To the Editor:
The Herald published (July 27) “There’s a Case to be Made for Income Inequality,” a piece put out by the “Association of Mature American Citizens.” Their main argument is that those who work hard deserve to be rich. They benefit society as job creators and philanthropists. The piece, though it may appeal to those who think anyone can be Horatio Alger, is unfortunately ill-informed.
No one can argue that hard work should not be rewarded. Nor that those with capital (earned, borrowed, or inherited from daddy) will have the means to build factories and businesses. But they are not “job creators”. Nobody in their right mind would build a single factory, retail store, or service business, and hire workers to staff it, unless they thought there were consumers with enough money to buy their products or services.
Consumers (who are mostly workers) will only buy these things when they themselves have enough income. Consumers are the job creators. Henry Ford knew this when he paid his workers a living wage. Whether they could afford to buy his cars didn’t matter. He famously said that “low wages are the most costly that any employer can pay” because worker turnover results in higher production cost. More importantly, his workers would spend money on necessities and some luxuries, which would create economic growth, and eventually this would create consumers who could afford to buy a car.
Not a socialist, he still understood that workers produced the “surplus value” which made him rich. As consumers bought cars, he built more production capacity, and these consumers created more jobs when they bought gas, groceries, homes, etc.
Ford became rich, but not nearly on the scale of today’s average CEO or Wall Street financiers who manipulate money. In 2016 Fortune magazine, also no mouthpiece of socialism, published a chart titled “This One Chart Shows How Obscene CEO Pay Has Become.” Hint – a company’s stock market value rarely justifies anything close to what its CEO earns.
In 2015 Fortune reported that average CEO pay had reached 300 times that of the average worker. Wealth concentration has also become obscene. Today, just eight men own as much wealth as half the world’s population. Nearly 99 percent of all new income is going to the top one-percent. Do they really deserve this? Or is most of this wealth concentration the result of market manipulation, crony capitalism, and the fact that “money” is literally created out of thin air when private banks make loans?
The last fact may come as a shock to you and your readers, but as attorney Ellen Hodgson Brown documents in her very readable book “Web of Debt,” the US government doesn’t create money at all (except for coinage, which constitutes less than 1/1000 of one percent of the money supply. If a bank loans you $100,000, it shows a $100K debit on your account with them, and a $100K credit to the bank. That’s how money is made “from thin air” whether at the local bank or the private Federal Reserve. And since banks control the money supply, the government must borrow from them and pay interest to them, when it instead could borrow from itself – if it had the political will.
Borrowing from private banks including the Fed is the source of “the national debt,” something that was started by Alexander Hamilton who created the first National Bank and convinced Pres. Washington to allow private banking interests to take control of it. Interestingly, Brown notes there is a simple solution to our debt crisis. The government should create and control its own money. Interest paid on money borrowed would return to benefit the people, not the private banks.
In 1836 Congress did not renew the charter of the Second Bank of the United States, which opened the door for States to create their own banks. Many did, and Missouri once owned a majority share in its own state bank. Today, only North Dakota has a real “state bank”. It is one reason North Dakota’s state government survived many agricultural crises as well as the Great Recession relatively unscathed. Their website (bnd.nd.gov) details their history and how they still contribute to North Dakota’s financial stability.
Missouri and other states with recurrent or chronic financial problems would do well to copy that model and establish their own state banks. Meanwhile, let’s remember that the people create wealth, the people create jobs, and the people should reap their fair share of the benefits.
T. M. Kara
To the Editor: