Making The Economy in the Service of Man
“Under capitalism, man exploits man. Under socialism, the reverse is true.”
– Polish Proverb
“The inherent vice of capitalism is the unequal sharing of blessings;
the inherent virtue of socialism is the equal sharing of miseries.”
– Winston Churchill
The Uninvited Third Party
It seems that most business enterprises didn’t get the memo about Article 23, in the original Universal Declaration of Human Rights, which says:
(1) Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment.
(2) Everyone, without any discrimination, has the right to equal pay for equal work.
(3) Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
(4) Everyone has the right to form and to join trade unions for the protection of his interests.
Beginning with the industrial revolution, the rise of Capitalism [An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market] has resulted in the classic Dickensian dilemma. It is the best of times because the quality of life that Capitalism has produced over the last few hundred years is unmatched in human history. But, it is also the worst of times because Capitalism, by its very nature, is antithetical to individual freedom, democracy, and human rights. This is the world of materialism that is defined by the ownership of property.
So, what we have here is materialism as carried out via Capitalism versus Socialism. And it is this conflict that impacts our polity, drives our economy, pervades our society, challenges civil rights, and produces the tensions that can and do lead to conflicting priorities, including, but not limited to, wars.
When the U.S. Constitution was written, the industrial revolution was in its infancy and there was no compelling need to institute protection for the people from the often unscrupulous actors who participate in a “free market.” At that time too, the social contract was understood to mean, “an (explicit or implicit) agreement by individual human beings to surrender (some or all of) their private rights in order to secure the protection and stability of an effective social organization or government.” This is a two-party contract between We The People and our Representative Democracy.
So, the Constitution was designed not only to provide for the organization and operation of government itself, but to limit the government’s powers with respect to individual liberties. Even the infamous “commerce clause” in the Constitution, (Article I, Section 8, Clause 3: [The Congress shall have the Power] To regulate Commerce with Foreign Nations, and among the several States, and with the Indian tribes,) had to do with “trade,” not with commercial enterprises per se. But over the years, Congress, with support from the Supreme Court, has seen fit to assign a different meaning; effectively expanding their powers and thereby amending the Constitution without going through the rigors of the amendment process.
Simply called “Prohibition,” this amendment was repealed in 1933, as a colossal failure. If anything, it probably increased the consumption of alcohol, created more alcoholism than it stopped, and no doubt lead to an untold number of deaths from rotgut whiskey and bathtub gin. Of course, Prohibition also, famously, allowed organized crime to flourish, and by the news media reporting their adventures, turned many bad guys into heroes.
In short, the Constitution does not address the rights and limitations of Capitalism with respect to either the people or the government. Because this dilemma has never been resolved, and because of the power that wealth holds in our society, Human Rights has been given short shrift in our “free market” system.
The Rise of Wealth and the Decline of Family.
Arising from a culture favoring rugged individualism, independence, and inventiveness, there can be no doubt that the United States has been the most influential force for Capitalism ever seen. Before the Civil War, when the country was almost entirely agrarian, commercial enterprises had little effect on the social order. However, in the post civil war “Gilded Age,” big business took off with a vengeance. Factories sprung up all over the place, coal mines and oil rigs dotted the countryside, mega-banks were established to provide credit, and unemployment was almost nonexistent.
But, this was also the age of the Robber Barons, including such notables as John Jacob Astor (real estate, fur), Andrew Carnegie (steel), J. P. Morgan (banking, finance), John D. Rockefeller (oil), and Cornelius Vanderbilt (railroads). These giants of industry often used anti-competitive, monopolistic, and other illegal business practices to amass great wealth. In the doing, they had effectuated Alexis de Tocqueville’s portentous observation:
“As one digs deeper into the national character of the Americans, one sees that they have sought the value of everything in this world only in the answer to this single question: how much money will it bring in?”
The oil industry boomed along with the steel industry and many others related to the manufacture of automobiles. Road construction also took off so that all those horseless carriages could get around much easier. Our mostly agrarian economy became mostly industrial as many left their farms and families to seek their fortune in the cities and even in other parts of the country.
But, all of this increased mobility was causing a profound shift in family structures. With transportation more difficult in the pre-automobile era, families tended to stay together. Besides farming and ranching, the shops and stores and trades were mostly family owned. If any of them were to move, say, out west, then most likely the whole family would go, or would be sent for later. There were no “retirement” plans back then, nor any health insurance. Most folks worked until they died. And there were no “career changes;” they had one career and it lasted a lifetime. When they got sick or injured, the rest of the family pitched in to help. If there was no family around, then the friends and neighbors stepped in, or maybe the congregation of the local church. There was no need for local charities except for the homeless, the orphans, and the poorest of the poor. Government aid was non-existent.
