged $5.1 trillion per day while trading in over-the-counter derivatives markets averaged $2.7 trillion.
What are called “manufactured financial products” are now estimated to be 23 times the value of the world’s entire economy (GDP). High-speed trading by computers accounts for more than 60% of all trades in the United States and in the United Kingdom. The financial sector of the American economy was about 4% in 1980, but it has risen to more than 8%. A study by Brookings found that new business formation in the United States fell by half between 1980 and 2014.
In the years 1949-53 about 80% of the average income growth in the United States went to the bottom 90% of earners and only 20% to the top 10%. Every five-year period from then until 1979 had more growth for the bottom 90% than for the top one in ten. Then a sudden shift occurred. In the years 1982-90 only 20% of the income growth went to the bottom 90%, but in the decade 1991-2000 about 23% went to the 90% of earners. Then in the 2001-07 period barely 1% of income growth went to the bottom 90% while 99% went to the top tenth. During the recession “recovery” 2009-12 the income of the bottom 90% of earners went down by about 7% while the income growth of the richest 10% increased by about 116%. In the mid-1970s one out of four employees in the private sector were in unions, but this has decreased to only 7% in 2014.
During the housing bubble from the beginning of 2002 to the end of 2006 annual US corporate profits after taxes nearly tripled from about $500 billion to around $1.4 trillion. During the financial meltdown they fell to $671 billion at the end of 2008; but with the Troubled Asset Relief Program (TARP) bailout they quickly rebounded and increased to $1.9 trillion by the end of 2013. During the years 2007-2012 there were 15.7 million foreclosures completed in the United States and more than 18.7 million foreclosure starts. Foreclosures in 2016 averaged nearly 100,000 per month.
Many of the largest corporations use foreign-based tax shelters to reduce their tax obligations to the United States Treasury. For example, Google channels its billions in profits to Google Ireland Ltd. and bases them in Bermuda. Corporate profits have never been so high in the United States as they are now, but their share of taxes providing revenue for the government is at an all-time low. American corporations paid taxes that were 6.1% of GDP in 1952, but this had fallen to 2.1% in 2000 and was only 1.2% in 2011. The Government Accountability Office (GAO) has reported that companies owned by foreigners pay about half as much tax on their sales in the United States as American companies.
In studying corporate crime Ralph Nader reported in 2012 that annually about 60,000 Americans die from diseases and trauma from the workplace, 70,000 from air pollution, 100,000 from negligence in hospitals plus 100,000 from infections suffered in hospitals, and about 45,000 people die because they cannot afford health insurance or to see a doctor. Drug companies promoting antibiotics leads to bacterial resistance and evolved super-germs, causing at least 23,000 American deaths each year.
In 1949 General Motors, Phillips Petroleum, Standard Oil of California, and Firestone Tire were convicted of conspiring to get rid of one hundred electric trolley systems in the United States so that they would be replaced by automobiles and buses. To rebuild those public transit systems today would cost about $300 billion, but General Motors paid a fine of only $5,000. Slack enforcement of the False Claims Act of 1986 has recovered more than $30 billion from corporate criminals. In 1995 white-color fraud was estimated to cost Americans $200 billion a year. Since then health-care billing fraud alone has surpassed that. Harvard professor Malcolm Sparrow has calculated that computer fraud in health care is about 1% of corporate crime, but only 0.1% is exposed. Law enforcement has found that for whatever is spent on enforcing white-collar crime at least seventeen times as much is returned in fines.
In the past thirty years international trade has increased from $3 trillion a year to $30 trillion annually, and it continues to grow at a rate 50% higher than global production. The US and its imperial allies have used the International Monetary Fund (IMF), the World Bank, the General Agreement on Trades and Tariffs (GATT), the North American Free Trade Agreement (NAFTA), the World Trade Organization (WTO), and the Multilateral Agreement on Investments (MAI) to exploit and control international trade by devaluing the currencies of other nations. In the World Trade Organization (WTO) every member nation has one vote, but important decisions are usually decided in the “Green Room” negotiations by the United States, the European Union, Canada, and Japan. Developing nations cannot participate in discussions unless they are invited by the big four. If one opposes the major powers, it is usually threatened to comply.
