A week or so ago, Washington Post columnist Harold Meyerson gave his opinion of the current economic situation and what should be done about it in “Owner-take-all” (The Washington Post, 08/28/14, A17). On looking through our records, we realized that we had written a number of similar letters to the Post regarding similar opinions expressed by Mr. Meyerson in previous, also similar columns.
We realized that we were getting dangerously close to perfecting a standard template to send automatically in response to anything Mr. Meyerson writes. That being the case, we didn’t just whip out our now usual letter, but actually put some thought and time into it. Since it didn’t get published anyway (nor did Mr. Meyerson respond to the cc.), we’re taking this opportunity to fill the gap in our blog posting schedule with a slightly rewritten piece.
Mr. Meyerson’s point was that the greedy corporations should use more of their profits to pay workers more, create jobs, and invest in new capital to create jobs instead of enhancing shareholder value or paying dividends. Thus, Mr. Meyerson’s point was valid only if we accept that 1) owners have no right to the fruits of ownership, i.e., income and control, 2) human labor is the sole factor of production, and 3) existing accumulations of wealth are the only source of financing for new capital formation.
The solution to the problems Mr. Meyerson bemoaned is not to turn owners into non-owners by stripping them of their rights. As Louis O. Kelso and Mortimer J. Adler pointed out more than half a century ago, the solution to powerlessness is power — and “Power,” as Daniel Webster observed, “naturally and necessarily follows property.”
All dividends should be tax deductible at the corporate level to encourage companies to pay out all earnings and give owners their rights, and the tax system should favor the accumulation of capital assets by ordinary people on a tax-deferred basis. Full payout of earnings in the form of dividends tax deductible to the corporation, not artificial government stimulus, would increase consumer demand, and thus the demand for new capital and job creation, raising wages naturally as the demand for labor increases.
All growth should be financed in ways that create new owners of the wealth, not keep it concentrated so that the State has to step in and redistribute the benefits of ownership to non-owners. Meyerson should advocate that non-owners be helped to purchase newly issued growth shares using non-recourse credit obtained from commercial banks at low cost and collateralized with capital credit insurance and reinsurance, and rediscounted at the Federal Reserve, to be paid for with dividends on the shares purchased.
An aggressive program of expanded capital ownership financed by expanding private sector bank credit would spread out capital ownership and supplement or replace wage income with ownership income, thereby reducing the upward pressure on wages and benefits. It would also replace the present unstable debt-backed currency with a stable asset-backed currency — as the Federal Reserve was originally intended to do.
The role of the State is to remove barriers to full participation in economic life, not put more in place. By refusing to acknowledge barriers that inhibit or prevent propertyless people from owning capital on easy terms, and by advocating that capital ownership be penalized, Meyerson only succeeds in promoting a wage and welfare slave system in place of the free society he, like most of us, clearly desires.