Three options to economic life

          The choices for living  (in a world that will become market-based economies only) then have come down to three options. 
          Be unemployed and depend on others to provide for your material means of living (food, shelter, clothing, transportation, etc.). This choice is not helping to grow the economy, this is not demonstrating the self-improvement that has been our focus. (I remember one economics professor starting out a semester of study with the assumption that all people are lazy and helped his class to understanding the world based first on that assumption. The assumption is not true, and what that professor did not help us understand is that the lazy people are the least important to the workings of any economy. Discarding the assumption of that one professor,) The group of unemployed people in society does include the very young, adult students who are investing in skills, training and knowledge, and the elderly, and some adults who are (the very pinnacle measure of our humanity) disabled. ("If we want to discover the full potential in our humanity, we need to celebrate those heartbreaking strengths and those glorious disabilities we all have. It is our humanity and all the potential within it that makes us beautiful." -- Aimee Mullins)
          The other two choices ARE expressions of financial self-improvement and I would even term as seeking "financial livelihood." 
          Second you might be employed and manage to spend, save and invest the income that is earned from an employer or several employers. 
          The third choice is for you to be a business owner, an employer.
          What about employment by the government? How is this different from employment by a business owner and why can't we all just be employed by the government, letting the government be the business owner? The difficulty in depending upon government employment too heavily is that government agencies do not operate on a profit basis as a decision-making mechanism like businesses do. This same reasoning can be applied to non-profit employers. Let's demonstrate with a long example. 
          (Hopefully readers will not become confused if outside of this book pundits use the term Mixed Economy as a substitute for a Regulated Market Economy. The substitution does not work. A mixed economy depends upon the government to produce some sizable proportion of the country's gross domestic product. Well in that case, most every economy is a Mixed Economy since governments produce the education, roads, military training, and so many other portions of the economic whole. The emphasis here is to point out that by "Regulated Market Economy" we are dismissing the misleading phrase of Free-Market Economy since no market organizes freely, free of regulation or free of societal restraints.) 
          In a business, the owner is managing the capital, the loans, the costs of maintaining those two, the labour costs, the input costs and quality of goods and services, and is trying to squeeze profits out of every sale. The mathematics behind each of those costs and any revenue streams are all comparable (in dollars or Euros or Yen or other national currencies) and all directly affect each other by the measure of the currency. 
          How is this different in a government agency? First of all, if government agencies generate surplus revenue (or profit) for one year's budget, then their funding is cut with the expectation that they will be able to perform like that in the next budget year. That is wrong. Government agencies are not organized to generate "profits" or excess revenues. If there are excess revenues, then it's as much of a fluke as any roll of the dice.
          Secondly, the managers of a government agency have not been trained and conditioned to notice how extra revenues are being generated, so they don't specifically know how to repeat those steps that led to any excess revenue. In fact those managers will see any reduction in funding as a demerit, or a disciplinary action. This will be a dis-incentive for them trying to repeat the effort at generating excess revenue. Along this same line, the agency managers do not have any personal financial incentive in generating excess revenue -- they do not personally get bonuses for easing the burden on the tax payers. 
          By those two reasons, we see how a business operates with an advantage by using the currency and the mathematics possible through the currency to gauge costs, revenues, profits, the success of any planning, to look into future months and deal with shortages, to see peaks and valleys in the seasons of their industries and of their communities. Using the flow of currency works dramatically well for the business owner. Government agencies and their managers do not have the same tools or insights. 
          Why can't that principle be applied to government agencies or to non-profit organizations? The first answer is that those agencies and organizations often times have to respond in reverse to the business cycle. So while a business owner may forecast a slow season based on the mathematics behind the money flow (laying off employees, cutting the size of orders, not purchasing replacement equipment, etc.), government agencies may have to increase their expenditures at that very time because of greater unemployment, greater demand for low-cost housing, bread-winners experiencing greater difficulty in feeding their families, or when a natural disaster disrupts the smooth working of the market economy. Then when a community is more self-sustaining based on the general health of the market economy, the government agencies need to remain vigilant and those managers need to fight to keep their budgets at levels high enough to keep the agencies intact even though demand may be low for their services. This type of management is counter-intuitive to the management of a financially based and profit-seeking business. 
          Non-profit organizations can base many of their decisions on cash flows. At the same time they need to base their decisions on the missions and objectives and goals set out for them to accomplish, which justify their operation as non-profit organizations. A church may offer free cooked meals to groups of homeless or disadvantaged people. They are not looking to profit from this, but they do need to manage their costs, predict how much food to prepare, not be too wasteful with left over foods. Funds still need to be collected to pay for all those costs. A church could be collecting excess food from restaurants and grocery stores, and could be collecting cash donations from members and finding other sources of funding. Instead of delivering cash dividends as a business would, such a church needs to be sure they communicate the success of their programs to all those who generously give to the non-profit mission. Still those "returns on investments" or returns on donations are very difficult to measure, unlike the ease of measuring cash flow, costs and revenues, profits and capital values. 
          In spite of these complications and the differences between business employers, government employers, and non-profit employers, a principle of Capillary Action http://bit.ly/1SI4HIj must still be recognized. On the micro-economic level, each employee must be creating value for the employer, value that is greater than the paycheck which the employee receives. The justification becomes more complicated and sometimes more difficult to gauge for the government agency and for the non-profit organization. They cannot judge the value of the employee's contribution solely on monetary values. In fact, businesses should not judge solely on monetary values either. For instance, a business does need to build loyalty and trust with its customers, which is difficult to measure in monetary amounts, but employees do create that loyalty and trust in their relationships with customers. Employees do create some value that is beyond monetary measurement. Business managers and owners can base their decisions more weightily on monetary values since the cash flows are involved in every facet of a business. Government and non-profit employees will be evaluated on more loosely defined values (expressed in mission statements and funding directives) they create beyond any savings of costs or generation of revenues. 

