Society wants cars/antibiotics/furniture/houses/etc but doesn’t want to make them ourselves through our government.
In order to accomplish functions like these that government wants accomplished but doesn’t want to do itself, government “contracts out” those functions. Corporations are those contracts. Corporations facilitate aggregation and manage of resources (huge sums, labor, etc) that are beyond the scope of individuals. We “contract out” through corporate charters to get these things done for us.
When You Look At It This Way
When you look at it this way — that government is the way all of society’s functions are managed(of course it is) and that corporations & the “private sector” are just “contracting out” some government functions — it gives people a way to take back the power in their own thinking. Who is the boss of who? How should corporations be regulated? Who should be regulating them? Etc.
Where Things Went Wrong
Here is where we went wrong. Executives at corporations are allowed to use corporate funds to influence society and pay politicians to allow things that enrich those executives personally.
We live in a society, and getting things done for society is what government is for. Government is society’s way to make decisions about society’s resources, economy and future. Period. Anyone who tells you you don’t need government, or that government shouldn’t do this or that, is actually just trying to BE the government, for their own benefit.
EVERY decision about society’s resources, econony and future is made by government, one way or another. Period. Every. Single. One. Socialism, capitalism, communism, dictatorship, aristocracy, oligarchy, democracy, etc are just descriptions of how that decision-making is divided up. It’s about who makes the decisions and who gets the benefits. All the “ideological” battles are really just all about keeping the public from understanding that.
In the US, supposedly a democracy where the decisions are ultimately made by “We the People,” we hear about the “public sector” and the “private sector” of our economy. What we call “the private sector” is really just the government “contracting out” the functions of managing society. Corporations are those contracts. From the recent post about corporations, Understanding What a Corporation Actually Is Can Help Restore Democracy,
We the People want to have factories to build cars or toasters. We the People could do this – build the factory, hire the managers, organize supply chains, provide insurance. etc. – ourselves but instead we have come up with corporations as a way to “contract it out” to private investors to accomplish these jobs for us.
Corporations are the contracts government makes when it “contracts out” its functions. Period. Government charters corporations to do things government doesn’t want to do itself. Those charters come with conditions and rules.
Except our currently captured government doesn’t enforce the agreements.
A Currently ‘Hot’ Example
Government contracts out money creation. We charter banking corporations to do that function of government for us. The Post Office could do that as well, but we, for various reasons, choose to let a few “capital” holders – wealthy people – do that and reap the returns.
fight is going to be a turning point of some kind. The right intends to let the country default to stop “government spending.” They mean it.
Biden’s choice is to let that happen, cave like Obama did, or enforce the Constitution, which says the govt has to pay its bills.
Gimmicks
For those insisting that “Mint the Coin” as a solution to this is a “gimmick” – (as if the debt ceiling wasn’t just a gimmick) – compare that to what we do now:
The idea that the constitution providing the power to "coin money" implies the ability to charter Federal Reserve Banks that can issue paper currency and open book entry accounts is much more of a gimmick than just… coining money.
Our federal budget is not like a family “kitchen table” budget. We stopped using gold as our currency a long time ago. We don’t mine or “round up” money at the federal level. Our government does not get “revenue” from taxes. It does not “borrow” money, it prints it.
(In this clip economist Stephanie Kelton explains that our government does not operate like a family “kitchen table” budget):
We (representative democracy through our Congress) decide that we’re going to allocate our resources toward accomplishing something, and we issue dollars as an exchange medium toward that. There are things Congress should do along with issuing currency (which we are not doing because of neoliberalism): Make sure we allocate resources we have (allocate toward steel increasing capacity before allocating toward using more steel than we have) and tax enough to balance the distribution (tax the rich) and soak up some of those circulating dollars.
Breaking away from the idea that the federal govt operates with “kitchen table economics” is a paradigm shift. You see it completely one way (deficits, debt, govt spending are bad), and then when something clicks you can’t see it that way anymore, only the new way (MMT, govt issues currency), and then you are frustrated seeing so many getting it so wrong.
Our government issues currency. So of course we could just “mint a coin” to issue dollars to pay off bondholders. But if we did that, the most dangerous question arises: If we can just issue money to pay bondholders, why can’t we issue money to … do things that people want and need?
Shake The Foundation
Minting platinum coins with a face value of $1 trillion and depositing them with the Federal Reserve is Constitutional and solves the problem. But it brings up questions that shake the foundations of neoliberalism. If we can “mint coins” to pay bondholders, why can’t we mint coins to do things that people want and need? Instead of just relying on private capital (the rich) to make investment decisions and get things done in our economy?