At the end of World War II the United States was the largest creditor nation in the world, and they bullied the British and others into accepting new international economic policies after meetings at Bretton Woods in New Hampshire. The World Bank and IMF were supposed to help poor countries improve their economies. However, voting by the wealthy nations decides their policies, and a decision requires an 85% majority. Since voting is counted by how much money each nation contributes to these funds and because the United States has more than 15% of the stock in both institutions, the US has veto power over every decision. The managing director of the IMF is always a European with a North American deputy, and the president of the World Bank is always from the United States. Both institutions operate from Washington DC.
The United States national debt reached $20 trillion in February 2017. At the end of 2016 Americans’ personal debts were over $18 trillion, mortgages over $13.3 trillion, student debt over $1.4 trillion, and credit card debt over $985 billion. Wealthy people collect the interest on these debts. Including state and local governments the total debt of the American governments is $23 trillion. The US benefits from the dollar being the international currency and does not suffer external pressure for austerity programs, inflation control, and liberalization. Poor nations have to pay about 18% interest on their loans, but the US borrows money at 3% interest. The United Nations Security Council controls the World Bank and the IMF. Thus the world economy as well as collective security and wars are still controlled by the five nations that won World War II. Why is the United States the richest nation in the world? Maybe it is because it owes more money to other countries than the next two highest debtors (United Kingdom and Germany) combined.
The World Bank and the IMF pressure poor countries to pay back their loans by forcing them to spend more on interest payments than they do on primary education. For example, Sierra Leone has spent 6.7 times more servicing its debt and at that time had only 24% of their children in school. Although the purpose of the IMF and World Bank is supposed to be to help the economies of poor nations, Stiglitz found that the opposite occurred. Rather their policies helped the private banks of the rich and financial speculators while forcing poor countries into debt and recession by destabilizing their exchange rates and worsening their balance of payments, causing the loss of jobs and incomes in the tens of millions. The IMF forced poor nations to control inflation and remove barriers to trade and the flow of capital by liberalizing their banks, reducing government spending on everything except repaying debts, and privatizing their assets by selling them to foreign investors.
Between 1980 and 1996 countries in Sub-Saharan Africa paid twice their total debt in interest and ended up owing three times as much in 1996 as they did in 1980. This usury has caused a massive transfer of natural resources from poor countries to the rich.
In the 1980s Thailand, South Korea, the Philippines, and Indonesia disobeyed the IMF and World Bank by investing in education and promoting their industries, and consequently they had more economic growth and lifted people more out of poverty than other poor countries who took loans and followed IMF advice.
In 1997 financial speculators borrowed the vulnerable Thai baht currency while it was valuable, exchanged it for dollars so suddenly that the baht collapsed. They paid off the loan with their extra dollars to make a large profit. Then the IMF loaned billions of dollars to Thailand, but most of this was sucked out of the country by Western banks. The IMF pushed the unstable poor economies into recession by demanding they raise interest rates, bankrupting many of their indebted companies. Foreign companies then came in and bought them at low prices. At the same time the IMF forced the poor nations to balance their budgets by cutting imports.
In 1998 the financial problems caused by the IMF upheaval spread to Russia, threatening the world economy and causing what Stiglitz called “the greatest economic crisis since the Great Depression.” Argentina had similar problems. Yet the nations ignoring the IMF advice, such as Malaysia, China, and Poland, prospered. The World Bank followed the failing policies of the IMF, and Stiglitz resigned. Despite its lofty intention to relieve the plight of poor nations, the World Bank caused more poverty, environmental damage, and debt. One of the ways the World Bank did so was by loaning money to build large hydro-electric dams that forced hundreds of thousands of people to lose their homes, destroyed natural resources, and burdened the countries with debt. Then IMF policies locked them into destitution as they reduced government spending, sold public assets, privatized food reserves, and laid off workers. Reduced public spending on health care and education caused hundreds of thousands of deaths. In 2001 no less than 19 of the 26 countries eligible for relief from the heavily indebted poor countries (HIPC) initiative were spending more than 10% of their revenue making payments on their debts.