          For an economy to be stable and healthy, we might wonder what proportion of people can be employed by business owners and how many could be business owners. And is it possible to have too many business owners and not enough employees? If everyone decides to own a business and not be dependent on an employer, what would the economy look like, would if function properly? 
          According to experts including master restaurateur Gordon Ramsey and small business advisers Second Wind Consulting, your business should be all right if you are spending approximately one-third of your gross income on payroll. Spending more means you're not making enough profit, or unable to make investments to support the business. Spending less means you might lose your best employees because you're paying them too little. . . .

          Those numbers work well for businesses that manufacture a product. However, you can afford a higher percentage for payroll if you run a service business. Service businesses don't have materials costs, and thus have more room to pay their staff -- who are essentially their product. Even in service businesses, Second Wind Consulting recommends keeping payroll below 50 percent. (Wayne, Jake, of Demand Media, http://smallbusiness.chron.com/percentage-payroll-vs-income-small-business-13026.html)

          Since businesses need employees and their labour to create value, then some people must be convinced to remain as employees and depend on the income earned from employment. Within businesses, employees are necessary.
          Employees do become dependent on their paychecks and dependent on their roles within businesses, under the management of owners. In a market-based economy, financial livelihood is possible from ownership (which not everyone can have) and from employment. Considering Capillary Action, if value is flowing up hill to the owners through the work efforts of the employees, then there is a clear possibility of taking excessive financial advantage over the employees. 
          Changing jobs is not a process that can be taken without a great deal of planning and considerations. As an employee, a person has a certain skill set that is valuable and employable, but often not quickly transferred to another employer nor to another industry. So while there may be pay and other incentives attracting an employee to keep a job, there are also heavy potential costs to leaving a place of employment to seek other opportunities. Employees can not specify one point at which a current job will be abandoned. More reasonably, they have a range of issues to consider before looking for and applying for a job with a different employer. 
          Secondly, an employee is not fully informed about how an employer is taking advantage. A group of coal miners may be very happy as a group when they are kept ignorant of the level of income and life styles outside of their "company town." Meanwhile the coal company executives could be living excessively lavish lifestyles based on the value created by the coal miners. Those company executives will want to keep the employees ignorant of the differences in their lifestyles. A company executive may even believe that one deserves the better pay and lifestyle given ones investment in education and social graces and tough negotiating skills. This is a complication. Once the miners learn of the inequities between the levels of pay and living standards, they as a group could organize and demand better pay, and demand that their lives not depend solely on the coal company. That history offers a great many trying lessons.
          So far in this economic treatise, I have dealt only with employment, labour and management. Much of economics examines the role of capital too and its level of earnings. Investors and silent partners, owners of land and wealthy individuals who lend money to a business but take no role in managing the business practices, are they "owners" or are they "dependents" under this model? Precision in naming the distinctions can be difficult. If a person offers capital until such time as some level of returns has been reached, then the capital is withdrawn, then that person is acting as a dependent. 
          (This does not speak to the role of any lending or investing business such as a bank. Those businesses are acting in far more complicated ways. We are speaking about the actions of individuals, basing our model on the actions of individuals. i.e. The committee did not act, rather individual members within the committee voted and their majority rule placed some processes into action by agents, individuals, who agreed to carry out the directives of the group.) 
          In opposite extreme to these dependent capitalists, if an investor or lender places pressure upon business managers for the business to emphasize some value(s) other than earning profits, then that capitalist may be seen as acting an employer. An involved investor can be seen managing some resources and directing the actions of employees to achieve something other than simple profits, or to achieve profits by a particular expression of personal character or culturally shared values.