So Biden can do the right thing and just … pay our bills. But then the neoliberal order breaks down. If We (through Congress) can decide to … you name it, then why are we depending on “the investor class” (capital) and “market solutions” etc to decide where to invest, allocate resources, do the planning and everything else?
It is argued that the way around the “debt ceiling” argument is for the government to mint $1 trillion platinum coins and deposit them with the Federal Reserve. This would then reduce the “national debt” by $1 trillion for each coin minted.
The problem people have with this is people just don’t understand what money -IS-.
Money Is Created Not Mined Or “Raised”
I hope everyone reading this understands where banks get the money they loan out from. The answer is they “create” it. They are not loaning out deposits. They create the money out of thin air. If you don’t believe this, go look it up and come back when you understand it.
Like banks, the US CREATES money; it doesn’t get money from taxes or borrowing. The US does not round up gold to trade for armies anymore. The government doesn’t have to “borrow” money or get it by taxing. It just doesn’t. It creates it.
Our “money” says right on it that it is “legal tender for all debts public and private.” It doesn’t say you can trade it in for gold or something, it says it IS the money.
The US govt “appropriates” spending. Money is CREATED to use as the intermediary – the token – of that appropriation. The money the government spends minus the money it taxes bak is the amount of money in circulation. (Think about what “paying off the debt” would mean – it would require taking $30 trillion out of circulation.) Stephanie Kelton does a good job explaining all this in her book about Modern Monetary Theory (MMT).
Republicans Understand Money
Republicans understand money and know that Democrats and the public do not. This is why they ALWAYS use deficit spending and then beat Democrats over the head for “borrowing.” They do this so they can deliver things to the public and keep Democrats from doing the same. They do this every time, and Democrats respond by being “responsible” and imposing austerity on the public.
MMT and Inflation
One last important point. MMT does NOT say we can just print all the money we need. It explains that our govt needs to analyze spending for inflationary effect BEFORE spending. Like how China built tens of thousands of miles of HS rail – they ramped up steel plants etc first. What we do now is superstition – don’t spend “too much” or you “might trigger” inflation. And then you “fight” inflation by putting people out of work.
So Why Can’t Leaders Admit This?
Thinking about WHY Biden and Yellen and all Republicans and Wall Street types maintain this illusion that it would be “irresponsible” to mint the coin or get rid of the “debt limit.” It seems that maintaining the public’s “kitchen table” misunderstanding that the US gets money from taxes and borrows the rest, is the underpinning of the neoliberal order.
If the powers-that-be ever admitted that the US creates money through appropriation, and can control inflation by planning, (and therefore give everyone a job with good pay,) that would undercut the ideology that “markets” are superior to public planning, that capital is better at allocating resources than the public.
The website We CAN Have Nice Things explains MMT and links to many sources, articles, videos, etc.
This post originated at Imagine Democracy. If you follow all the links, it pieces together.
Over at sister-site Government Cheese, a discussion of capitalism, propaganda and how a few wealthy people keep things under control
Capitalism literally means that the people with wealth make the investment decisions for society & get the return on investment, and the broad public don’t.
All the rest is just propaganda. Capitalism has nothing to do with “markets” or “freedom” or any of the rest.
It’s really so simple. It’s how a few people maintain control of society for their own benefit and it’s been this way for thousands of year, under different labels. It’s what a monarchy is. The King and his buddies control the wealth. “WE should have this and you should not and here’s why.”
It’s why the United States was such a breakthrough. WE THE PEOPLE will decide what’s best for us, not you. Government of, by and for THE PEOPLE. Not the elites, the wealthy, the aristocrats, the priesthood, the monarchy, the warlord, whatever label put on the ruling wealthy. A country run for the benefit of the people in the country. Whatever label we put on that – democracy, socialism, whatever.
That’s all. All the rest is just propaganda.
Read Lincoln’s Gettysburg Address in the context of the monarchies of Europe just salivating waiting for “the Union” – the experiment in democracy – fail so they can get the world back where they want it.
This post first appeared at Government Cheese – Chronicling the Collapse of democracy
Government budget cuts are not what they seem.
Understanding history could also be called ‘wisdom.’ Wisdom told stories about “eating the seed corn.” If you eat the seed corn you can’t plant your crops the following year and everyone eventually starves.
In the early 80s Reaganism/Thatcherism (neoliberalism) convinced the country to drastically cut taxes on the rich and “pay for” it by cutting spending. The US stopped spending on maintaining and modernizing infrastructure – especially transportation infrastructure, on education, on science … on so many things. So we lived off of prior investment for so long. But the infrastructure deteriorated and we certain never modernized it. (Just look at our rail and transportation systems, compared to the rest of the world.)
