[This review was published in the Fall 2014 issue of The Journal of Social, Political and Economic Studies, pp. 376-386.]
With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don’t Pay Enough
Berrett-Koehler Publishers, Inc., 2014
There is a weather pattern that is common for summer days in Denver, Colorado. The morning will start with a clear cobalt-blue sky, most often with only the smallest of clouds appearing over the mountains to the west. Clouds begin to build up as the morning progresses, so that by mid-afternoon there are thundershowers, some of quite ominous appearance, spotted over portions of the plain. This reviewer remembers the pattern well: as an eleven year old in the spring of 1946, he loaded his bike with Denver Posts and headed out to throw them door to door. It rained every afternoon at exactly that time. It was a day and age when the newspapers didn’t provide plastic sheaths for their carriers to place over each paper, so we can well imagine that homeowners had to dry out their papers in their ovens.
The expression “a cloud on the horizon” is often used when referring to a portent of much larger developments to come. In With Liberty and Dividends for All, Peter Barnes is dealing with a subject that is of the highest importance for American society and for which the first clouds appeared long ago. We see this when he cites Thomas Paine as someone who more than two centuries ago made essentially the same points he is making now. Since their early beginnings, the clouds have been building up, accumulating backers who have grasped the same concepts. A forecaster now might well say there is “a high chance of rain,” with conditions ripe for the ideas to reach fruition.
There have been socialists who have long endorsed the same ideas, but now the increasing polarization of wealth and income, the decline of the American “middle class” after almost a half century of stagnating wages, and the alliance of politics and business to form what many see as “crony capitalism” are conditions that are bringing a growing number of non-socialists – supporters of limited government and a market economy – to believe that the ideas will be vital to the successful operation of capitalism itself.
What are those ideas?
The concepts are simple. The first is a recognition that there are many beneficences enjoyed by people that have not come about through anybody’s effort, having been created by nature or society as a whole. Much of what surrounds us in daily life is of this sort. As the nineteenth-century economist Henry George emphasized, the improvements made to land are the products of someone’s effort, but the land itself is already there. This reviewer has made the point in his own writing on the subject that when Mike Tyson earned $30 million for his infamous ear-biting prizefight with Evander Holyfield he was in effect plugging into an immense social mechanism that he had not created, but on top of which he had added his own skill and brawn. “Earnings at that level were the product of a set of worldwide marketing institutions made possible by advanced communications. Did Tyson create that? Certainly not. Did anyone in particular? No. It was the product of the accretion of vast scientific-technical-entrepreneurial-even governmental effort by countless people.”
By now, a good many people on both the Right and Left in the United States have come to see the importance and validity of this perception. Barnes cites economists Robert Theobald, James Tobin, Paul Samuelson and John Kenneth Galbraith – and reports an exchange between Fox News commentators Bill O’Reilly and Lou Dobbs – both “on the Right,” so to speak – agreeing that “we the people own the gas and oil discovered in America… Land and water are the domain of we the people.” (1)
The inference from the presence of so much “unearned increment” is that it rightfully belongs to the population at large. Without violating anyone’s legitimate property right, some of it can be taken to provide for the common benefit. (We say “some of it” because much of it must be considered to serve as “the commons” within which individuals exercise their freedom; to take all of it would be to deny them the space within which to carry out their lives. An example would be the air we breathe, which is, in effect, “common property.” If each of us were charged its full value, whatever that might be, for breathing, all individual activity would be enormously encumbered, and that is not the intent of those who take the concept seriously.)
The conditions that are so vitiating “capitalism” today impel the conclusion that a market economy would be well served if some significant portion of common property were made the basis for a stream of non-labor income in equal portions to everyone. To the conditions we’ve already listed (i.e., the polarization, etc.), we should add the onrush of non-labor-intensive technology, which is capable of producing heretofore unthought-of abundance while at the same time stripping hundreds of millions of people of the traditional means of self-support through remunerated employment. Barnes points out that “jobs alone won’t sustain a large middle class in the future,” a fact that is apparent when we consider that there will be many millions of people competing for income in the non-technical parts of the economy. There is a major conundrum if the potential for incredible productivity is combined with people’s inability to buy it. Without consumer purchasing power the productivity will have no means to continue or the population to live. One need not have exceptional prescience to see that such a situation has explosive potential, and that in itself gives those who are highly successful in today’s global market a very personal stake in putting the market economy back on the right track.
