Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Anti-Voodoo manifesto
#1
This is almost an anti-Voodoo manifesto by Nick Hanauer:

A 1 percenter tells the truth about "job creators"

Nick Hanauer, successful entrepreneur and one percenter, gave testimony on income inequality a few days ago before the U.S. Senate. His testimony in full should be posted in every break room in America:

Quote:For 30 years, Americans on the right and left have accepted a particular explanation for the origins of Prosperity in capitalist economies. It is that rich business people like me are “Job Creators. ” That if taxes go up on us or our companies, we will create fewer jobs. And that the lower our taxes are, the more jobs we will create and the more general prosperity we’ ll have.

Many of you in this room are certain that these claims are true. But sometimes the ideas that we know to be true are dead wrong. For thousands of years people were certain, positive, that earth was at the center of the universe. It’s not, and anyone who doesn’t know that would have a very hard time doing astronomy.

My argument today is this: In the same way that it’s a fact that the sun, not earth is the center of the solar system, it’s also a fact that the middle class, not rich business people like me are the center of America’s economy.

I’ll argue here that prosperity in capitalist economies never trickles down from the top. Prosperity is built from the middle out. As an entrepreneur and investor, I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all would have failed and all those jobs would have evaporated.

That’s why I am so sure that rich business people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring.That's why the real job creators in America are middle-class consumers. The more money they have, and the more they can buy, the more people like me have to hire to meet demand.

So when businesspeople like me take credit for creating jobs, it’s a little like squirrels taking credit for creating evolution. In fact, it’s the other way around. Anyone who's ever run a business knows that hiring more people is a capitalist’s course of last resort, something we do if and only if increasing customer demand requires it.

Further, that the goal of every business—profit-- is largely a measure of our relative ability to not create jobs compared to our competitors. In this sense, calling ourselves job creators isn't just inaccurate, it's disingenuous.

That’s why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer. Since 1980 the share of income for the richest 1% of Americans has tripled while our effective tax rates have by approximately 50%. If it were true that lower tax rates and more wealth for the wealthy would lead to more job creation, then today we would be drowning in jobs. If it was true that more profit for corporations or lower tax rates for corporations lead to more job creation, then it could not also be true that both corporate profits and unemployment are at 50 year highs.

There can never be enough super rich Americans like me to power a great economy. I earn 1000 times the median wage, but I do not buy 1000 times as much stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, we go out to eat with friends and family only occasionally. I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or cars or enjoy any meals out. Or to make up for the decreasing consumption of the vast majority of American families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.This is why the fast increasing inequality in our society is killing our economy. When most of the money in the economy ends up in just a few hands, it strangles consumption and creates a death spiral of falling demand.

Significant privileges have come to capitalists like me for being perceived as “job creators”at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from “job creator” to “The Creator.”

When someone like me calls himself a job creator, it sounds like we are describing how the economy works. What we are actually doing is making a claim on status, power and privileges.The extraordinary differential between the 15-20% tax rate on capital gains, dividends, and carried interest for capitalists, and the 39% top marginal rate on work for ordinary Americans is just one of those privileges.

We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather, jobs are a consequence of an ecosystemic feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit in a virtuous cycle of increasing returns that benefits everyone.

I’d like to finish with a quick story. About 500 years ago, Copernicus and his pal Galileo came along and proved that the earth wasn’t the center of the solar system. A great achievement, but it didn’t go to well for them with the political leaders of the time. Remember that Galileo invented the telescope, so one could see, with one’s own eyes, the fact that he was right. You may recall, however, that the leaders of the time didn’t much care, because if earth wasn’t the center of the universe, then earth was diminished—and if earth was diminished, so were they. And that fact--their status and power--was the only fact they really cared about. So they told Galileo to stick his telescope where the sun didn’t shine and put him in jail for the rest of his life.