Managers and owners of affected businesses were adamantly opposed to unions being in any area of their operations. But they too often used less than honorable means to, well, lets’s just say, discourage employees from joining unions.
The undercurrent through all of this was the fundamental Human Right to work in a safe environment without fear and to be recompensed fairly. Over the years, the fight for these minimum standards was carried out by collective bargaining units, which eventually became a significant part of the labor force in many industries, peaking in 1954 with over a third, 34.7%, of all full-time employees. However, by 2010, that percentage had dropped to 11.9%.
Holes in the Safety Net
Another major factor in labor-management relations centered on productivity. In economic terms, productivity has to do with “the rate at which goods or services are produced, especially output per unit of labor.” So, if Susie could produce four widgets an hour, but was given a better machine that enabled her to produce eight widgets an hour, the result was a 100% boost in productivity. Thus, in lieu of hiring another person, the widget factory owners shifted that labor cost to the cost of a new machine. And machines don’t strike or require fringe benefits, and properly maintained, will work 24/7 with nary a complaint.
Beside the increases in productivity, and being ever diligent about getting more profit for the buck, many companies sometimes require what’s called “Speedup” within their operations. Speedup is “a required acceleration of work or production without an increase in pay.” So, rather than hire new people to help carry the workload, existing employees are pretty much stuck with extra chores without any accompanying compensation. This is another way companies can defer hiring and put the related savings their owners’ pockets. (They certainly don’t seem to use it to reduce their prices!)
Meanwhile, the unemployed, along with the disabled and the sick, have, for the most part, lost the family support system they had just a century or so earlier. Where employers have failed to replace it with insurance or other related programs, the problem falls to the government to provide relief; mostly in the form of welfare.
In that regard, all the Presidents and Congresses since the Great Depression have gained government involvement into virtually every aspect of our lives. The social security system has expanded over the years to include virtually all workers, their spouses and children, and even added disability benefits. And don’t forget Medicare and Medicaid. To help the poor, the government offers welfare payments, food stamps, minimum wages, and unemployment benefits. Then there is government help for home owners with government backed mortgages, for college students with grants, for farmers with subsidies for crops, and, for all of us, more security (say some) with the largest (read bloated) military in the world. Meanwhile, the cost of all this benevolence and security begins to add up.
Then we found out about something called “too big to fail,” meaning that if certain companies were to go under, then the consequence would be the end of the world as we know it – or so we were told. Rather than let Adam Smith’s invisible hand sort things out, we taxpayers were volunteered by Congress to assume the risk of a massive bailout called the “Troubled Asset Relief Program” or TARP, involving hundreds of billions of dollars.
Although most of the TARP funds have been repaid (they say,) the beneficiary firms involved have somehow managed to pay record bonuses. And executives of the firms that did go under are doing just fine with their multi-million dollar golden parachutes. All this thanks to the generosity of the taxpayers (read suckers,) via their representatives in Congress.
Back in the day, when I was involved in the financial industry, we had something called the “Prudent Man Rule.” Although it would no doubt be called the “Prudent Person Rule” in these times of political correctness, the idea was that you treated other people’s money as if it was your own. You didn’t take unnecessary risks. And if I you did, you were out on your ear, or nose, or ass, you choose.
Well, obviously that is not the case in today’s financial world. Now we have something called a “Moral Hazard,” which is the exact opposite of the Prudent Person Rule. A moral hazard occurs when an individual or institution that can protect themselves from risk behaves differently than if they were fully exposed to the risk. This means the individual or institution does not have to assume the full consequences of or the responsibilities for its actions, and therefore has a tendency to act less carefully than it otherwise would. But of course this only leaves another party to take some responsibility for the consequences of those actions. For example, if you could insure your property on the gulf coast against hurricanes, then you might be more inclined to live there because you can shift much of the risk back to the insurance company – or to the government via FEMA.
Meanwhile back in 2008, the Federal Reserve and the U.S. Treasury claimed that a bailout was necessary because if banks are allowed to fail, then that would create a loss of confidence and lead to a global financial melt-down. The resultant “nationalization” of the financial industry effectively eliminated the risks of “capitalism” at the expense of the U.S. taxpayer.