spelling out my bias for Stiglitz’s preface

Stiglitz’s preface does not bode well for his 2012 book “The Price of Equality” to accomplish very much, nor to open up new discussions, nor to impress enough decision makers about the value of his work. In the preface, he points to a downward spiral of inequality corrupting the political and business processes of a country. This corruption leads to less efficiency for the markets and less stability for the markets. With markets being less efficient and less stable then there is growing inequality and then more corruption. I want to see how Stiglitz develops this theory, and what evidence he can offer to convince his readers. But then for the rest of the preface, he seems to be whining, “It’s unfair, it’s unfair, it’s unfair, and it’s unfair,” like a second-grader. And then I saw him slip in the idea of government redistribution of wealth.

Life is unfair, and if he expects to undo that reality, then I am biased against his book and I need to deal with my bias against him before continuing the reading. Holding on to my bias is not going to allow me to read and best understand what he does have to offer. I will write out this essay so that I can work out my bias, and then maybe I will be able to read and better appreciate what his book has to offer.

And get off the idea of government redistribution of wealth!!! Before government can lay their hands on wealth, capital, assets, or possessions, they have to offer due process. Through due process a government can claim imminent domain, or public goods, or “the needs of the many out weigh the needs of the few or the one.” (Star Trek reference there, and I think Gene Roddenberry had a beautiful vision for a future economic system.) Wealth should be out of the reach of the government. Income meanwhile is within reach, through monitoring and through taxation (payroll taxes apply with every paycheck and April 15 is coming). But wait, the government can not know what’s best for the redistribution of the income. We cannot trust a corruptible government to best decide what to do with one person’s income in assigning it to other people!! If we are striving for efficient markets, then what about allowing the markets to decide about the redistribution of income?? (Specifics on how can come in a bit.)

First we much realize that all questions of income and markets and economics are rooted in micro-economic questions. Let’s toss out Stiglitz’s downward spiral and replace it with the micro-economic story. Individuals are the only ones who act within an economic system. Maybe a statistician or scientist can spot a trend based on watching and measuring the actions of many individuals, but you can realize that the individuals act. Within a corporation, individuals act to create the value that is marketed and sold to individual customers. Within the stock market, individuals write the code for the computerized buying programs and then individuals decide the prices that will trigger bids to buy and to sell. Individuals in representative bodies and in executive offices decide to lead on a legislative initiative, or to vote one way or the other. All those individual actions accumulate together to play out the economic system. This is micro-economic actions playing out to cause macro-economic trends and realities.

Individuals will act based upon perceived incentives which should pay off compared to risking some investments of time, labour, skill, strategy, reputation, weighed against other opportunities and other dimensions of a decision to act. If the incentives can be increased for growing numbers of people, then more might risk starting their own businesses, more might risk an embarrassment in front of a supervisor and a work team to offer a revolutionary production method, more might risk investing in a new home, real estate or new vehicles and equipment. If more incentives can be offered to more individuals, then the economy can grow based on what opportunities the individuals seek (not based on the government’s corrupted notions). From this micro-economic view, the growth of the economy is based on individuals perceiving and acting upon greater incentives which drives those prospering individuals to seek out even more opportunities and understanding the incentives that keep compelling them to make economic investments and striving for greater efficiencies and stability and to all the more appreciate predictable markets, those being the markets that do not fail so often and probably that have less volatile business cycles.

