11/7/2019

1

THERE ARENO RICH PEOPLEIN THE WORLD

“There are no rich people in the world, and there are no poor people. There are just people. The rich may have

lots of pieces of green paper that many pretend are worth something—or their presumed riches may be

even more abstract: numbers on hard drives at banks—and the poor may not. These “rich” claim they own land, and the “poor” are often denied the right to make that same claim. …Those without the green paper generally

buy into these delusions almost as quickly and completely as those with. These delusions carry with

them extreme consequences in the real world.”

--Derrick Jensen, Endgame, p. 196

The Economyas Social Institution

Defining Economy

• The social institution that governs the management, production, and distribution of human material resources (goods, services, raw materials, and the things we need for survival).

– What for?

– What should an economy do?

Ideal Types of Economic Systems:

Capitalism

• A way of organizing economic life based on:

– Private ownership of productive property

– Profit as incentive

– Competition between actors in “free markets”

– Prices are driven by supply and demand

– Relationship between employer and employee is based on surplus value

11/7/2019

2

Socialism

• An economic system in which the raw materials and the means of producing and distributing goods and services are collectively owned

• Based on the belief that everyone should share equally in the goods and services produced by society

Mixed Economies

• Economies that combine features of capitalist and socialist systems, including both the public and private ownership of property and limits on “free-market” competition

Keep in Mind:

• Homo sapiens have been around for an estimated 200,000 – 300,000 years

– (maybe longer?)

• Agriculture has only been around for about 10,000 – 12,000 years

• The current dominant economic practices and property relations—i.e. predominantly capitalist mixed economies, as we know them today—have only been around for a few hundred years or so

“We live in capitalism.Its power seems inescapable.

So did the divine right of kings.”

--Ursula K. Le Guin

"To learn who rules over you, simply find out who you aren't allowed to criticize"

-- Voltaire (1694-1778)

In a relatively free society, in which control is based on ideological

hegemony, we might say,

"To learn what rules over you, simply find out what you are

highly discouraged (threatened with severe social ostracism)

from criticizing."

11/7/2019

3

We’re going to deconstruct and criticize capitalism

just a little bit

Congresspersonfrom Utah

We all already know many of the benefits of capitalism, right?

Capitalism as a Constructed Reality:

Ideology and the Culture of Capitalism

• “Naturalizes” a social construct– Economic rules are understood as “the way it is”

– Would be the same under any other economic model

– Myths are reinforced as “reality”• “Free Markets” (there’s no such thing)

• Equal opportunity (uhhhh…)

– Facilitates social control (through consent)– Again, same for other economic models

– Wealth is evidence of success, poverty is a sign of failure to achieve

11/7/2019

4

Implications of “Naturalized” Capitalism:

• Market values supersede human values– E.g. Tobacco companies, vacant houses, etc.

• Produces quiescent workers– Quiescent = “at rest,” someone who is docile, not agitated

• Public goods become private property– E.g. Enclosure movement, privatization of water, healthcare, etc.

• Structural problems treated as personal issues– E.g. Poverty, unemployment, etc.

• Alternative economic arrangements are rarely even considered– E.g. Healthcare reform debate concerning “Obamacare”

Some Dilemmas of Capitalism

• Clean air vs. national sovereignty

Kyoto Protocol Some Dilemmas of Capitalism

• Clean air vs. national sovereignty

• Property rights vs. human rights

Some Dilemmas of Capitalism

• Clean air vs. national sovereignty

• Property rights vs. human rights

• Needs of market vs. needs of people

11/7/2019

5

Nike factory in Vietnam

Some Dilemmas of Capitalism

• Clean air vs. national sovereignty

• Property rights vs. human rights

• Needs of market vs. needs of people

• Public health vs. private profit

“The U.S. spends more on healthcare than any other country — but not with

better health outcomes”

Dilemmas of Capitalism

• Clean air vs. national sovereignty

• Property rights vs. human rights

• Needs of market vs. needs of people

• Public health vs. private profit

• Intellectual property vs. art and science

11/7/2019

6

Dilemmas of Capitalism

• Clean air vs. national sovereignty

• Property rights vs. human rights

• Needs of market vs. needs of people

• Public health vs. private profit

• Intellectual property vs. art and science

• Trees vs. jobs

Dilemmas of Capitalism

• Clean air vs. national sovereignty

• Property rights vs. human rights

• Needs of market vs. needs of people

• Public health vs. private profit

• Intellectual property vs. art and science

• Trees vs. jobs

• Climate change vs. economic “growth”

“Predicted impacts have materialized”

Inequality is an inevitable consequence of capitalism.