But all this favoritism, all the promises made, have come at great cost. And we’ve been painfully reminded of that in the recent “debt ceiling” debate. Congress has been sawing on the wrong side of the limb for a long time. But hey, that’s what we voted for.
The Carrot and the Stick, Without the Carrot
I argue here that the current state of our economy is mostly the result of the substantial changes in the relationship between the for-profit businesses, the people, and the government regarding their mutual responsibilities and obligations.
Unfortunately, those companies that do try to operate with the best interests of their customers at heart are being punished by those that are more interested in profits by any means possible. And to the extent regulatory compliance adds to costs, customers end up paying higher prices and businesses, especially small businesses, become less competitive.
With all this mischief created by the private sector, government really has no choice but keep its promise of making life, liberty, and the pursuit of happiness available to all citizens. But in the doing, it often creates watchdog bureaucracies that are mostly inefficient, and sometimes inept, and even corrupt. To add insult to injury, the funding for these agencies is, again, an involuntary tax on all of us; one that we didn’t vote for. If the private sector wants fewer regulations, then it needs to clean out its own nest first. “Trust me” won’t get it. (As if it ever did.)
A Will That is Not Free
Although the official unemployment rate is a little over 9.0% (as this is written), a much more inclusive measure puts it at about 23%. The official tally shows more than 14 million people out of work. But the bigger number, which includes the underemployed plus those who gave up looking for work, is about 35 million; more than two and one-half times the official count.
But most of the employed are still at the mercy of their employers. Indeed, the Constitution offers little protection for the freedoms and rights of those who work in commercial enterprises. As described by the American Civil Liberties Union in its “Briefing Paper Number #12:”
“. . . when the Constitution and Bill of Rights were ratified, the government was viewed as the only major threat to individual rights. The Founders could not have imagined back then that, one day, concentrations of corporate power would exist on a scale rivaling, and in some cases exceeding, governmental power. Today, most Americans are more vulnerable to having their rights violated by their employers than the early Americans were to having their rights violated by the government. Yet because the Constitution does not limit their authority, private employers are free to violate the civil liberties of their employees.”
Here, the ACLU is addressing the inequity of what are called “at will’ employees; those who are not part of a bargaining unit or do not have specific employment contracts. But at-will employees are by far the largest segment of the labor market. Under this arrangement, the employer is free to discharge individuals “for good cause, or bad cause, or no cause at all,” whereas the employee is equally free to “quit, strike, or otherwise cease work.” Furthermore, at-will employees are assumed not to have a property interest in their jobs, which means they lose their rights to the just compensation for a “taking” of their livelihood, along with the due process provisions of the fifth and fourteenth amendments, respectively. And, as if that wasn’t bad enough, the fundamental constitutional rights of free expression and privacy are still largely unprotected in the workplace.
We’ve come a long way from the days or yore when family was all important and stepped in to help in times of trouble. Today, it’s the government that provides support in place of the family. And the captains of industry continue offloading their responsibilities under the guise of “maximizing shareholder value,” as Jack Welch, former head of General Electric, once put it. As a result, 2010 was a record year for corporate profits. It was also the year when the total number of unemployed in the United States was the highest in history; more even, than at the peak of the Great Depression. Let’s hear it for the plutocrats.
So, as you can plainly see, even though the United States was a signer of the Universal Declaration of Human Rights in 1948, it’s clear that, with respect to Article 23 thereof pertaining to employment (as enumerated above), the U.S. has failed in its obligation to see that any of the four “rights” provided for in that Article are made available to its own citizens. And this is due in large part to the tail waging the dog. It is the captains of Capitalism who call the shots these days, and we are all at their mercy.
The World, Inc.
Prior to the 1950’s, the notions of outsourcing and down-sizing were unheard of. But, as productivity increased and as cheap labor became available elsewhere in the world, workers in this country became expendable. And when that happened, the idea of “globalization” entered the vocabulary. White collar and blue-collar workers alike were left to the mercy of their employers. Strikes by unions were no longer effective against low-cost labor in other parts of the world. As a result, the “at will” employees discussed above were at substantial risk.
It’s one thing for a company to begin operations in a foreign country for the purpose of providing goods or services to that country. But its’s another thing to relocate in another country to produce goods and services that are to be sold back in the U.S. Consider, for instance, the automobile industry. Ford’s Fusion, Fiesta, and Lincoln MKZ models are built in Mexico, while the Edge, Flex, and Lincoln MKT are built in Canada. General Motors vehicles assembled in Canada include Chevrolet’s Camaro, Impala and the GMC Terrain, while GM vehicles built in Mexico include Cadillac’s SRX, Chevrolet’s Aveo, and GMC’s Sierra. No doubt tens of thousands of U.S. workers were “outsourced” just in this one industry. And the severance package these employees received, if they got one at all, would not carry them very far, especially in a time of high unemployment. Like, now!