With Liberty and Dividends for All is a lucid, easily readable, highly intelligent discussion of all this. Clarity of exposition is Barnes’ hallmark. If we were to seek to classify him ideologically, it wouldn’t be far off to place him on the American Left, although with the caveat that the Left and some parts of the Right have been coming to have a fair amount in common on several issues. He has been a correspondent for Newsweek and the New Republic, the co-founder of a worker-owned solar energy company; and, as an environmentalist, has served on the board of Greenpeace International. His compatibility with the Right comes when he says “I want to fix capitalism rather than scuttle it…, I strongly believe in markets… [and I] just as strongly believe in private property, tempered by a certain amount of community property.”(2)
The quick explanation we have just made of Barnes’ central thesis leaves a number of particulars to be discussed. Here are some of them:
He cites figures that are by now well known on the matter of polarization. Speaking of the United States, he reminds us that “the top 1 percent… currently owns 35 percent of all wealth, while the next 19 percent claims 53 percent.” The spread has been developing for several decades: “Since 1970, the incomes of men in their twenties and early thirties have fallen by 30 percent,” a fact that has been masked, he says, by three factors: women’s income to produce two-income households; overtime and second jobs; and the expansion of consumer debt. We might add that the fall in income has also been masked, and significantly offset, by the cheap cost of vast quantities of imported consumer goods.
When he examines the reasons for the decline in income, he points to four relatively recent developments: deindustrialization (the hollowing-out of American manufacturing by off-shoring, out-sourcing and importation); globalization (which through vastly improved communication and low-cost transportation is the setting for the factors just mentioned); automation; and deunionization. These are central, of course, but don’t fully tell the story. Barnes doesn’t take into account the flood of tens of millions of immigrants competing with Americans for work and most often willing to take less in pay; and he places little stress on the imports, through which workers elsewhere in effect compete with Americans, again at much lower wages. While he lists automation among his four causes, the brevity of his book doesn’t allow him to give it the attention it needs for readers fully to grasp the impact, already existing and bound to increase immeasurably in the near future, of robotics and other non-labor-intensive technology.(3) It was this last factor, even more than the growing polarization since 1970, that a few years ago caught the eye of this reviewer and caused him to see that profound changes were occurring that made necessary a rethinking of just how capitalism will need to work.
When Barnes includes deunionization among the reasons for the fall in wages, he is accepting the theory that unions were a cause of higher-than-otherwise wage levels in the United States. This thesis, while common on the left, is not shared generally by free-market economists, who argue that wage levels are the product of the supply and demand for labor. They agree with the obvious fact that unions have been able to increase wages for their members, but they make the point that this comes at the expense of others who are not then able to compete for those jobs. This is not the same thing as to say that unions have served no useful purpose; there are a number of facets involved with “the conditions of employment” that are not clearly a result of supply-and-demand, but rather depend on how things are organized within a given firm or industry.(4)
It isn’t surprising that because “common property” is so ubiquitous, Barnes reasons there is no final answer as to what specific sources a society, through its law-making organs, might choose for the money with which to pay the common dividend. He is, of course, able to name several. One of these, he says, might be a financial transactions tax, a small levy upon each transaction (advocated by a number of economists as a way somewhat to tame the ocean of financial flows in global finance), Another might be for the United States to adopt a Value Added Tax (VAT), also endorsed by many economists, that would match what most other nations have. Or the government could issue new money itself rather than have the banking system do it through the present system of “fractional reserve banking,” and some of the newly created money each year could fund, or help fund, the dividend. Barnes mentions that the United States government issued money directly itself in the form of “Greenbacks” during the Civil War, and that several economists in the 1930s urged such a monetary system. Along these lines, we would bring the reader’s attention to the work of the American Monetary Institute (mentioned by Barnes) in support of monetary reconstruction; and to the article by this reviewer discussing the AMI’s proposal, the “Chicago Plan” put forward by University of Chicago economists and others during the 1930s, and his own recommendations, which differed somewhat from AMI’s. (See Endnote 5 here.)