Of course when we say incentives, we mean cash. We mean getting more money out in front of more people. We mean offering them more income, that is what is meant by incentives. (Along with prestige, and individual autonomy, and self actualization, but economists don’t do well at measuring those things. We measure money.)

(Are we a bit further on yet? Can we now turn to the specifics of how income can be redistributed if not by government?)

What’s needed then is some extra incentives, but where can they come from?? They will not magically appear.

If inequality is an unwanted outcome, is there a way to lessen the inequality as a method for increasing the incentives for more people? Is there a way to lessen the inequality as a method for increasing the incentives for 99 percent of the people? Income can be taxed. But we don’t want the income to go to the corruptible government as tax revenue. What if instead of a tax, we capped all individuals so that no one in the whole world could earn more than 10 million Euros in a year, or no more than $15 million in a year, or the equivalent per country in a year (remember countries wish to keep their sovereignty)? What could corporations do with those revenues that no longer can be offered to their executives, their superstar employees (a term from Freeland‘s book “Plutocrats”), to their board members, to their consultants, nor to their richest investors? How would corporations and businesses redistribute those revenues?

Now how would a cap work?? Well, yeah, . . . let’s call it a tax. After earning the income up to that annual cap within a year, all further individual income will be taxed at 100 percent. This is a tax that the government does not want to collect -- how awful it would be to allow the government to collect that money!!!! And it is a tax that no millionaire would want to approach or to deal with! After all, not only is the millionaire loosing all of that extra income, but one would still have to deal with the costs of accounting for the money earned over the cap. So the tax rate really would feel like 102 percent or 105 percent when you figure in the accounting costs. Then there would be the embarrassment among ones peers should they find out you tried to earn money over the annual cap (which they are all denied) and then got busted by the feds!! Yes, we’ll call it a tax that is never intended to be collected. This will be a 100 percent tax on all income over the annual cap.

What could corporations do with those revenues that no longer can be offered to their executives, their superstar employees, to their board members, to their consultants, nor to their richest investors? How would corporations and businesses redistribute those revenues? Would corporations and their markets find some efficient means for steering funds toward more research and development? Efficient means for raising the pay of deserving employees who are not near the annual cap? Efficient means for investing in equipment, real estate and manufacturing opportunities? Efficient means for green and sustainable developments? Efficient means for greater training, education, workplace safety? More creative ideas on serving customers, earning greater loyalty and reducing the risks to the lives of customers?

I believe in the markets, and in people’s abilities to recognize economic opportunities and incentives. Things would still be unfair with an income cap in place, would still be unfair regardless of how society evolves (even if guided by Roddenberry himself). But I do want to understand the price of inequality in economic systems, and I hope Stiglitz can help open my eyes.

Summarizing Two Actions Proposed after all the preliminary truths

Trevor, Brian and Jordan, (who commented on http://www.pewresearch.org/fact-tank/2013/12/05/u-s-income-inequality-on-rise-for-decades-is-now-highest-since-1928/?moderated#comment-546050) 

I agree completely!! Corporations are non-citizens and should not be influencing ballot measures or candidate campaigns at all. We already rule out any influence from Japanese citizens, or German citizens. Corporate stock can be owned by anyone around the globe, and thus corporations have interests that conflict with our national interests. Restore the privileges of citizenship to the citizens exclusively (see the 14th Amendment to the Constitution, and my arguments about how courts have been alienating citizens from their rights and privileges)!! And after all corporations are merely legal inventions -- why should they be represented in any manner similar to the representation of citizens??

Following Trevor's second point, the circumstances from Ferguson (and so many other communities) demonstrate how people are not represented adequately in our Republic! We need to get more people to be active citizens through voting and through constant conversations with their representatives. 

Similar to Trevor's second point, we need to be sure there are enough incentives for all people to be community involved and to seek out adequate income. Knowing that you own part of this country will make you more interested in what is important to keep the country on the right track.

