The economic system is broken for most of us

Bill Knight column for 2-17, 18 or 19, 2020

On a riverbank, a scorpion that can’t swim asks a frog to carry it across a river on the frog's back. The frog pauses because he’s concerned the scorpion will sting him. But the scorpion convinces him that if that happened, they’d both drown, so the frog agrees. Halfway across the river, the scorpion stings the frog anyway, dooming them both. The dying frog asks the scorpion why it stung him despite certain death, and the scorpion says, “I couldn't stop; it's my nature.”

Last week, the stock market surged, with the Nasdaq and S&P 500 both setting record highs and the Dow Jones Industrial Average still topping 29,000 a month after breaching that level for the first time.

It meant big gains on Wall Street gains but little on Main Street.

Corporations and Trump’s Republican Party brag that such performances show prosperity, but the economy isn’t working for most of us. Actually, it’s become so obvious and threatening that the country’s richest businesspeople are publicly expressing concerns.

This month’s federal economic report also showed mixed news, with 225,000 new jobs, but 139,000 new unemployed Americans, plus a gain of 44,000 construction jobs (thanks to mild January weather) but a loss of 12,000 manufacturing jobs, nominal earnings increasing 3.1% from a year earlier, but that’s not adjusted for the cost of living.

The real story: Some 10 percent of Americans own 85% of all corporate stocks. The economy is broken for most of us.

“Far from representing a ‘blue collar boom,’ as the president put it in his State of the Union address –

 real, inflation-adjusted data show most U.S. workers have not benefited from the growing economy,” said David Salkever a University of Maryland professor emeritus of public policy.

Economist Thomas Palley, author of “Financialization: The Economics of Finance Capital Domination,” agreed, saying Wall Street doesn’t show economic health.

“Our addiction to stock-price inflation is politically and economically toxic,” he said. “It is rooted in an illusion promoted by Wall Street, the Federal Reserve and mainstream economists that conflates the stock market and shared prosperity. A stock market boom is not the basis of shared prosperity.

“Though each new boom ameliorates, it does not recuperate, the prior damage done to income distribution and shared prosperity,” Palley continued. “Now, that cycle is in full swing again, clouding understanding of the economic problem and giving voters reason not to rock the boat for fear of losing what little they have.”

Marjorie Kelly, co-author of “The Making of a Democratic Economy,” in January said, “In fact, there’s really two economies. Forty-five percent of jobs today are insecure. They’re part-time, contract, ‘Uber-ized’ jobs, and wages have been stagnant for decades.”

Now, even titans of capital concede problems, from JPMorgan Chase’s Jamie Dimon and BlackRock’s Larry Fink to the Business Roundtable (BR). Writing for BR – the nation’s main lobby for 180+ big corporations – Alex Gorsky said that corporations’ fundamental commitment shouldn’t exclusively be maximizing shareholder value, but to benefit workers, vendors, customers and communities, and to reduce inequality and protect the environment.

“While each of our individual companies serves its own corporate purpose,” his statement said, “we share a fundamental commitment to all of our stakeholders.”

Similar corporate voices agree: PayPal CEO Dan Schulman, Ray Dalio, billionaire co-chair of Bridgewater Associates investments, and Salesforce CEO Marc Benioff.

But the best of the “activist capitalists” may be Peter Georgescu in his book “Capitalists Arise!” There, he notes that after the 1970s, stakeholder capitalism serving customers, workers, shareholders and society surrendered to short-term, shareholder-only capitalism. Profits soared – at the expense of everything else.

However, business elites seemingly want to just tweak the system, and one wonders whether corporations will really change policies and actions on workers’ rights, money’s influence in politics, monopoly power, etc.

It’s unwise to expect some benevolent billionaire to ride to the rescue of hollowed-out towns, households and billfolds, says a labor leader who used another animal comparison in reacting to the surprise corporate reformers, but with an unsurprising recommendation: Organize.

“Trusting corporations to hold themselves accountable is like trusting the fox to guard the henhouse,” commented Communications Workers of America vice president Richard Honeycutt. “True accountability comes from workers who join together to fight for fairness, respect and dignity for themselves and their communities.”