The world economy has been dominated by the rich G8 nations which includes the United States, Canada, Japan, Russia, United Kingdom, France, Germany, and Italy. The G8 nations had between 43% and 55% of the votes in the IMF, the International Bank for Reconstruction and Development, the International Finance Corporation, the International Development Association, and the Multilateral Investment Guarantee Agency.
The updated mercantilism long used by the British, French, Dutch, and other European powers has exploited the natural resources and cheap labor of colonies or third-world nations and sold them expensive products in exchange. The low wages were often at least ten times less. These drastic inequalities exist because of unequal financial, economic, and military power. Then the imperial powers use their extra wealth to increase their financial and military power, wasting most of the wealth they have stolen from the poor. More than half the labor of those in the developed nations produces little of real value. The United Nations Children's Fund (UNICEF) reported that in the richest 41 nations at least 76.5 million children live in poverty and that between 2008 and 2014 more than 2.6 million children have fallen into poverty.
For fair trade the wages for productive work should be equalized in order to remove the control of imperial monopolies. Developing nations need adequate wages and commodity prices so they can make fair profits, but local farmers are often driven out of business because developed nations export subsidized food. Low-paid workers in undeveloped countries do not have enough income to develop prosperous local markets. Loans from the International Monetary Fund (IMF) and World Bank force undeveloped nations to export cheap goods abroad while having to pay high prices for other imports, causing an increasing spiral of debt. In the 1970s the Organisation for Economic Co-operation and Development (OECD) nations adjusted to higher petroleum prices by expanding their money supply, raising prices on American exports to Third World countries. As the elite in developing nations skimmed off wealth and put it in foreign banks, about half the borrowed funds of nations like Argentina and Mexico moved to other countries.
Rich nations give their farmers subsidies worth more than $350 billion a year which is more than six times as much as they give to poor countries in aid. Thus poor nations cannot prevent imported cheap goods from ruining their markets because the WTO and the IMF do not let them use trade barriers or support their own farmers with subsidies. After the large demonstrations in Seattle in December 1999 the WTO met again in Qatar in 2002, and the rich nations promised to reduce their subsidies; but instead they increased them by $180 billion over the next ten years. In 2014 Vandana Shiva complained that the WTO has a double standard on farm subsidies. The WTO considers that India’s $12 billion subsidies to its 500 million farmers distort trade but that United States subsidies which give $120 billion to its two million farmers do not. The average Indian farmer receives only $24 compared to a $60,000 subsidy to the average American farmer.
Rich nations impose tariffs four times higher on the imports from poor countries as they do on those from wealthy nations. Without these trade barriers the poor nations could export $700 billion worth of goods per year. Rich nations protect many of their products as “intellectual property” with monopolistic patents and copyrights in media, information technology, pharmaceuticals, and genetic engineering, especially of seeds; 97% of patents are owned by corporations based in rich nations. Intellectual property rules cost poor countries about $40 billion a year in license fees, and half that goes to companies in the United States. Only 29 of the 500 largest corporations in the world are in developing countries.
Nearly every wealthy nation that has successfully industrialized did so by protecting its own exports. Then after achieving dominant economic power they demand free-trade policies for all nations. A study of 116 nations showed that national income per person grew by 3.1% from 1960 to 1980 but only by 1.4% between 1980 and 2000 because of rules imposed by the IMF on poor countries in the later period.
Susan George in her book, The Debt Boomerang: How Developing World Debt Harms Us All, noted that $418 billion of borrowed funds ended up back in northern countries between 1982 and 1990. More than 80% of foreign aid from the United States returns quickly through exports as part of the deal. Thus developing world debt charged more than 20% interest between 1973 and 1999 increased from less than $100 billion to $1.7 trillion. Lester Thurow and other economists have advised that such debts were so unjustly incurred and are so unpayable that they should be forgiven. In the 1990s the World Bank and the IMF forced the least-developed debtor nations to liberalize their trade policies, causing sharp increases in their poverty. The developing world now owes more than $4 trillion.
