Monday, November 29, 2004

The ownership economy and other columns

My columns for the stanford daily can be found at http://daily.stanford.edu/tempo?page=aboutauthor&author_id=1672&showall=1 I am particularly proud of the first one. They forgot to post one of them so I have posted it here:

The ownership economy

I may be shunned by the economics profession for saying this but I am a closet Marxist. The academic economics profession in the US has been the only humanities/social science department to have effectively exiled their Marxists to peripheral schools. What is under appreciated, is that they have done so after adopting and fully internalizing what is in my opinion, Marx’s most important contribution, dialectical materialism.

Though Marx is often associated with notions of communist ideology, the ideological aspect of Marxism was introduced by his followers such as Gramsci, decades after Marx’s death. Marx himself, at least in his more academic and less rhetorical writing, was a strong believer that material factors – tangible things such as amount of labor or capital – determined the shape of the economy. This materialist approach is central to the mindset economists have today.

One other point of agreement between Marx and modern economists that Martin Carnoy likes to point out is that capitalism is the best system at wealth creation known to man. The crux of Marx’s argument against capitalism is not that communism would provide more wealth, only that capitalism distributes wealth unfairly. Capitalism concentrates wealth in the hands of the capitalists.

The question I always had, then, is why can’t everybody be a capitalist?

I was reminded of all this by the recent rhetoric of the Bush campaign, and his vision of an ownership economy. Bush wants to create programs that allow all Americans to have greater ownership of their homes, their healthcare savings and their retirement savings, i.e. their capital. I would argue that this is a Marxist idea.

One simple point that is taken for granted by economists and their models of the economy but is easily forgotten or ignored by everyone else is that corporations are owned by people. People seem to have a visceral distrust of corporate profits. However, corporate profits eventually go to the owners of the corporation, i.e. the shareholders, or as Marx would call them, the capitalists.

In America today, over 50% of Americans own stocks. That makes them capitalists. I see no reason why this number can’t increase. Admittedly, Marx and many others would point out that ownership of capital is very unequally distributed, and that most of these are petty bourgeois at best, fooled into thinking they have power, but just as oppressed as the rest.

Yet that could change as well. The main reason Marx’s predictions did not come to pass—he expected England to be the first communist country—is that workers started acquiring skills and education, i.e. human capital, that allowed them to start demanding higher wages. Though estimates of human capital are imprecise at best, many estimate that one third or more of any nation’s assets are in the heads of its people. Marx’s original theory was not wrong, only blind to technological developments.

By improving education, and transferring ownership of assets from the government to the people, we potentially move toward a society where everyone’s a capitalist and everyone’s equal.

I further want to disabuse people of the notion that capitalism requires inequality in order to produce incentives. Untrue. Capitalism requires only the possibility of inequality. In a society where capital is evenly distributed and everyone works equally hard, there is no economic reason why capitalism would not produce an equal society.

John Locke and the founding fathers held the belief that ownership of property was an essential component of citizenship. I am inclined to agree.
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