All that $$ was transferred to the already-wealthy top few who paid for the propaganda that convinced the rest to do this.
Privatization
Another piece of this scam was “saving money” through privatization. Using local trash collection as an example, cities would “save money” by getting rid of public trash collection and contracting with the “private sector” to do this more “efficiently.” What this meant was laying off the decently-paid public employees and hiring them back at minimum wage with no benefits. The infrastructure – trucks etc – to do this would receive little maintenance, collection schedules would be cut back, and people had to drag their trash to the curb instead of having it picked up at the house.
This didn’t actually save money, it shifted it. The newly minimum-wage workers would lose their houses which reduced property prices for e everyone and killed the tax base, they’d go on public assistance, schools would suffer and have higher costs, etc across the board. And poor people can’t spend much so all local businesses suffer, too.
Etc etc etc we can see it all around us now. But it is too late.
You can “save money” by not changing the oil in your car. But have you ever seen a car that has never had its oil changed? After a while white smoke pours out the back because the rings are ruined. Other parts of the engine are also being ruined. Eventually the engine will seize up and quit and you have to either replace the engine or scrap the car. A simple and inexpensive procedure every few months would have prevented many thousands of dollars in expenses later.
After the Reagan tax cuts we “made government smaller” in several ways that are coming back to bite us now. One way we “saved money” by not “changing the oil” was by deferring maintenance of the country’s infrastructure – the water systems, levees, dams, roads, bridges, airports, ports, rails systems, electrical systems, and the rest of the things we all rely on to bring us safe water, get us to work, ship products and generally move our economy and live our lives.
Now the American Society of Civil Engineers’ (ASCE) most recent “Infrastructure Report Card” estimates we need to spend $3.6 trillion just to bring the infrastructure up to where it should be, never mind catching up to the rest of the word with high-speed rail and smart electrical grid systems. The bill is getting more expensive every year, and people are dying as bridges, roads and other important infrastructure components fail. Thousands died in New Orleans when the levees failed.
If people with OK public-employee jobs are replaced by lower-paid workers the community is poorer in the aggregate. More people will need public “safety-net” services. There will be foreclosures. Tax revenue drops because of lower pay but also because poorer people can’t spend as much in stores. Sales taxes drop as stores face fewer customers able to get by.
How many of you have heard about “MMT” – Modern Monetary Theory?
MMT says federal budgeting should look ahead to whether spending will cause inflation instead of just worrying that it will. After analyzing whether spending might cause inflationary pressures, address those causes of inflation – resource & capacity shortages – in advance. Then spend.
That way government can do what it needs to do to meet the needs and wants of We the People.
Example, of you want a high-speed rail system make sure to set up steel & train car manufacturing etc. first, then build the rail systems. If you approach it that way, capacity and resource shortages – steel, labor & other resources – don’t cause inflation.
Address the causes of inflation first instead of trying to “fight inflation” later by forcing people out of work, etc.
Superstitious Fear of Deficits
We have a superstitious fear that we might “run out of money.” We used to use gold (or shells) as money. Kings used to have to round up gold. People still think this is what money is. People think taxes round up gold – “revenue” – and the government that makes money – “dollars” – can somehow run out of the money it makes.
But that is not what money is, and not how a modern economy works. Money is created by government. (We “make” dollars and license banks to “create” money.) Taxes help regulate the money in the economy and (used to) balance its distribution. Dollars are like points on a scoreboard. A baseball game can’t “run out” runs. Our government can’t “run out” of dollars. Dollars are just an instrument of keeping score of how government has allocated our resources.
Unfortunately, the way government budgeting still works now – worrying about “deficits” and inflation instead of addressing problems that deficits might cause – we end up with austerity. We don’t spend enough. We don’t address the needs and wants of We the People. And if we see inflation we do terrible things to fight it. We CAUSE unemployment. We CAUSE poverty. Etc. We try to fight inflation after it begins instead of not causing inflation in the first place.
Austerity Breeds Fascism
Our medieval monetary superstitions and the resulting practices cause us to refuse to allocate resources to address our societal problems. This austerity keeps us from doing things to make our lives better. We don’t fix and certainly don’t modernize infrastructure, don’t provide healthcare or childcare or good education (through college), etc., so people feel government doesn’t work. As we saw in the 1930s and are seeing again now, austerity breeds fascism.