A good economy is efficient, fair, and sustainable. When any one of these is lacking, there are problems. When all three are missing, there is a serious crisis. Free markets in the private sector may seem efficient by natural supply and demand; but without wise government regulations and amelioration, they may be very unfair by allowing wealthy corporations and individuals to exploit the poor and disadvantaged, by neglecting to serve the needs of the entire public, and by failing to be accountable for negative externalities such as environmental pollution and damage to human health. An unfettered market economy may also be unsustainable by causing financial inequities and instability and by failing to provide for the positive externalities that are public goods such as infrastructure, education, health care, and scientific research for the general welfare.
Recent history is showing that both libertarian capitalism and totalitarian communism have serious problems. Capitalism may allow some individuals to acquire great wealth; but many people may remain in poverty while the middle-class has to pay higher prices so that a few can get richer. Also many negative externalities occur, resulting in unfairness and harms. Communism with a totalitarian government tends to restrict opportunities with excessive bureaucracy and fails to allow the freedom of choice which promotes happiness and self-regulating efficiency. European and other nations have been showing the value of intelligently balancing mixed economies which combine open markets and free trade for consumer goods while providing beneficial regulations and public services for necessities such as health care, education, utilities, roads, and law enforcement.
The American economic system needs to be reformed so that it is more democratic and more just. Because of growing economic inequality the great need now is for more sharing of wealth as well as power. Businesses tend to be autocratically controlled by their owners. Yet the gigantic transnational corporations are not even controlled by their shareholders but rather by their boards of directors and chief executives.
Workplace democracy is more beneficial for more people. Worker self-management enables employees to democratically control productive enterprises. Businesses can still be privately owned, but economic democracy is enhanced by gradually increasing the share that employees of the company own. Businesses can still interact in the market with each other and consumers by adjusting prices naturally to supply and demand without government interference except for beneficial regulations to protect the health and environment of the public from negative externalities. Legislation can mandate and promote worker participation and profit-sharing in corporations and large businesses. Small businesses with only a few full-time employees may be exempted from requiring employee voting, but consulting the employees on decisions would still be a good idea. Publicly traded corporations could be required to be controlled democratically by the employees.
The decree by the US Supreme Court that corporations are “persons” and therefore have the same rights as human beings needs to be corrected. Corporations are set up with “fictitious names” and cannot have the same rights as people because they do not have the same responsibilities. Although corporations are obviously run by human individuals, it is the humans who are responsible for any crimes committed, not the corporations which cannot be put in prison, though they may be fined. Giving corporations political rights makes a mockery of democratic elections as powerful financial entities are given an unfair advantage over all but the richest individuals. Fascism is a combination of military and corporate power and has been responsible for massive wars and even genocide.
Democratic governments have the right and the responsibility to regulate corporations in order to protect the general welfare, health, and the environment. When corporations become too powerful and monopolistic in their field of endeavor, they destroy the free market with their overwhelming domination. People who suffer from this have the right to enact antitrust legislation in order to limit the power and influence of large corporations which may have surrendered their ethical responsibilities to society because of their single-minded pursuit of profits with the “bottom-line” mentality. Ralph Nader and others have described extensive corporate crimes that have been increasing in the past forty years. Employees and consumers need to be protected by laws and the role of government in making sure that corporations are held to account. Rarely have the managers of these corporations gone to prison for their many crimes. Things will continue to get worse until they are made responsible and change their behavior. Then everyone will be better off with the single exception that a few people will not be quite as rich.
The United States and nations in the European Union as well as Japan and South Korea have refused to support an intergovernmental working group to negotiate a treaty to prevent violations of human rights by transnational corporations because they believe that corporations should not be bound by international law. Americans declared that countries voting against this resolution would not be obligated to respect it. Instead of protecting human rights the World Trade Organization and international treaties aimed at protecting “free trade” have attempted to give the transnational corporations free reign even to the point of forcing nations to comply by abrogating their own sovereign laws. Three-quarters of those in the Democratic caucus in Congress have written to President Obama in opposition to the proposed Trans-Pacific Partnership (TPP) which was negotiated secretly. The major candidates running for President in 2016 opposed the TPP, and the US withdrew from it in January 2017.