My most striking proposal (I suspect this will take 30 years to happen) is to have an income cap. If the top earning people are taxed at 100% for every dollar they earn after the first $15 million in a year, then they will walk away from the table after that ceiling is reached. Then the market systems (not governments) can help to redistribute (not the dollars but) those financial incentives to larger and larger groups of people. Plus, corporations (not allowed to have their finances prying into political balloting and not overpaying their top executives, managers and investors) will have to find efficient ways to spend their money (R&D, equipment investments, greater workplace safety, higher wages for employees, greater quality of products) and/or lower some prices in the market place. Yes, the market mechanisms can redistribute all this without the government trying to decide IF we regulate the greed. As a bonus, if we regulate the greed with an income cap, then a lot of other minor regulations can be eliminated -- those regulations that are merely nibbling at these problems of income inequality. 

I'd like to stay in touch with people of your thinking!!

AuntieGreed@gmail.com

Three arguments against corporate involvement in citizen ballots and campaign funding

A complete political restriction on corporations needs a bit more discussion. Corporate laws as far back at the 1700's originally were written to allow people to take risks that they personally and professionally could not take as individuals. So while a partner in a firm could not take the risks financing of spice trade with India, a corporation could take those risks. Through our evolution of corporations, eventually they would operate with investments from people who were not directly involved in the management of the company, with decision making by boards that held wide-ranging perspectives on several related industries, and based on the expert abilities of managers and directors who could focus on the best financial health of the company and its projects. The risks were not personal or individual risks, and so each individual was protected from the heaviest, most onerous of risks. The corporation, as a legal entity or as a legal invention, could accept those risks and act based on the outcomes.  

Something went wrong when corporations started being compared to people -- legally, socially, in marketing efforts, and politically. {explain the moral questions raised by giving corporations and businesses the same rights as citizens} 

The United States is the longest standing republican form of government, and the vitality of its markets over the past 200 years offers testaments to the validity of a market based economy. The example of the United States has also been one leading basis for framing the laws, constitutions and market institutions throughout Latin America, western Europe, Japan, Korea and other  nations of the eastern Asia, India and nations of Africa and Arabia. So the United States' example will lead in our discussions here followed by examples from other nations. 

Ballot measures are issues for citizens to determine. Corporations are legal inventions, not citizens. Corporations represent the interests of their owners and investors and executives and managers. Corporations can base themselves in any nation, state or province, and even be multi-national -- meaning they could have conflicts of interest with and between the best interests of their multiple nations! And in a very real sense, the corporations and businesses are mainly interested in the value of profits which for them supersede any community values or national values.  

Non-citizens are restricted from voting. Non-citizens are banned from giving financial support to political campaigns. {offer examples of laws from several countries} Why then should corporations (defined as non-citizens) be allowed to give financial support to political campaigns, or even express opinions about the ballot issues that are solely for the consideration of the citizens? I am seeking agreement on the idea that corporations should not be allowed to express opinions on ballot measures because of the influence of the non-citizens in those corporations and their interests which may be contrary to the best outcome for the citizens. That concludes one argument.  

By recent decisions of US courts, rights to free speech have been extended to corporations and businesses. From that basis, corporations have found themselves completely free to give unlimited amounts of financial support to politically active groups that are swaying voter opinions on ballot measures throughout the US. (Even the selection in states of their Secretaries of State is being politicized {...}.) 

From the US Declaration of Independence, there is a recognition that human rights to "life, liberty and the pursuit of happiness" are unalienable rights. Saying this in another way, no action or inaction by anyone or any group should allow citizens to be alienated or separated from their rights. Yet by giving rights to the non-citizen corporations these court decisions are alienating the citizens from their rights as voters. As those corporations exercise to finance political campaigns, the liberties and free speech of citizens are being drowned out, are being overshadowed by the power of these corporate voices. The negative advertisements, the extremely loud and too-often repeated advertisements, and many other efforts financed by corporations are alienating the citizens from their rights to speak and to be heard, and from their rights to consider and vote on ballot measures. Some growing apathy and antagonism towards "government by the people" is the very sign that the people are being alienated from their rights. That concludes the second argument. 

Lastly, Section One of the Fourteenth Amendment to the US Constitution reads, "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws."  

Did you notice the change in terms, the difference that is expected between citizen and person? Any person shall not be deprived of life, liberty or property without due process. Yet a citizen falls into a more specific group and the privileges and immunities of a citizen shall not be abridged.  