But the level of inequality we are willing to tolerate is up to us.

We are currently experiencing nearly the highest rates of

inequality since 1929.

11/7/2019

7

From Ray Dalio, co-chairperson of Bridgewater Associates (worth 124.7 bil. In 2018)

• Capitalism must be reformed because it’s not producing enough opportunities for most Americans, creating an income gap that threatens to spark conflict

• “If you look at history, if you have a group of people who have very different economic conditions, and you have an economic downturn, you have conflict.”

From Ray Dalio, co-chairperson of Bridgewater Associates (worth 124.7 bil. In 2018)

• The Republican idea that cutting taxes on the rich promotes productivity “doesn’t make any sense to me at all,” and the wealthy must pay more, Dalio said. “The important thing is to take those tax dollars and make them productive,” he added.

From Ray Dalio, co-chairperson of Bridgewater Associates (worth 124.7 bil. In 2018)

• He pointed to statistics including that the bottom 60 percent of income-earners in the U.S. keep falling further behind the top 40 percent -- and that the percentage of children who grow up to earn more than their parents has fallen to 50 percent today from 90 percent in 1970.

• The income gap is about as high as ever, and the wealth gap is the highest since the late 1930s because the wealth of the top 1 percent of the population is more than that of the bottom 90 percent combined, Dalio said.

From Ray Dalio, co-chairperson of Bridgewater Associates (worth 124.7 bil. In 2018)

• “Disparity in wealth, especially when accompanied by disparity in values, leads to increasing conflict and, in the government, that manifests itself in the form of populism of the left and populism of the right and often in revolutions of one sort or another,” Dalio wrote.

• https://www.bloomberg.com/news/articles/2019-04-07/dalio-says-capitalism-s-income-inequality-is-national-emergency

Inequality and Life Chances

• Working class and poor people are:

– Less likely to go to college

– More likely to get arrested, convicted, go to prison, and receive the death penalty than upper class people

– More likely to die prematurely

Our economy was worth, roughly,$124 trillion

(assets minus debts)in the first quarter of 2014

11/7/2019

8

Which was split between, roughly,319 million people

(again, in 2014)

Our country’s wealth split evenly would’ve given everyone, roughly,

$388,715.

In 2017 there were roughly 39.7 million Americans living in poverty.

(Poverty line for a family of 3 is about $19,500)

https://www.census.gov/library/publications/2018/demo/p60-263.html

Yet if you add families who are “near poverty” the number is

around 100 million Americans.

(“Near poverty” is defined by the Census Bureau as income "between 100 percent and 125 percent of the poverty line.“)

Haymes, Stephen N.; et al., eds. (2015). Routledge Handbook of Poverty in the United States

But the economy is doing great!

The question, though, is,

great for whom?

11/7/2019

9

From economist Robert Reich:

• Official unemployment rate is currently 3.8%

• But about 80% of Americans live paycheck-to-paycheck

• Typical American worker earns about $44,500/year, not much more than 40 years ago (adjusted for inflation)

• “Although the US economy continues to grow, most of the gains have been going to a relatively few top executives of large companies, financiers, and inventors and owners of digital devices.”

From economist Robert Reich:

• “America doesn’t have a jobs crisis. It has a good jobs crisis.”

• When Republicans delivered their $1.5 trillion tax cut last December they predicted a big wage boost for American workers.

• Wages actually dropped in the second quarter of last year.

https://www.theguardian.com/commentisfree/2018/jul/29/us-economy-workers-paycheck-robert-reich

TAXES!!!