Trade needs to be fair rather than “free” to allow unfair exploitation. Tariffs can be imposed in order to pay for the various costs of transporting products long distances. Also the revenues from fair-trade tariffs can be rebated to poor countries to nourish their starving economies. Hunger and poverty can be eliminated by managing equalized trade that benefits both developing and developed countries. Local farmers by growing more vegetables, fruits, and nuts as well as grains can provide better diets. To develop their own market economies developing nations need to expand their own agriculture and manufacturing. Less long-distance shipping of heavy products helps relieve the climate crisis. Wages need to be increased so that workers have more buying power for local consumption to create mass markets and so that developing countries can trade more with each other regionally. Developing nations can also barter their resources to trade for technology, capital, and access to markets.
Companies, especially large corporations, can become more democratic by sharing power and control with the employees or with the consumers by becoming employee-owned companies or cooperatives. In the United States about 10,000 companies have employee stock-ownership plans, and about 1,500 can be considered employee-owned because employees own a majority of the stock. Some cooperatives include consumers as non-worker owners. Cooperatives are usually non-profit corporations, or they are owned and operated by those who use their services. Worker-owned businesses currently account for about 12% of private employees, and they are growing at the rate of 6% per year. An employee-owned company is not democratic unless the employees have the right to vote in electing directors and to participate in other important decisions.
Economic democracy can reign in the arbitrary power of large corporations and require them to give their employees the right to vote on the corporate policies and major decisions such as selling off assets, purchasing other businesses, which products and methods are working and which are not, moving plants, and what salaries executives and workers are to be paid.
In single-payer health care the government pays for all medical expenses. This system is used by most advanced nations and in the United States for veterans, for the poor in Medicaid, and partially for the elderly in Medicare. Single-payer health care is much more efficient than the private health-insurance system still used in the United States for everyone else. Americans spend nearly twice as much per person on health care as other advanced countries using single-payer; but still many Americans are left without insurance, and they do not live as long as those in single-payer nations. The United States does provide innovation and advances in health care but at much greater cost because of the enormous private profiting which no other advanced nation allows. Statistics show that government investment in research and development is more productive and efficient than private corporations which siphon off large profits.
In programs of social benefit such as education and health care governmental programs that are obligated to take care of everyone equally are more efficient than private efforts which make personal profits while neglecting those who cannot pay or rejecting those who are too expensive or inconvenient to serve. The Affordable Care Act of the Obama Administration is attempting to rectify some of these problems while maintaining the immense profit-making by the private sector in health care. The US is the only advanced nation that allows private profit-making in the medical field. Because of this Americans pay almost twice as much for health care as other advanced nations, and yet millions of Americans still lack adequate care. Using the single-payer system to cover medical care for everyone is much more cost effective because it reduces so many unnecessary administrative expenses in regard to insurance coverage, complicated billing, and higher prices for services and prescription drugs.
Medicare for all without any monthly insurance premiums or co-pays for essential health care services would end the shameful situation in which millions of Americans have trouble getting adequate medical care because they lack insurance or cannot afford to pay doctors. In single-payer Medicare for all the federal government would pay all the medical bills except for such things as cosmetic surgery which are not necessary for good health care. Medicare for all could be financed by a seven-percent tax on all personal income with no cap regardless of how high one’s income is. Individuals would choose their own doctors who would be paid for their services by the Medicare Trust Fund. Everyone would have an electronic card which would contain each person’s complete medical history. At each visit the patient would present one’s card to be updated. As in England and other nations, no one would ever have to worry about payment for essential medical services.
The federal tax on all personal income for Social Security could be ten percent. By removing the cap the tax would become progressive as everyone would pay the same 10% tax regardless of how small or large their personal income is. In order to establish a basic income for all retired persons everyone would receive the same amount of Social Security with the only exceptions being that those who retire at a younger age would receive a little less per month until they reach the age of 65. Once again with higher incomes paying more into Social Security the system would be more secure and could pay out adequate monthly benefits equally to all seniors. Thus all health care and Social Security retirement income would be given to all and would be paid for by a 17% tax on all personal income. In the current system the employer pays an equal amount that is subtracted from the employee’s pay-check, making it appear that the person is paying less than they actually are for these taxes. In this new system with the full amount being deducted from the employee’s income, that tax and the income will seem larger than under the old system. The increase from the old 12.4% tax paid is because Medicare for all would provide health care for everyone, not just for seniors and the disabled. Also there would be no deductibles or co-pays.