One privilege of being a citizen is that citizens can not be anonymously influenced by non-citizens in voting matters, in discussing and deciding upon ballot measures. I point to the "free speech of corporations" as an abridgement of the privilege of citizens to exercise their right to vote because those non-citizens do attempt to influence and affect the citizens, their opinions, and their resolve in casting ballots.   

If a non-citizen is permitted by some state law to keep a citizen away from the ballot box on election day, then that directly affects the citizen and that state law is abridging a citizen's privilege. If a non-citizen, permitted by states or by courts, overwhelms citizens with any opinion on a ballot measure, especially by way of negative advertising, then those efforts are abridging a citizen's privilege. Finally, if the number of advertisements, financed by a non-citizen, and then some confusion from those advertisements brings a citizen to not vote out of frustration or a sense of apathy, then the advertisements are abridging a citizen's privilege.  

Based on the history of court decisions and other duly passed laws, only an amendment to the US Constitution may reverse this current trend in the corporate funding of political campaigns.  

Beyond these three arguments the US Declaration of Independence reads, "That to secure these rights [we are focused on the right to vote], Governments are instituted among Men [we understand this to be citizens, not legal inventions, but a special group of persons], deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People [again the right of citizens] to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them [exclusively citizens] shall seem most likely to effect their Safety and Happiness." We citizens have the right to exclude non-citizen corporations.

Wisdom from Aristide's "Eyes of the Heart"

pg 36 of Jean-Bertrand Aristide, Eyes of the Heart: Seeking a Path for the Poor in the Age of Globalization. Common Courage Press, 2000.

Do not confuse democracy with the holding of elections every four or five years. Elections are the exam, testing the health of our system. Voter participation is the grade. But school is in session every day. Only the day-to-day participation of the people at all levels of governance can breath life into democracy and create the possibility for people to play a significant role in shaping the state and the society that they want.

Auntie Greed: maybe this is a nice point to emphasize about the November 24 referendum vote in Switzerland. The youth wing of the JUSO had proposed and won more than 100,000 signatures to a petition. That led to a referendum on a proposal that the top pay within any Swiss company be held to no more than 12 times the pay of the lowest wage earner in the same company. If the measure would have passed, then executive pay would have been lowered for those companies, and lowest wages in those companies would have been raised to allow the top executives to earn greater amounts.

The referendum failed with 35 yea vote to 65 no vote margin. Remember now, Aristide said the vote was merely the grade. The fact that Swiss citizens are engaged with the issues demonstrates the true power of their democracy. Salute to the Swiss and their attempts (there have been other ballot measures) to raise questions about inequality of pay scales.

My opinion is that such a ratio based policy on pay scales would not have worked. If the Swiss would have passed the measure and executed the letter of the resulting laws, then companies would have exited the country and conducted their business under more favorable laws. That is a crucial point I have been making about corporations and businesses. They are not citizens. They are not bound to any location or nation. They are only bound to profits and the good of their owners/stock holders. Switzerland would have lost out if the measure would have succeeded on the ballot.

Also, nothing would have prevented a company wanting inordinate pay for their top executives to end up subcontracting a great deal of their business. That would be a pretty simple model for a company to operate. A bank could contract each of its branch locations to some pseudo firms. The top earners of those sub-contractors could only receive the maximum pay of 12 times the lowest paid bank teller. But the true bank would get to set it's executive pay at some higher level because it would no longer employ those underpaid tellers.

What I hope the Swiss leaders and the rest of the world appreciates is that the democratic systems are working, and the voices of those who are hurt by the current level of inequality are being heard. As their voices join together under some common mantras, they will organize and find solutions that fit the needs of the many countries around the world.

All my best,
Auntie Greed

     The book "Eyes of the Heart" was published in the year 2000 with the controversial Jean-Bertrand Aristide as the author. He ends Chapter One: A Crisis in Faith in this way:

     "Behind this crisis of dollars there is a human crisis: among the poor, immeasurable human suffering; among the others, the powerful, the policy makers, a poverty of spirit which has made a religion of the market and its invisible hand. A crisis of imagination so profound that the only measure of value is profit, the only measure of human progress is economic growth.

     "We have not reached the consensus that to eat is a basic human right. this is an ethical crisis. This is a crisis of faith.