Barnes includes a passage discussing this reviewer’s “shared market economy” proposal, which calls for creating a national trust that will hold index mutual fund shares (thereby investing across the entire stock market), receive dividends from the shares, and pay a common dividend to the American public from that money, which will have been generated by the economy. When Barnes says briefly that “the capital to acquire the holdings would come from the US Treasury, which would borrow it from the Federal Reserve,” that is a too succinct and not altogether accurate description of the sources this reviewer discusses in Chapter 18 of his book A ‘Shared Market Economy’ and in his article on monetary reconstruction.(5)
One of the sources this reviewer cites comes from the fact that a common dividend, depending upon its sufficiency, can replace the multitude of social welfare programs, amounting to expenditures of hundreds of billions of dollars, that exist today. Barnes tells us that in Europe the initiatives that are proposed for a “guaranteed minimum income” do not contemplate such a substitution: “Such income would be in addition to, not in lieu of, existing social programs.” But he says “a trend among major developing countries… [is to have] direct cash payment programs as alternatives to traditional aid.” For his own part, Barnes says “the new pipes wouldn’t replace our existing ones – like social insurance.”
This is consistent with his as-yet rather limited aspiration: “The long-term goal is to pay dividends that modestly supplement labor income for everyone.” This should be seen as insufficient, though, for the impending future in which non-labor-intensive technology so greatly displaces “labor income.” The limited aspiration comes perhaps from being too centered, as most people still are because that is all they’ve ever known historically, on jobs as the means of livelihood. A “modest supplement” may be valuable as a politically feasible first step because it fits into everyone’s current mindset, but the future will demand more.
It seems apparent, too, that whether the common dividend can replace the existing programs will depend on how ample the dividend is. One of the things that can make it ample is for the money that is now spent on social security, Medicaid, food stamps and countless other supportive efforts to go, instead, into the fund from which the dividend is paid. It is interesting that Henry George argued that his proposed land tax should cause the abolition “of all other taxes now levied.”(6) (This, of course, was speaking of taxes, not social programs; but the idea is similar.)
This has a direct bearing on an issue that will be of especial interest to “libertarians” on both the Left and Right: how to minimize the role of government itself in the matter of income distribution. Those who wish to keep an active government role, including a vast stage for politics and ideology, will not want the common dividend to take the place of the multitudinous programs. For his part, Barnes sees it as a good thing for money to go directly into the national trust fund and then on to the population through dividends: “This means the revenue bypasses government coffers and all the battles that surround them.” As a classical liberal, this reviewer agrees with Barnes, and sees the bypassing of government as a major advantage to be gained from creating an independent trust fund to pay a common dividend.(7) It would be a mistake to think of it as a “socialist” program rather than as a far-reaching enhancement of limited government.
Another issue has a bearing on this. This reviewer has proposed a national trust that will hold index mutual fund shares, paying the dividend from the earnings. Is this better than alternative formats? The Alaska system, Barnes tells us, has the money from the oil pipeline revenue go into a trust that invests the money and pays the Alaska dividend from the investment earnings. This is almost the same thing as this reviewer’s proposal, but without the requirement that the investments be in index mutual funds. If we consider how the trust, even though independent, will almost certainly be subject to pressures from interested parties and even ideological or political factions with regard to where it invests its money, we come to understand that the index mutual fund idea has the advantage, to those with a libertarian bent, of removing the trust’s role in selecting investments. By definition, index funds are those that invest broadly across the market.
Barnes includes a very brief discussion of the lifestyle effects of a common dividend. He observes that “we’ll have more time to devote to family, friends, communities, and other interests. An ever-larger number of us will be able not only to pursue happiness but to enjoy it.” No doubt that is true. There is, however, a dystopian possibility that society will have to take seriously about a (relatively) “jobless” future. Will tens of millions of people use their leisure well, as we might hope they will? Or will Jonathan Swift’s horrific vision of the brutish Yahoos seen by Gulliver on his voyage to the land of the houyhnhnms rather set the tone? Our expectation will, of course, be colored by whether we are optimists or pessimists; but the truth is we don’t know what that future will bring. We can anticipate, however, that civilization will face unprecedented psychological, spiritual and cultural issues.
As we noted earlier, Barnes is a committed environmentalist. This has caused him to have “global warming” and a perceived need for the reduction in carbon dioxide emissions play a central role in his thoughts about how the common dividend system should work. He devotes a chapter to cap-and-trade, with a very considerable reduction over time of the extent of permits issued. He tells how President Obama has called for “a descending cap on carbon that will cut U.S. emissions 80 percent by 2050.” Barnes favors combining an auctioning of permits with a distribution of the revenue from the auction to the public (as part of the common dividend), resulting in what he calls a “cap and dividend” system. The dividend would greatly increase the political palatability of the permit program and would offset the increased fuel costs the public would incur because of the limitation of fuel supplies.