Those with low incomes would pay this tax to insure their medical care and retirement years. If they needed additional assistance they could apply for a food subsidy, a housing subsidy, and a third subsidy for other necessary expenses. No one would be denied what they need for their basic living expenses. Low-income apartments would be provided by the government and private businesses at reasonable rents.
I believe that health care, retirement income, and education for all are the best investments our society can make to assure a good future for everyone. Public education would also be free through high school as it is now. Anyone attending a college or a university could apply for a no-interest loan from the federal government to pay for tuition to any public institution of higher learning that accepts them. If necessary they could also apply for the basic living subsidies. These subsidies would also be considered no-interest loans from the government, and they would be paid off in the future if and when the person had extra income beyond the basic deductions that would be subject to the extra income tax. Half of that extra income tax would be credited to reduce their debt. Those individuals who die without having paid off their debt to the federal government would have up to half of their remaining assets given to the government to pay the debt. Then whatever debt was left would be forgiven.
Because of the 17% tax on all personal income for the basic expenses of health care and retirement, the deductions allowed before tax applies on extra income are larger than previously. These would be adjusted for cost of living increases but could begin with a $30,000 deductible per person on annual income with it being $60,000 for a married couple filing together. Additional deductions for dependent children would be $10,000 each. A single person would be taxed for extra income beyond $30,000 a year, but a family of four would not have to pay any extra income tax unless they had income beyond $80,000 a year. The extra income taxes are progressive because they take increasing portions of income from those who make more than is needed for a good and happy life. Yet people still have the incentive to make more money if they want to have this extra income. No one can make large amounts of money without living in a society that works and is successful. Progressive income tax prevents an elite class from taking too much from the society without giving enough back.
The extra income taxes would only be on income greater than the substantial deductions noted above. The following brackets for the extra income beyond the deductions would include the basic 17% income tax as well and thus would be:
10% extra income tax on the first $100,000 for a rate of 27%
20% extra income tax on the next $200,000 for a rate of 37%
30% extra income tax on the next $300,000 for a rate of 47%
40% extra income tax on the next $400,000 for a rate of 57%
50% extra income tax on the next $500,000 for a rate of 67%
60% extra income tax on the next $600,000 for a rate of 77%
70% extra income tax on higher income for a rate of 87%.
This top rate would be on all extra income greater than $2.1 million a year. A single person with a gross income of $2.13 million would have an after-tax income of $737,000 for an effective tax rate of 65.4%.
The current tax on capital gains of 15% is much too low. This tax could be made more fair by simply including all capital gains as personal income.
Salaries would also become larger because the minimum wage would be increased. I propose that the minimum wage be increased to $20 an hour by the year 2020. If Congress would pass it in 2017 at $17 an hour, it could increase one dollar each year until 2020. Then it would be adjusted each year according to the annual increase (or decrease) of the cost of living.
To balance out the advantages of large corporations a progressive income tax could be imposed. Businesses would pay only a 15% tax on the first $50,000 of profits, 25% on the next $25,000, 34% on the next $25,000, and the usual 39% on the next $235,000. The tax for corporate profits over $335,000 would be 40%, on annual profits over $10 million would be 45%, on profits over $15 million would be 50%, and the tax on all business profits over $20 million would be 55%.
Companies that have hoarded money in offshore tax havens need to be required to repatriate at least half of these funds within eighteen months. This money would be taxed at the new rates on corporate income. A 0.25% tax on financial transactions would bring in additional revenue and will deter the short-term speculation that has corrupted the stock market. Corporate bond sales could be taxed at 0.1%, and derivatives trading and swaps by counter-parties could be taxed at 5%. The fossil fuels industry would have to pay the new carbon tax on the sale of refined energy to retail distributors. The Federal Reserve banks should be made a public utility, and their boards should be democratically elected.
Until the national debt (which is owed to the wealthy) is paid off, a temporary annual tax could be imposed of 1% on assets over $1 million, 2% on assets above $10 million, 3% on assets over $100 million, and 4% on assets above $1 billion. The government should not be paying the rich to use their money. Rather the wealthy could be grateful to live in a country where they can be so rich and give back a fair share to help others who are less fortunate, and the poor could be grateful to the rich for helping them. After the national debt is paid off, the government could be responsible enough to operate on balanced budgets so that such a tax on assets would no longer be necessary.