Typical Kinds of Taxes

• Income tax: A tax on money earned through wages from work,

rental payments on property, interest payments on savings, profits from businesses owned, and other sources of incomes (“progressive”)

• Property tax: A tax on ownership of land, buildings, or other

personal property

• Sales tax: A tax paid by consumers on retail goods/services at

the point of sale and passed on by retailers to the government (“flat tax”)

2018 Federal Income Tax BracketsMarginal tax rate

Income earned by a single person

How much you would pay in taxes

10% $0 to $9,525 10% of Taxable Income

12% $9,526 to $38,700 $952.50 + 12% of the excess over $9,525

22% $38,701 to $82,500 $4,453.50 + 22% of the excess over $38,700

24% $82,501 to $157,500 $14,098.50 + 24% of the excess over $82,500

32% $157,501 to $200,000 $32,089 plus 32% of the excess over $157,500

35% $200,001 to $500,000 $45,689 + 35% of the excess over $200,000

37% $500,000+ $150,689 + 37% of the excess over $418,400

Another Kind of Tax

• Capital gains tax: If you buy and sell pieces of companies (“stocks”)

and make a profit, this is called “capital gains” and not “income”

The top marginal capital gains tax rate (for most) is 15%

A lot of the income made by the super wealthy is through “capital gains”

Also, there is no sales tax on stocks

11/7/2019

10

How Are Corporations Taxed?

• Businesses are taxed on their profits

But anything categorized as a “business expense” is not taxed and corporations are allowed to “write off” those expenses, offsetting some of their profits

Many other complicated tax “loopholes” also allow large corporations to avoid paying taxes

But the most effective way to avoid taxes is by establishing “offshore accounts” in “tax havens”

How Are Corporations Taxed?

• According to a study conducted by the U.S. Public Interest Research Group and Citizens for Tax Justice: “[T]hree out of four companies in the U.S. Fortune

500 operate at least one subsidiary in an offshore tax haven and some have registered more than 100, allowing them to evade taxes on hundreds of billions of dollars in profits every year”

“Between 2008 and 2014, the amount of money U.S. firms claimed as profits attributable to offshore entities doubled to $2.1 trillion.”

How Are Corporations Taxed?

• “The U.S. firm that leads the pack in offshore profits is Apple, and by a large margin. The Cupertino, Calif., electronics manufacturer has an estimated $181 billion in profits booked offshore. Second is General Electric, with $119 billion, and third is Microsoft, with $108 billion.”

• “Apple paid an effective 2.3 percent in taxes on its overseas billions and would owe the Treasury Department as much as $59.2 billion if that money were not considered overseas for tax purposes.”

• The Fiscal Times, Oct. 2015(Putting Apple’s overseas profits into context, some estimates suggest that we could provide free college for everyone currently attending college for about $70 bil/year. In other words, taxes from just Apple alone could’ve paid for roughly 85% of tuitions for everyone attending college in 2015.)

How Are Corporations (Not) Taxed?

• http://billmoyers.com/2014/05/29/10-companies-that-dodge-corporate-taxes/

• Microsoft saved $4.5 billion in federal income taxes from 2009 to 2011 by transferring profits to a subsidiary in the tax haven of Puerto Rico. It had $60.8 billion in profits stashed offshore in 2012 on which it paid no US taxes.

• Pfizer paid no US income taxes from 2010 to 2012 while earning $43 billion worldwide. It did this in part by performing accounting acrobatics to shift its US profits offshore. It received $2.2 billion in federal tax refunds.

• Verizon made $19.3 billion in US pretax profits from 2008 to 2012, yet didn’t pay any federal income taxes during the period. Instead, it got $535 million in tax rebates. Verizon’s effective federal income tax rate was negative 2.8 percent from 2008 to 2012.

Hawkins on Tax Plans

The Big Picture

• In December 2017, Republicans passed a massive tax cut

– officially called the Tax Cuts and Jobs Act (TCJA)

• Original estimate = add $1.5 trillion dollars to the national debt

– Government revised estimate in October: new projection is adding $1.9 trillion

• Corporate tax revenue dropped over 27% in 2018

11/7/2019

11

What the new plan does:• Permanently reduces the amount of taxes

corporations pay from 35% 21%

• Reduce income taxes for the wealthiest more than for the middle class (both in terms of % of income and total amount paid)

• Remove some exemptions, increase some credits (specifically child tax credit)

• Changes tax rules for self-employed people (called “pass through income”), reducing what they pay