     "Global capitalism becomes a machine devouring our planet. The little finger, the men and women of the poorest 20%, are reduced to cogs in this machine, the bottom rung in global production, valued only as cheap labor, otherwise altogether disposable. The machine cannot and does not measure their suffering. The machine also does not measure the suffering of our planet. Every second an area the size of a soccer field is deforested. this fact alone should be mobilizing men and women to protect their most basic interest -- oxygen. But the machine overwhelms us. . . ."

     I agree with him and wish that I could make many of the same points in my arguments for an individual income cap.

     Behind the economic turbulence there are other factors, other measurements we should be addressing. (First we would have to notice them.) Too many of the scholars and pundits are concentrating on the financial economy as the priority and hoping that other issues render their own solutions once the prosperous times return. My concentration is on limiting greed. My highest expectation though is that we humans will then recall how much we value so many other aspects of humanity (community, arts, leisure, wellness, family, etc.) once the profits and the excessive wealth are capped.

     As Aristide points out, the worshipping of the excessively wealthy, the aspiring to have what they have, the competition for status (Veblen) among those wealthy, has wrenched the spirit out of so many well-to-do people that they are not noticing their roles in turning up the suffering on the poverty stricken. Not only do the poor own nothing, they also have no opportunities in their futures because the richest people are drawing more and more of the value and the finances and the wealth to themselves.

     Let us shake off this money worship by limiting the income of individuals. Once a person earns 10 million Euros in a year's time, have that person walk away from the table and give others chances to earn better incomes. Then we could move towards recognizing all those things that are more valuable than profits, more valuable than individual greed. And we can measure the happiness indices, we can live upon some more humane indices in addition to our economic growth.

     In his second paragraph, Aristide names a crisis in faith. A crisis in faith is when one does not believe in a proposal, is doubtful about some aspect of the future. Societies do not see food for all as a basic human right, comparable to the right we all have to free speech, or the right to practice our religions without persecution. We individuals may not have faith that there will be enough food for "my own family" if all people are promised food. That is a crisis of faith. My argument is then that the excessively wealthy and those who wish to emulate them, will grab up all they can (expressing their greed) to protect their own families (or their individual futures). They will take financial advantage over others to express that individual greed. If we can cap that greed, and if our economic systems can keep growing under the conditions of capped individual incomes, then we may grow in our faith, grow in our confidence that the world can feed all people, that all people can be provided for without threatening the futures of anyone who contributes. I hope more people can give consideration to these ideas and raise their faith.

     There is wide agreement on the points of his third paragraph. The laborers are thought to be disposable. Any workplace lay off is judged simply on the balance sheets and profit calculations -- hardly ever in humane ways. Meanwhile those unemployed are powerless against the machines of capitalism and of nation-wide politics. As the working poor watch the mistreatment of the unemployed, they are simply relieved that they were able to hold on a little longer. They too are powerless against the machine. And we do not value our natural resources, our held-in-common societal resources while our focus remains on the dollars, Euros, Yen, Reals, etc.

     I hope to clearly state my eleven points in such a way that the crisis in faith can be remedied, turned around.

Capillary Action in micro-economics

Trickle Down Economic Stimulation can be declared dead. The “Capillary Action” on value creation and financial gain that occurs in every business eliminates any chance for economic stimulation in Trickle Down theories.

Trickle Down Economic Stimulation suggests that if tax breaks are given to established business owners, then their investments in the communities and business and in increasing payrolls will allow the value of those tax breaks to trickle down to the citizens who are at lower income levels of the economy, of the community and of the state. The problem is that established businesses are successful in drawing all that value back up into the owners’ controls (discretion, management). The citizens at lower income levels do not see appreciable increases in their well-being. My illustration begins with a stalk of celery.

You might recall Capillary Action from a second-grader’s science project. A cut stalk of celery is placed in a dish of colored water. Over time the color of the water and the water itself flows up hill into the celery and its leaves. (Yes, water is flowing up hill!!) This process is nicely explained at the ga.water.usgs.gov/edu/capillaryaction.html webpage.

“Capillary action is important for moving water (and all of the things that are dissolved in it) around. It is defined as the movement of water within the spaces of a porous material due to the forces of adhesion, cohesion, and surface tension.