The consequence here, among others, is yet another involuntary tax imposed on us by for-profit corporations. When the big companies expatriate operations by closing facilities here and opening new facilities in other countries, as described above, their American labor force is left in the lurch. Therefore, a company that makes a unilateral (autocratic) decision to move to a country with lower wages, lower taxes, and fewer regulations, has shifted its responsibility to the government. In turn, the government needs more taxes to fund more bureaucracies to help those made worse off because of a small group of executives who have decided that profits are more important than people, and even, I would argue, their own patriotism.
Moreover, U.S. Companies that operate in countries in Africa, Central and South America, and Asia (read China) are effectively providing support for continued human rights violations, including slavery and child labor. Then there is the modus operandi for doing business in foreign countries – bribery and corruption. But it shouldn’t be a shock to anyone that morality doesn’t get much attention in the board room. If it can’t be bought, it’s irrelevant.
Since World War II, the advance of the industrial/communications/technology revolution and the concomitant rise of Capitalism has captured the entire planet. Free, democratic countries like Japan, and even not-so free countries like Iran, are all part of the bandwagon called Globalization. The shared ethic is wealth; its accumulation and its growth. Human Rights are tolerated only if they be used in the service of those aims.
I don’t think I can say it any better than Dr Samir Naim-Ahmed in his April 21, 2007, essay, “Human Rights And Globalization,” that appears on Countercurrents.org
“[With globalization] Everything has to be dealt with as a market commodity judged by its economic value rather than its social value.
“So governments find themselves in a very paradoxical situation. If they try to abide by UN human rights agreements which they signed, they would be violating the globalization agreements, which they also signed! and they would be criticized or even penalized for this violation ( by cutting the aids offered to them by international institutions ), and if they try to abide by globalization agreements they would be necessarily violating the human rights agreements and would be criticized for that in the human right reports and the UN statistics on human development would show them lagging behind in indices of human development!!
“Transnational corporations which are steering the economic globalization are not at all directed by ethical or humanitarian principles . The maximization of profit is the major if not the only driving force for all their activities .
“[Therefore, what is needed is]a government which is capable of making economy in the service of man instead of making man a victim and a slave for the market economy.”
To the extent Capitalism dominates economic globalization, then the objective of profit maximization means that workers are disposable, natural resources are expendable, individual liberties are compromised, accountability and responsibility are diminished, and authoritarianism and imperialism breach the social contract and eat away at democracy.
More than that, Capitalism has replaced religion as the single most powerful force in society, foreign and domestic. But, the Humanist zeitgeist these days is to purge the human race of the evils of religion. Once they do that, if they can do that, then maybe, just maybe, they will take on the task, as suggested by Dr. Naim-Ahmed, of helping to restore our form of government to “making economy in the service of man.”
Now, if they could just get the word “socialist” out of the English language, they might stand a chance.
A superb series, Herb, with legacy documentation of human rights and economic history. You have not recommended any resolution of the issues, however, except by implication and per the very last sentence in Part 5- “Now, if they could just get the word “socialist” out of the English language, they might stand a chance.”
By another analysis, it could be said that the US was presented with a virgin paradise 150 years ago, and really just exhausted its riches by increasing the population by a factor of ten, and through profligate, mis-appropriated wealth that eventually died out as surely as an old oil well. As Jimmy Buffet commented “..pissed it away so fast.”
Scandinavian socialism is the beacon that every human seeks to approach, everywhere outside of America, and it depends on broad and deep taxation to fund its benefits. As humanists we must carry that standard through to realization, although in the anglophone world humanism as a concept has been hijacked for anti-religion crusades.
Our species and planet are conceivably headed toward cinder status, as happened on Venus, and we are a young breed of killer apes with no universal record for cooperation – only wars. So we are unlikely to avoid this fate through evolving labor standards and rights, etc. because there just isn’t time for it anymore.
Humanists must retake our lost credo by restating what the classical Greeks, Confucius and Petrarch taught – responsibility. I maintain that responsibility is the new species morality, displacing all previous associations with religion, if we must.