2017 (old) Federal Income Tax Brackets

Marginal tax rate

Income earned by a single person

How much you would pay in taxes

10% $0 to $9,325 10% of Taxable Income

15% $9,325 to $37,950 $932.50 + 15% of the excess over $9325

25% $37,950 to $91,900 $5,226 + 25% of the excess over $37,950

28% $91,900 to $191,650 $18,713 + 28% of the excess over $91,900

33% $191,650 to $416,700 $46,643 plus 33% of the excess over $191,650

35% $416,700 to $418,400 $120,910 + 35% of the excess over $416,700

39.6% $418,400+ $121,505 + 39.6% of the excess over $418,400

2018 Federal Income Tax BracketsMarginal tax rate

Income earned by a single person

How much you would pay in taxes

10% $0 to $9,525 10% of Taxable Income

12% $9,526 to $38,700 $952.50 + 12% of the excess over $9,525

22% $38,701 to $82,500 $4,453.50 + 22% of the excess over $38,700

24% $82,501 to $157,500 $14,098.50 + 24% of the excess over $82,500

32% $157,501 to $200,000 $32,089 plus 32% of the excess over $157,500

35% $200,001 to $500,000 $45,689 + 35% of the excess over $200,000

37% $500,000+ $150,689 + 37% of the excess over $418,400

Distributional Impact Impact of TCJA on the Debt

11/7/2019

12

Impact of TCJA on the Debt

Corporate Tax Avoidance,2018 Style!

from the Organization for Economic Cooperation and Development

“[An] OECD report finds that the richest 10 percent of American households earns about 28 percent of the overall income pie. This is a lot, but it's roughly consistent with what you see in the world's other rich countries.

By contrast, the wealthiest 10 percent of U.S. households have captured a whopping 76 percent of all the wealth in America. And that number is considerably higher than in other rich nations, as the chart below shows.”

--Washington Post, May, 2015

From 2009-2012, 91% of all new income

went to the top 1%

Data from Emmanuel Saezhttp://eml.berkeley.edu/~saez/saez-UStopincomes-2013.pdf

11/7/2019

13

Brookings Institute Reporthttps://www.brookings.edu/blog/social-mobility-memos/2015/01/30/wealth-inheritance-and-social-mobility/

About 325,000 peopleown nearly 25% of all wealth

in the United States

Forbes 400 Richest Americans

• Have a combined net worth of over $2.7 tril.

• Bill Gates = $97 billion

• Jeff Bezos (Amazon CEO) = $160 billion

• All 400 are billionaires ($2—$160 bil.)– (as of 2018, https://www.forbes.com/forbes-400/#742adeca7e2f)

• About 38 % inherited their wealth– (as of 2016, https://www.entrepreneur.com/article/269593)

An estimated 35 to 45 percent of wealth is inherited

https://www.brookings.edu/blog/social-mobility-memos/2015/01/30/wealth-inheritance-and-social-mobility/

Brookings Institute Report

Should inheriting

wealthbe allowed?

If you think domestic inequality is shocking, how

about global inequality?

11/7/2019

14

The richest 1% of people around the world own more wealth than the rest of the world combined.

And…

26 peopleown as much wealth as the poorer half of the world’s population—

3.8 billion people.--Oxfam, 2018

https://www.theguardian.com/business/2019/jan/21/world-26-richest-people-own-as-much-as-poorest-50-per-cent-oxfam-report

The world’s 6 richest people are,in order of net worth (2018):

1. Jeff Bezos: American founder, chairman and chief executive of Amazon (net worth: $160 billion)

2. Bill Gates: America founder of Microsoft (net worth $97 billion)

3. Warren Buffett: American CEO and largest shareholder in Berkshire Hathaway (net worth $88.3 billion)

4. Bernard Arnault: French owner of Louis Vuitton and 70 other brands (net worth 72 billion)

5. Mark Zuckerberg: American chairman, chief executive officer, and co-founder of Facebook (net worth $71 billion)

6. Amancio Ortega: Spanish founder of Inditex which owns the Zara fashion chain (net worth $70 billion)

https://www.forbes.com/forbes-400/#26f450217e2fhttps://www.forbes.com/billionaires/#2804e438251c

Questions for us to consider:

Is a capitalist economy compatible with a democratic society?

andHow should we structure our

economy if we wish to truly achieve democracy, freedom, and equality?