“Capillary action occurs because water is sticky, thanks to the forces of cohesion (water molecules like to stay close together) and adhesion (water molecules are attracted and stick to other substances). Adhesion of water to the walls of a vessel will cause an upward force on the liquid at the edges and result in a meniscus, which turns upward. The surface tension acts to hold the surface intact. Capillary action occurs when the adhesion to the walls is stronger than the cohesive forces between the liquid molecules. The height to which capillary action will take water in a uniform circular tube . . . is limited by surface tension and, of course, gravity.

“Plants and trees couldn't thrive without capillary action. Plants put down roots into the soil, which are capable of carrying water from the soil up into the plant. Water, which contains dissolved nutrients, gets inside the roots and starts climbing up the plant tissue. As water molecule #1 starts climbing, it pulls along water molecule #2, which, of course, is dragging water molecule #3, and so on.”

All businesses in our market economy do a similar thing with value creation (as the water) and financial gain (the color of money).

For instance, a fast food franchise owner invests in real estate, in a license from the national franchise chain, in the supplies, equipment and food, along with other tangibles. The owner builds a business (analogously a stalk of celery). Employees are then hired to take all these tangibles (inputs and capital) and to create value for the business. Labor creates value -- this is a widely understood principle of economics. So the minimum wage front-counter staff conduct the business with the customers, and while these individuals are paid (let’s say) nine dollars per hour they might on average be creating for the business 15 dollars of value per hour.

If any employee is not creating more value than what is received in wages or salary, then that employee needs to be eliminated, fired. No business can survive if employees are creating less value for the business than their paychecks.

So in our example, the lowest paid employees could be creating six dollars per hour in value above the hourly wages they are paid. If not into their paychecks, where does that $6 in value go? Part of this excess value pays for the inputs and capital that allowed the employee to create any value at all. Beyond this, for a business to succeed some value must also translate into reserves for the health of the business (possibly future maintenance of equipment and business expansion), and some of the value must translate into profits. In a sense then the excess value is “flowing up hill” to the owner who decides how to manage any marginal profit.

Imagine now that a second tier of employees who are paid a little better should be creating larger flows of value for the business. Imagine a tier of low-level managers paid even better and producing even greater flows of value for the business. Plus a higher tier of managers could be producing greater and greater flows of value. And the business owner may be then profiting from all of this value creation. Then again, as a franchise, the owner will need to share profits “up hill” with the national chain. So by this example, we see that Capillary Action is drawing value creation and financial gain to the apex of each business across the whole of the economy.

Economic stimulation by Trickle Down methods supposes that if business owners are provided tax incentives and tax breaks, then they will invest more and hire more people and by these investments and hires the economy over all will be strengthened. Yet we can see that the Capillary Action works counter to any Trickle Down effect. For every drop of value that may Trickle Down, the owners are highly likely to absorb it back up their businesses, since the Capillary Action is constantly at work while growth in investment and hiring are not constant. Those on the lower part of the ladders are not having their financial situations improved. They are more accurately enabling the businesses to better absorb any value creation, or the abilities of the lower paid employees allow the businesses to better absorb any “trickle down.”

Under this model of the micro-economy, what is more suitable for improving more people’s financial situations is to enable more people to become owners. If the numbers of businesses are increasing in the economy with owners seeing success by Capillary Action, then those extra numbers of owners will have their financial situations improve. How can the social systems and government create structures and supports that better allow lower earning employees to take the risks involved in starting more businesses? Does the Affordable Care Act and its vision for a Health Insurance Exchange address some risks that have prevented people from opening new businesses?

If former employees are becoming owners, then businesses may realize a tightened market in the labor pool and move to pay greater amounts to attract employees who can create value for the businesses. Then could employees too see improvements in their financial situations.

Finally, we may come to realize that Job Creators are not the business owners. Successful business owners have incentives to keep their number of employees at a level that fits the business opportunities. Business owners should not be creating more jobs simply because of tax breaks or tax incentives. They will likely create more jobs once demand increases. So the Job Creator in a market economy is actually Heightened Consumer Demand, which becomes all the easier to envision when more people’s financial situations are improving. With more business owners achieving improved financial situations and with employees seeing their financial situations improving, then all of those improvements can feed into Heightened Consumer Demand and will grow the market. Trickle Down Stimulation does not exist in a business model where Capillary Action in constantly drawing value up.

All my best,
Auntie Greed