For those who are convinced by the “global warming” thesis and as to its scientific foundation, his inclusion of limits on carbon will be most welcome. It should be apparent, though, that this is an add-on that is by no means integral to the book’s main theme. A recognition of “unearned increment” and of how this justifies a common dividend to maintain a middle class and undergird a market economy does not depend upon such an added feature. A marriage of the two will be unfortunate if it complicates the picture by introducing highly controverted issues of science and ideology. And if the skeptics toward “globaI warming” turn out to be right, the marriage will be doubly unfortunate.
Readers who have had the intellectual fortitude to grapple with all we have considered in this review – and we have confidence that most readers of this Journal are of that sort – will easily appreciate that Peter Barnes has produced a remarkably valuable book. It deserves earnest attention.
Dwight D. Murphey
(1) Dwight D. Murphey, The Great Economic Debacle – and Beyond (Council for Social and Economic Studies, 2011), p. 147. This book is available without charge on the Internet at www.dwightmurphey-collectedwritings.info. The second and third paragraphs of that website tell how to access the book’s contents on the site.
(2) We should note, of course, that similar support for a market economy and private property has been voiced by the social democratic parties in Europe ever since German socialists adopted the Bad Godesberg Program in 1959. This suggests that there is considerable room for disagreement about just what it is that “a market economy” and “private property” entail. An extreme example of how the terms can be misused comes to mind. The American advocate of employee-ownership Louis Kelso wrote of a plan for what he called “capitalism” that called for a total equalization of incomes, which necessarily is altogether incompatible with a market economy. This was, in effect, a ruse, effective with the many who didn’t read him carefully. We don’t assign too much significance to Barnes’ speaking well of Kelso, since Barnes is by no means calling for a George Bernard Shaw-type of socialist levelling of all incomes. For a discussion of Kelso’s ruse, see this reviewer’s article “Selling Socialism as ‘The New Capitalism’ in the June 1990 issue of Conservative Review. The article is available as Article 25 (i.e., A25) on Murphey’s website identified in Endnote 1 here.
(3) For an extensive description of the new technologies and their effects on work, see this reviewer’s books The Emerging Crisis of Economic Displacement and A ‘Shared Market Economy’, each available without charge on his website. They are books B8 and B12, respectively, on the site.
(4) These issues of workers’ wages and conditions of employment are discussed at length in Chapter 12 on “Theories of Exploitation” in this reviewer’s book Socialist Thought. The book appears as Book 4 (i.e., B4) on his website.
(5) The article is “Capitalism’s Deepening Crisis: The Imperative of Monetary Reconstruction,” published in the Fall 2011 issue of this Journal, pp. 277-300. It appears as Article 105 on Murphey’s website.
(6) Henry George, Protection or Free Trade (Robert Schalkenbach Foundation, 1966), p. 283.
(7) It would seem to this reviewer that Barnes has misconstrued Henry George’s intent when he says (on page 51) that “unlike [Thomas] Paine, who would have returned recaptured rent to everyone, George would have left it in government’s hands.” In Protection or Free Trade (p. 285), George wrote of “a fund in which the tenant himself [which in the context of George’s discussion we can take to mean everyone] would be an equal sharer with the richest.” As to this fund, he mentioned (p. 284) “a large and constantly increasing fund [that] would be provided for common uses….” Were those uses to be determined by government? Not necessarily. “All schemes for securing equality in the conditions of men by placing the distribution of wealth in the hands of government,” George wrote at p. 305, “…presuppose pure government; but it is not government that makes society.” It was in keeping with this that George quoted with favor (p. 312) a suggestion that there be “a pension to everybody.” George wrote a great deal, though; and Barnes basically relies on a different book of his than this reviewer does, so it seems best to leave the question open, simply citing the foregoing quotes as some evidence of George’s views.
 Dwight D. Murphey, The Great Economic Debacle – and Beyond (Council for Social and Economic Studies, 2011), p. 147. This book is available without charge on the Internet at www.dwightmurphey-collectedwritings.info. The second and third paragraphs of that website tell how to access the book’s content on the site.