And by so doing, put themselves on the wrong side of history forever. 500 years later, we are arguing about what or whom is at the center of the economic universe. A few rich guys like me, or the American Middle class. But as sure as the sun is the center of our solar system, the middle class is the center of our economy. If we care about building a fast growing economy that provides opportunity for every American, then we must enact policies that build it from the middle out, not the top down.

Tax the wealthy and corporations--as we once did in this country—and invest that money in the middle class as we once did in this country. Those polices won’ t just be great for the middle class, they’ll be great for the poor, for businesses large and small, and the rich.

He's right: except for the very wealthy global plutocrats whose fortune is in no way dependent on the health of the American middle class, most of the merely rich would in fact do better under Keynesian policies also.

But then, we also know that it's a human (and extremely American) impulse to worsen one's own circumstances just as long as it means doing better than the guy next to you. That's what's the matter with Wall Street just as much as it's what's the matter with Kansas. 
Reply
#2
Sorry, Folks, Rich People Don't Create The Jobs
  • JUN. 28, 2014, 1:51 PM

AP

Billionaire Nick Hanauer is at it again.
One of the country's most successful entrepreneurs and investors, Hanauer is on a mission to teach his fellow 1%-ers how the economy actually works — how jobs are actually created, how a higher minimum wage would actually help, and how the crazy "trickle-down nonsense" parroted by the ruling class is creating record inequality and actually crippling the economy.


As Hanauer points out in a new essay in POLITCO, "The Pitchforks Are Coming...For Us Plutocrats," the problem with our economy is that the once-powerful middle class has been impoverished by decades of cost cuts and wage stagnation, while Hanauer and his friends have captured an ever-greater percentage of the country's incomeUnlike Hanauer and other 1%-ers, middle class people spend almost every penny they make, and this spending becomes revenue for companies started and owned by people like Hanauer. But right now, thanks to shortsighted greed, wages are at record lows as a percent of the economy, and the middle class is hurting. And that hurt, in turn, is holding back the revenue growth of companies owned by Hanauer.

Unlike most successful entrepreneurs and investors, Hanauer understands that his success is in large part the result of having been born in the right place at the right time. Had he been born in Africa, Hanauer points out — where the potential customers for his entrepreneurial efforts would have barely enough money to survive — Hanauer would likely be selling fruit by the side of the road. And so would the rest of his rich, successful entrepreneur and investor friends.

Happily, Hanauer was born in America, land of the (formerly) well-off middle class, so he was able to build and invest in companies whose customers could afford to buy their products. And the buying power of that affluent middle class made Hanauer's companies prosper and his family rich.

To anyone reared on the political orthodoxy of the moment — "rich people create the jobs," "higher wages cause higher unemployment," etc. — Hanauer's views sound like lunacy.


But they're just common sense.

[Image: screen%20shot%202014-02-28%20at%209.46.39%20am.png]Business Insider, St. Louis Fed


Wages as a percent of GDP are at an all-time low.

Take that first phrase, the one that has been repeated so often that people regard it as fact: "Rich people create the jobs."


By starting and directing America's companies, this story goes, entrepreneurs and rich investors create the jobs that sustain everyone else.

But entrepreneurs and investors like Hanauer (and I) actually don't create jobs — not sustainable ones, anyway.

Yes, we create jobs temporarily, by starting companies and funding losses for a while. And, yes, we are a necessary part of the economy's job-creation engine. But to suggest that we alone are responsible for the jobs that sustain the other 300 million Americans is the height of self-importance and delusion.

So, if rich people don't create the jobs, what does?

A healthy economic ecosystem — one in which most participants (especially the middle class) have plenty of money to spend. This ecosystem starts with the company's customers.

The company's customers buy the company's products. This, in turn, channels money to the company and allows the company to hire employees to produce, sell, and service those products. If the company's customers and potential customers go broke, the demand for the company's products will collapse. And the company's jobs will disappear, regardless of what the entrepreneurs or investors do.