The inheritance tax on estates may also be increased in order to share excessive riches. I suggest a $1 million exemption with a 35% tax on the next $2.5 million, 45% on the next $50 million, 55% on the next $500 million, and 65% on anything beyond that. Senator Sanders has proposed a bill that is similar which also closes the “billionaire’s loophole” known as the Grantor Retained Annuity Trust (GRAT) that is being used by the super-rich to avoid the estate tax and the gift tax in order to pass on wealth untaxed to their relatives.
Because of the continuing effects of the recession on the middle class and the poor the federal government can promote a more egalitarian recovery by promoting good jobs. The economist Jack Rasmus has advised the government to inject $2.5 trillion into the economy to create more jobs and reform the labor markets. Spending on the needed improvements in infrastructure and technology will provide many good jobs in repairing and constructing roads, bridges, and ports. This could include retrofitting buildings and reforming building codes to assure greater energy efficiency. Residential mortgages and small-business property markets could be nationalized. Mortgage payments need to be modified to make them more just. Speculation by investors needs to be curtailed and replaced by investing in real assets that create jobs. The suffering public sector could also be revived by extending grants to state and local governments to improve funding for schools, clinics and hospitals, and manufacturing in addition to the shoring up of unemployment insurance, food and housing subsidies for the poor, and of course complete medical care. These kinds of governmental expenditures put money into the hands of those who will spend it, thus promoting economic growth.
Other important work that government could help finance includes solar energy production, windmills, making buildings more ecologically sustainable agriculture, projects to clean up the environment, medical clinics where needed, local manufacturing, and low-income housing. Green taxes can be enacted to protect the environment and people from pollution and other expensive problems and to pay for the consequences. For example, to reduce the amount of trash and to pay for the cost of recycling, the materials in the elaborate packaging on commercial products can be taxed. Lumber companies can be held responsible for preserving and renewing forests. Feedlots for livestock must be held to account for removing and recycling excremental waste. Pollution must be eliminated and waterways rehabilitated.
Another way to create more jobs would be to reduce the work week from 40 hours to 35. Also with government health care that includes everyone the workers could choose to work even shorter hours if they wish without losing their health insurance. This would allow many people to find part-time employment to live simply or supplement their family incomes. In the future as our technology continues to improve and reduce the drudgery work required of humans, the work week could be lowered from time to time. These advances would give people more free time to pursue their own interests to find greater happiness. Many ecologists and economists have argued that if people consumed less and did not waste so much of the world’s resources and added less to pollution, society and the planet would be better off.
Quality of life does not depend on how much money one earns and spends but rather on the value of what one is experiencing. Ralph Waldo Emerson, Henry David Thoreau, and other transcendentalists believed in “plain living and high thinking.” Today we might call this “simple living and high thinking.”
I have been conscientiously opposed to paying federal income tax because half of it is wasted on military spending and war crimes. I have lived my adult life below the poverty line, and yet I consider the quality of my life extremely high. I have taught dozens of college courses and written many books and have had time for spiritual exercises and meditation, reading books, watching movies and educational programs, listening to good music, learning from the web, having free time for friends and loved ones, taking walks and getting physical exercise, and working with other social and political activists. Although an adequate income for one’s basic needs and for a little spending money is essential, once those conditions are satisfied I consider free time much more valuable than more money.
People also might want time to garden, grow food, play music, practice arts, participate in theater, play sports and games, get involved in politics and social causes, belong to social clubs, and participate in religious or spiritual experiences, etc. In our time these things and more can easily be experienced locally and with others through computers and other electronic devices. Once wars are stopped for good, taxes will no longer be wasted on military spending. Then humanity can work together to help people out of abject poverty, and the human race will be much closer to living in a paradise on this limited Earth.
1. An Inquiry Into the Nature and Causes of the Wealth of Nations by Adam Smith, Book 2, end of Chapter 11, p. 110.
2. The Price of Inequality by Joseph E. Stiglitz, p. 39.
3. “How Wall Street Killed Financial Reform” by Matt Taibbi in Rolling Stone May 10, 2012.