In Canada, Trudeau is moving toward a “mincome” solution that will see all tax payers be granted a minimum income of perhaps $10K, and that will replace many or all social programs. In the “gig economy” that is replacing “jobs”, this will be a financial floor – and it is important to qualify mincome as applicable only to those earning less than $10K annually – it is not credited blindly to one and all each month.
Essentially it allows the poor to communalize and stabilize their lives through cooperation, and it will be incumbent on them to do that. The rich and the 1% will either pay the tax rate or face increasingly aggressive opprobrium, and humanists can provide some vigilance there by holding their feet to the fire as part of what we do.
At the species level, humans must assume full responsibility (in the absence of war i.e.) for their canton (under the UN/Swiss model) in which they were born. There can be no gratuitous option to simply migrate to greener fields – making your own yard green will be the sine qua non of responsibility and the central concept of the new humanism.
Bravo for a fine series documenting well where we have been, where we are, and the state of the union. Now we must build a humanist union and bootstrap this exploding plague of killer apes into lifelong responsibility.
The ancients have instructed us, and your article sets the stage for the task ahead of the American people in the time of Trump, which will be a telling and ominous crucible for the changes that are imminent.
Thanks for the nice words. I agree that a big part of the problem here is the lack of responsibility. But that comes from the notion that we are all victims. I discussed “A Nation of Victims: The Decay of the American Character,” by Charles Syke in part 4 of this series. He was right on every point. Now add to this the increasing polarization of the political parties and the retreat into tribalism we’re seeing among races and ethnicities, plus the recent “election” of a pathological narcissist who appears ready to take a wrecking ball to our constitution, and what we end up with is a nation that is supported only by a shaky house of cards.
Unfortunately, we can’t look to western Europe for any help. The Nordic model of economics – mixing socialism with capitalism– works fairly well for those nations because their populations are much more homogeneous that the U.S. and their sense of morality and their work ethic is at a level that we haven’t seen here in decades. On the plus side, they are much less religious than we are. On the negative side, the personal taxes are the highest in the world.
Also, the Nordic model is under threat now with the wholesale immigration of displaced Muslims coming from the Middle East. Crime rates are up and assimilation is down. Germany, Denmark and Sweden are now reversing their policies on taking in these displaced people. I heard that Norway is actually building a wall – yes, a wall! – along its border with Sweden.
As to the role of Humanists in all this, it seems to me they are too few to make a difference. Besides, most people equate humanism with atheism, and that’s pretty much a conversation stopper. In any case, I am no longer a Humanist. And this blog is filled with the reasons why.
Herb, I agree with Dwight. This is an outstanding work of scholarship. With some editing, I believe it would be an excellent addition to an economics course.
Dwight’s mention of Canada’s consideration of a “mincome” is very interesting. I think even Republicans could get on board with it, be eager about it even. But there’s a big difference between Canada and the U.S. of course. Besides the word “socialism”, there’s the fact that our Big Pharma and Big Medical are, unlike those in the rest of the industrialized world, structured for financial gain rather than for health goals. Evidence abounds that the industry is all too eager to leverage essential healthcare to pry the maximum money from the desperate. If the moguls had a long-term view, they should see that they are killing the geese laying their golden eggs, but unfortunately their vision only extends to the next quarter’s dividend period, or maybe the fiscal year.
As I see it, I’ve decided the best personal decision now is to understand what’s happening, invest in diversified stocks and bonds, hunker down, and vote Democratic. And keep reading Herb Van Fleet’s blog.
Jim, thanks again for the kind words.
Not sure I agree with the minimum income idea. Besides Canada there are many other countries that either have it or are thinking about it – the Scandinavian states, Iceland, Ireland, Luxemburg, and Switzerland, among others. Depending on how “mincome” is defined, such a program might well be an administrative nightmare, as people’s income moves into and out of the minimum. Of course, it is also a disincentive to work, unless it’s temporary like our unemployment benefits.
Then there’s the cost of such a program. It would have to be offset by higher taxes. That would be intolerable in this country and would only add to the already high tax rates in the other more socialist countries – 50% and higher!
As to healthcare, I sent an email to Obama back when the ACA was being considered. My suggestion was to bifurcate the law into one that addresses health care and the other to address health cost. But the ACA was mostly written by the health insurance industry, the pharmaceutical lobby and other special interest groups. As a result, human health in the U.S. has become an enterprise to maximize profits.
For more on the healthcare issue see my other blog at https://theabsurdityindex.com/2014/04/30/life-liberty-and-the-pursuit-of-health-care/