Yes, entrepreneurs are an important part of the company-creation process. And, yes, so are investors, who risk capital in the hope of earning returns. But, ultimately, whether a new company continues growing and creates self-sustaining jobs is a function of the company's customers' ability to pay for the company's products, not the entrepreneur's vision or risk-tolerance or the investor's capital. 

Saying "rich people create the jobs" is like saying that seeds create trees. Seeds do not create trees. Seeds start  trees. But what actually grows and sustains trees is the combination of the DNA in the seed and the soil, sunshine, water, atmosphere, nutrients, and other factors in the environment that nurture them. If you think seeds create trees, try planting seeds in an inhospitable environment. Plant a seed in a desert or on Mars, and the seed won't create anything. It will die.

So, then, if what creates the jobs in our economy is, in part, our companies' customers, who are these customers? And what can we do to make sure these customers have more money to spend to create demand and, thus, jobs?

The customers of most companies are ultimately American's gigantic middle class — the hundreds of millions of Americans who currently take home a much smaller share of the national income than they did 30 years ago, before tax policy aimed at helping rich people get richer created an extreme of income and wealth inequality not seen since the 1920s.

She'd like to create jobs. But she can't afford to anymore. Click to see how extreme inequality has gotten.

America's middle class has been pummeled, in part, by tax policies that reward "the 1%" at the expense of everyone else. 

It has also been pummeled by globalization and technology improvements, which are largely outside of any one country's control.

And, most importantly, it has been pummeled by our corporate obsession with short-term profits—by a prevailing business ethos in which employees are viewed as "costs" and companies strive to pay as little in wages as possible.

The economic story that justifies this behavior is the "trickle down" theory. Eventually, the mountains of money America's owners make, will get spent and, thus, find its way to the middle class ...

Unfortunately, that's not the way it actually works.

America's richest entrepreneurs, investors, and companies now have so much money that they can't possibly spend it all. So instead of getting pumped back into the economy, thus creating revenue and wages, this cash just remains in investment accounts.

Hanauer explains:

Quote:I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good.

If $9 million out of Hanauer's $10 million of annual earnings went to 9,000 families instead of Hanauer, Hanauer has pointed out, it would get pumped back into the economy via consumption. And, in so doing, it would create more jobs. Instead, it sits in Hanauer's bank account or gets invested in companies that don't have enough well-off potential customers to sell to.

Hanauer estimates that, if most American families were taking home the same share of the national income that they were taking home 30 years ago, every family would have another $10,000 of disposable income to spend.

That, Hanauer points out, would have a huge impact on demand — and, thereby job creation.

So, if nothing else, it's time we stopped perpetuating the fiction that "rich people create the jobs."
Rich people don't create the jobs. Our economy creates jobs.
Reply
#3
And there is a fairly simple solution: pay people more:

There's hope, America! Smart, successful people are finally talking about what's wrong with our country
The richest 10% of Americans — and especially the richest 1% and 0.1% of Americans — are now capturing all of the income growth in the country, while the rest of America, some 300 million people, are treading water or losing ground.

That's obviously not good for the 300 million Americans who are getting shafted. But it's also actually not great for the handful of Americans who own and control everything.

Why not?

Because the 90% of Americans who are struggling are the customers of the companies owned by the other 10% of Americans. And, as any smart business-person will tell you, when your customers are hurting, it's hard to grow your business.

This is the real reason our economy has grown so slowly in recent years.
Most of the "customers" in our country — the 300 million Americans in the 90% — are strapped.

And they're strapped not because of "our lousy education system" or "technology" or "globalization," or the other factors-beyond-our-control that America's executives and investors often invoke to justify this state of affairs. They're strapped because the handful of folks who own and control everything have gotten so greedy that they're keeping all the loot for themselves.

[Image: screen%20shot%202014-04-23%20at%209.09.12%20am.jpg]

Don't believe it?

Look at these two charts:

First, profits as a percent of the economy. They're at the highest level in history. The folks who own and control America's big companies are taking a bigger percentage of the fruits of the country's labor than ever before.

