Capitalism is a pyramid; a social structure that requires an abundance of laborers to produce, process, and transfer all of the goods that we consume. The base of this pyramid is very wide with a large number of laborers supporting a relatively small number of elite at the top of the pyramid.
The individual laborer is sustained by his or her productive labor, but society is created and sustained by his and her surplus productive labor. We create surpluses for future consumption, but we control them in the sense of who may distribute those surpluses to their exclusive benefit, and then we call such surpluses “wealth”. When those surpluses are used to expand the productive economy, they are called “capital.” The use of private wealth (surpluses) to build and control industries is the foundation of Capitalism.
Capitalism is used to generate a pool of surplus productive labor, stored in goods and infrastructure and consumption debt. Our democracy is supposed to regulate the distribution of that surplus productive labor. But our political system has been subordinated to the power of wealth from its beginning. Capitalism, unchecked by social examination and regulation, and unguided by principles of social liberty and relative equality of opportunity, will tend toward what is called an oligarchy; where a relatively few hold power to rule and perpetuate their rule by economic and political tyranny. Voters have little recourse to correct the actions of an oligarchy, because political parties, which are controlled by the oligarchy, choose the candidates that will perpetuate the economic tyranny.
Through capitalism we are forced to build an economic pyramid, arising from a foundation of economic inequality, and then we consume our social energies trying to politically re-arrange it. However we may arrange it, our pyramid requires that many must be at the bottom so that a few can be at the top. Those at the top of our socio-economic pyramid continually delude the poor and middle class into believing that all of us could join them if we simply work harder.
In the past, society was also structured like a pyramid. A king or queen stood at the top, aristocracy further down, merchants further down, and serfs and slaves at the bottom. Societies were quite rigid then, in that one could not easily change classes, regardless of their abilities. In today’s pyramid, fate, violence, corruption, or the right connections, can allow anyone to obtain any position in our pyramid. The opportunities of ownership and control that are available to some can only occur if those same opportunities are denied others. The unemployed are left milling about near the pyramid, hoping for an opportunity to join the structure and work for or inherit a place at the top. The pyramidal axiom of capitalism is; “some must labor more and receive less so that others may labor less and receive more”. Though our modern economic pyramid is more fluid in the sense that your class at birth does not now prohibit you from rising higher in that pyramid, our economic structure will always require that many must labor and receive less to support a few who will receive more.
America may be the land of opportunity, but it is not the land of equal opportunity. By limiting access to education, especially higher education, we create a pyramid of individual capacity that interfaces with our economic pyramid of ownership and productive labor. Rather than discipline children to learn and attain certain skill levels before advancement in primary and secondary schools, we matriculate all children according to their age. Such measures only create classes that are peers in age, not in ability. This does not profit the majority of students; it only supplies our economy with new replacements for those retiring from our economic pyramid. We do not want the majority to be peers in capacity. We want many to be very limited in skills, willing to do as they are told for wages that do not permit any opportunity to acquire surplus labor wealth and economic independence.
The anarchy of the capitalistic marketplace is always searching for increases in efficiency and more resources. Through technology we are able to increase industrial production and to locate or extract more resources from the Earth. Technology continually improves productivity because of competition for increased profits. But competition can be both constructive and destructive. Constructive competition promotes increased technology and frees up labor to pursue the production of more and varied products, conserving resources and reducing the labor input of society while raising the over-all standard of living for all. On the other hand competition often allows one person or company to control sufficient resources to destroy its competitors by temporary over-supply of its goods, and lowering prices below production cost; using its stored labor-capital to carry it until its competitors go out of business. Those who are driven out of business and into unemployment will have to be carried by the rest of the laboring economy. The company that is victorious in such an economic battle will then have a greater monopoly over the consumption of its goods or services. This will lead to price increases, which will ignore need. Those without sufficient labor-money to exchange will be unable to consume.
Regardless of the strength or weakness of any company in our economy, all companies should be required to make a profit on current sales to moderate competition. And all companies, regardless of profits should pay a percentage tax on gross sales.
Government should have the authority to liberate resources that are being monopolized, and further, to support companies whose growth will foster good competition. Doing this within the nation, and as a nation competing with other nations, would bring the world into an economic system wherein all standards of living would tend to equalize; needed goods and services should be produced in sufficient quantity to meet demand, and their prices regulated if necessary. But equal reward for equal labor is equal consumption, nearly impossible to establish and control. Inequality establishes itself easily, responding only partially and grudgingly to social controls. Capitalist ownership and monopoly are the antithesis of economic freedom and will forever deny such freedom, because economic freedom would lead to the collapse of our economic pyramid.
A capitalist economy must always increase productivity with machine technology that reduces the need for human labor, rather than use technology to increase overall company productivity to produce and sell more goods at a lower price. It’s apparently irrational to believe that auto makers should work together world-wide to meet the transportation needs of all economies, and do it for lower and lower costs as technology reduces the labor needed to manufacture those cars. Consumers should benefit from such price reductions without having to bear the increased burden of supporting those who become unemployed. Social freedom and harmony would be more forthcoming if technology was universally shared.
Surplus productive labor is our only source of capital. When our government talks of tax policies that promote the creation of capital, or which promote capital investments, the government is really just talking about surplus productive labor. This surplus productive labor can be the potential of machines and materials to build things (stored labor). It can be what we call borrowed capital (current surplus), debt acquired in order to build or expand a business. In either case, the recent focus of the government has been to aid the wealthy in gathering more and more capital, which has been poorly invested and scandalously misused. We have for most of the last generation been borrowing from the wealthy, the surplus productive labor they have taken from workers, to finance government deficits; requiring future workers to repay the wealthy for the communal use of today’s surplus productive labor.
The wealthy of today are so ignorant of how capital must be generated and expended to promote social stability that they invest and build to undo each other. One corporation moves outside the country to reduce its labor costs, causing unemployment here. Its competitors point to that event and force labor unions to give back wages and benefits. Still other industries see these tactics and do likewise. This may generate more profits for some corporations temporarily, but when the laborer receives less and less of his or her own productive labor to barter for goods and services; they obviously spend less, which hurts all manners of industries. Too much pressure on labor from the wealthy or from government will cause a downward spiral of economic activity, and an explosion of debt that cannot be repaid; resulting in a long economic depression.
Rather than lower capital gains taxes to promote resource availability, we can encourage wealthy individuals and the corporations they control to invest in our economy in times of economic decline by increasing their income taxes and capital gains taxes on a sliding scale, averaging 1% or 2% more tax for every 1/10% increase in unemployment and or every 1/10% increase in welfare recipients. We should set a benchmark of 4% unemployment and 5% welfare recipients, and begin with those whose personal income is in excess of $100,000 annually. This along with a law to limit dividends, interest receipts, and capital gains on investment outside our country when unemployment rises above 4%, will force the wealthy to turn over resource assets both to meet increasing tax burdens on their income, and to get the economy rolling again, which can result in having their taxes reduced. If capitalists believe that only the wealthy can lead us out of recessions and depressions, then we can persuade them to do so by threat of economic revolution, or coerce them with new tax laws. We should not have to beg or bribe them with tax reductions or other concessions.
© May 2009
Craig D. Hanks