An "ownership" society is by its nature fragile, vulnerable, dependent on force

[lostnfound]

After reading the AMAZING set of graphs in the DU research thread "Wealth, Taxes, Income - facts/resources/articles", which I HIGHLY recommend, I am pondering whether the "ownership society" much touted by Bush may well be ultimately an undesirable goal even if it were achievable across a broad section of the U.S. population.

We all enjoy the thought of a luxury life funded by investments, but ultimately the income derived from capital depends somewhere, somehow on labor. But a graph at the end of that thread predicts that the "pie" of US national income is going to become dominated by capital. If so, what would it mean for national security?

Force
A globalized economy means that you can purchase a portion of the productive output of a clothing sweatshop in China or programmers in India -- with parallels dating back to the colonies of the British or Roman empire (see neocolonialism). A future America where more and more income comes from capital is a land where domestic labor is provided by low-paid serfs, and wealth comes chiefly from overseas "plantations". But such a system works only if backed up by threat of force. Today's global sweatshops and plantations use sophisticated institutions and leverage to augment military threats, but ultimately depend on an army and weapons to secure overseas investments, as well as domestic forces (and surveillance) to quell domestic discontent and secure personal wealth.

Foreign countries who one day might permit takeover of factories by workers or enact land redistribution represent the greatest threat possible to the "American" way of life. No wonder leftwing populists in poor countries are so reviled in Washington.

How capital produces wealth.
"The Divine Right of Capital" succintly states that "the commotion on Wall Street is not about funding corporations. It's about extracting from them". According to the book, only a tiny percentage of capital gains are the result of venture capital or entrepreneurial investment. The 8% or 10% average return in the stock market can be seen as a form of subsidized gambling. People save money, or use inherited money, to purchase the right to a portion of the earnings generated by a corporation. The corporation doesn't generally use or obtain those invested funds other than IPO's or "special stock offerings". In a way, buying stock is not much different than buying into aristocracy, i.e., purchasing the rights to the income of a feudal estate.

We've been taught that dividends or growth in the stock price are the reward for having provided funds for the acquisition of necessary capital equipment, or a reward for the clever ideas or invention of the company's entrepreneur, but this perspective has many holes in it, such as:
1 - Retained earnings from operations play a much greater role in funding capital equipment or R&D than does initial investment.
2 - For multinational conglomerates, the innovation being rewarded is provided by pools of hired talent decades after the corporation reached a kind of critical mass.
3 - Finding the most desperate labor source, and externalizing costs as much as possible, are obvious drivers of profit.

This is not to detract from the valid perspective that dividends or growth in the stock price are a reward for saving money and making it available for investment via loans to businesses directly or indirectly, but the connection is a few steps removed.

Vulnerability
Ownership of corporations jointly by many nationalities provides a form of security as interests are commingled, not identifiably 'American'. Could China shut us off? In any case, the flow of money and information via the Internet is the new vulnerability, more than blockades stopping the flow of goods. The lack of domestic production limits our ability to regroup and reconnect through simpler means. Without labor, can we be resilient?

At least we have plenty of food production. Too bad it's so dependent on foreign oil.

[lostnfound]

1. Selfish kick for Monday crowd. nt

[shance]

2. Thoughtful post. Thank you LF.

n/t