[Image: screen%20shot%202014-08-19%20at%208.53.05%20am.png]


Business Insider, St. Louis Fed

Second, wages as a percent of the economy. They're at the lowest level in history. The folks who own and control America's big companies are sharing less of the country's wealth with the people who create it than ever before.

[Image: screen%20shot%202014-08-19%20at%208.49.29%20am.png]

Business Insider, St. Louis Fed

You can talk all you want about how the free market is supposed to fix this, how people need to take responsibility for themselves, and how investors and executives have their own careers and performance reviews and lifestyles to worry about.

That doesn't change the fact that the reason America isn't working for most Americans is because members of America's ownership class are hoarding all the loot for themselves.

Fortunately, there's finally reason to hope.
For years, the most successful and richest Americans have pretended that they bear no responsibility for this state of affairs.
But now, a handful of rich and successful Americans have begun to speak out.

Billionaires like hedge fund manager Paul Tudor Jones and Salesforce.com entrepreneur Marc Benioff are talking publicly about what's going on and what will happen if we don't change course (revolution, taxes, or war, Mr. Jones said this week) . Hecto-millionaire Nick Hanauer is warning his fellow 0.1%-ers to brace for an onslaught of torches and pitchforks.

Specifically, these folks are cutting through all the rationalizations and explaining the simple way to fix the problem:

Pay people more.

Yes, that's right. Pay people more. Voluntarily share more of the value that successful companies create with the people who create it — the rank and file workers who dedicate their working lives to the company and its customers and, in so doing, to increasing the wealth of the senior executives and investors who own the company.

When confronted with this simple and obvious solution, most rich executives and investors will assume you are joking ("What are you — a socialist?"). Or they will argue, effectively, that there's a law of economics that forces them to pay their employees as little as possible.

But there isn't a law of economics that forces companies to pay their employees as little as possible. The owners and senior managers of companies can pay their employees as much as they can afford to while still keeping their company financially healthy.

In a more balanced and healthier economy, successful companies create value for three constituencies, not just one. Specifically, they create value for customers, shareholders, and employees, not just shareholders. They maximize value, not profit.

The idea that there's a law of economics that you have to pay people as little as possible is just an excuse designed to make senior executives and investors feel better about taking almost all of the company's value for themselves. But it's not a law. It's a choice.

So, it's encouraging that so many rich executives and investors are finally talking about this. The next step will be helping more rich, successful Americans understand where this unchecked pursuit of self-interest will eventually take us and what can be done about it. And then we just need to start sharing more of the value our great companies create with the people who create it.

After all, we're all in this together. And the solution is simple. Pay people more.
Reply
#4
Remarkable logic not to tax 'job creators' once again in action on a proposal to link state tax rates to the ratio of CEO pay and workers:

Quote:Under a bill introduced in the California legislature last year, a company whose CEO earns only 25 times the pay of its typical worker would pay a corporate tax rate of only 7 percent, rather than the 8.8 percent rate now applied to all California firms. On the other hand, a company whose CEO earns 200 times the pay of its typical employee, would face a 9.5 percent rate. If the CEO earned 400 times, the rate would be 13 percent.

The bill hasn’t made it through the legislature because business groups call it a “job killer.”  The reality is the opposite. CEOs don’t create jobs. Their customers create jobs by buying more of what their companies have to sell. So pushing companies to put less money into the hands of their CEOs and more into the hands of their average employees will create more jobs.
Robert Reich (The Outrageous Ascent of CEO Pay)

The explosion of executive pay is one of the reasons the US economy has produced stagnant wages and has been growing less and investing less from the 1980s onwards
Reply


Possibly Related Threads...
Thread Author Replies Views Last Post
  Shiver, a Voodoo package is coming near you.. stpioc 3 4,252 11-27-2016, 12:22 AM
Last Post: stpioc
  Youth rejecting Voodoo economics stpioc 1 3,301 04-27-2016, 04:26 PM
Last Post: stpioc

Forum Jump:


Users browsing this thread: 1 Guest(s)