
Labor Day weekend came and went with little thought to labor. And I’m not just talking about North Carolina, or the South, where labor is considered by the people in charge to be either misplaced effort or simple ignorance. Even in The New York Times, Labor Day was noted mainly as an occasion for end-of-summer grilling. (“Grilled skirt steak with smoky eggplant chutney” was featured.)
On the other hand, vast attention was paid to capital, especially the recent losses on Wall Street and stock markets in Asia. It may be time to concede the obvious and declare that, henceforth, the first Monday in Septemberlike every dayshould be Capital Day.
Not so long ago, capital and labor were viewed as interdependent. Today, capital stands alone. When I started following the stock markets in the early 1980s, the Dow Jones Industrial Average was 800. It closed Friday at 16,102a 20-fold gain. The S&P 500 index shot from 100 to 1,921, after peaking this year at 2,134.
To put this in perspective, price inflation since 1980 in the United States is 290 percent, according to the Bureau of Labor Statistics. Wages have barely kept pace. Meanwhile, U.S. stocks are up 2,000 percent. In other words, owning shares in a market-traded corporation has been, on average, seven times more profitable than actually working.
But forget the averages. More than 80 percent of shares are owned by the richest 10 percent of Americans, many of whom inherited their wealth. Half of us own no shares at all.
The question is, what happens to an economy when all of its gains go to a few owner-investors while most of the populationlaborstruggles to make ends meet?
That’s a political question, as it was in 1894 when Congress made Labor Day a national holiday. Then, it was the dawn of the Industrial Age, and financier-investors were building factories and fortunes while paying workers just enough to keep them from starving. Labor unions were one antidote. New Deal reforms were another, following the Great Depression.
Today, we’re at the dawn of the Digital Age, when financier-investors will own not factories but intelligent machines able to harvest our food, build our houses, even diagnose (and predict) our diseases. They, or their algorithms, will deliver our music, entertainment and information. They already do.
Yes, these machines must be invented, programmed and operated by experts. But as Robert Reich, an economist and former U.S. Secretary of Labor, observed recently, the whole point of such “labor-saving devices” is that fewer and fewer people will be involved.
“Such technologies are even replacing knowledge workers,” Reich wrote, “a big reason why college degrees no longer deliver steadily higher wages and larger shares of the economic pie.”
Nor can labor unions easily intervene, because the new machines are dispersed around the globe, and their highly replaceable workers are not readily organized. But the owners are organizedas corporate shareholdersto assert control of the profits.
Thus we come to an inflection point. Those with money to invest will get more money, at compounded rates. Those with no money will find it hard to come by any. And the gap between their worlds will grow larger. Intergenerational mobility is worse here than at any time since the 1920s, according to Alan Krueger, former head of the White House Council of Economic Advisers.
The 1920s, don’t forget, ended in a depression when too few could afford what the rich were selling, a danger we face again today.
Our choice, then, is to stand back and see what happens this time, or take steps to close the gap before the bubble bursts.
Or, wait, there is a third choice, the one we’ve been making since 1980: We’ve all but abolished estate taxes. Taxes on capital gains have been cut, and unsold shares aren’t taxed at all. In these and other ways, our politicians have actually succeeded, with nods from their wealthy supporters, in making the wealth gap larger.
What should we do instead? We should force employers to improve worker pay by raising the minimum wage, for example.
But I wouldn’t put it all on employers. The federal government should subsidize such benefits as paid sick leave, family and medical leave, and of course health care benefits. In fact, universal health care should be a government responsibility not tied to employers.
The key is for governmentat the federal level, because the states won’t do itto tax capital gains and corporate profits and share the proceeds with the majority of workers who have no capital. Start by making public universities tuition-free (and cutting interest rates on old student loans). Pay for public transit so that people don’t need cars. Pay for high-speed broadband the same as for streetlights. Pay for infrastructure projects that employ, you know, labor.
In short, raise pay, create jobs, improve living standards and cut the cost of living by adding a bit of socialism to our oligarchic capitalist system.
A bit of socialism, by the way, is how we overcame the Depression, won World War II and created a post-war economy in which the middle class flourished. But we didn’t call it socialism back then. We called it fairness.
This article appeared in print with the headline “Happy capital day!”