While the national minimum wage did rise roughly in step with productivity growth from its inception in 1938 until 1968, in the more than five decades since then, it has not even kept pace with inflation. However, if the minimum wage did rise in step with productivity growth since 1968 it would be over $24 an hour today, as shown in the Figure below.
$15 WAS the compromise!
$15 is a compromise already. If the minimum wages had kept pace with the gains in the economy it would be $24 or so per hour now, which is around $96K per year for a couple. What this means is that if labor’s share of the economy had stayed the same the minimum lifestyle equivalent would be what a $96K lifestyle today is. The house you’d be able to buy, etc. That would be our minimum.
#FightFor24
If they kill the $15 compromise there is no reason to keep fighting for $15. It should be $24 and we should all rightfully be fighting for that. It just gets us back to where we were before the great financialization, the great separation of labor wages from the economy, the great inequalizer.
“Protectionism” literally means we, as a nation, protect our national interests. It is one more word that has been twisted to make people think it’s a bad thing, like “entitlement” (the things we are entitled to as citizens in a democracy) or “welfare” (people in a democracy making each others’ lives better.)
“Trade” is about competitive advantages. It used to mean one region can grow bananas and another can grow corn, and by trading they each end up with both bananas and corn in their kitchens. (Good.) Today, though, it means authoritarian governments have the “competitive advantage” of allowing slavery and pollution so their factories can make things for less. So (the executives of) big corporations move production there, then squeeze the remaining workforce here with threats to move their jobs as well if they won’t lower their standard of living. (Bad.) All the gains of that “trade” are passed to a few already-wealthy owners and managers of that means of production. They use some of the gains to influence our laws to allow them to do this.
A democracy obviously would consider its people’s standard of living an interest worth “protecting” and would never allow businesses to influence lawmaking.
Trade can be done a different way but that requires democratic governance. Economists (used to) tell us that society gained from trade because making the economy more “efficient” by moving production to lower-cost regions frees up resources, providing increased investment and general prosperity; better infrastructure, higher pay and more free time for everyone in the society. And the production moved to the lower pay area means jobs and investment there, so they also move up that same ladder to increased investment and prosperity. That assumption depended on viewing society as liberal democracies capable of making and enforcing rules that would pass these gains on to everyone.
The failure of our country to maintain itself as a democracy has resulted in the allowance of trade with slavers and polluters, resulting in the extreme inequality we see. Thereby enabling further squeezing of workers and environment here. It also incentivizes authoritarian governments to allow slavery and pollution.
The solution to this, and so many other problems, is, of course, to remove the influence of money from our political system.
Breitbart used some of my stuff about trade in 2016, quoting it out of context, and got it wrong. Trumpers think that China and other trade partners “outnegotiated” the US. But they didn’t. The trade deals were exactly what the corporate-controlled US negotiators wanted.
But it wasn’t the bad trade deals themselves that hurt us so much as the way they were used by American businesses to hurt us.
Here is what I mean. “Trade” is when places that can grow bananas exchange them for things that come from places that can grow corn, etc. But we call it “trade” when we close a factory here and open it in China, making the same things to sell in the same stores, because they get paid less there.
The thing is, that can be a good thing for all of us IF it is done in a way that benefits all of us. And it can be. If you take the resulting gains (the difference between what people here were paid vs what they’re paid there) and use those gains to give everyone here better jobs or a better life, then we all benefit. If you invest that money in better infrastructure here, a more efficient economy, etc, then we are all climbing a ladder. And also the Chinese (or other trade partners) benefit from getting the jobs. Then over time they can do the same thing to climb the same ladder. That’s a win-win.
But instead of doing it that way, what happened was a few already-wealthy people just pocketed those gains instead of sharing them by. They didn’t invest in better jobs, or in better infrastructure or education, etc. They just pocketed it.
Even worse, they used the lower-paid jobs there as leverage to force people here to accept lower wage jobs, “or else your job goes, too.” They intentionally created unemployment. Unions were busted.
How did this happen? You’d think in a democracy the government would work to ensure that We the People would benefit from deals our government made. Our government should have made sure the trade deals were used to help us. But it did the opposite.
This happened because our government was “captured.” Instead of doing things for all of us the government started only doing things that benefited the financial types at the expense of the rest of us. This problem was always around. But the real change happened starting in the 1970s, and the effect hit us in the 1980 election. “Free trade” and “tax cuts for the rich” and “cutting government” (which means cutting spending on infrastructure and education etc, as well as cutting the regulatory protections that kept big business from controlling everything) and the rest happened, and we are reaping the whirlwind since.
Trade can be used for good or bad. It isn’t “trade” that’s the problem.
