Seeking Alpha, September 4, 2014
THIS BOOK secures author Peter Barnes his place as a major public intellectual, rethinking the design of U.S. capitalism.
Building on Capitalism 3.0 and his decades of experience as a successful entrepreneur, Barnes addresses today’s structural problems of widening inequality and the disappearing middle class. Unlike Thomas Piketty, who rarely ventures outside economic orthodoxy, Barnes re-conceptualizes the U.S economy as a dynamic, complex system governed by feedback loops, and identifies pieces of its source-code which drive and amplify its current problems.
Barnes also pinpoints all the familiar policy bromides — more job creation, training, education, stimulus and innovation — and how they focus on symptoms rather than systemic cures. Stimulus, whether fiscal or monetary, fails to reach its targets and often leads to asset bubbles and wider inequality. Job creation can no longer provide access to the middle class since automation and globalization are reducing the need for U.S. workers, while the top growth occupations are almost all in low-paying service industries like home health care, food service and retail. Education as a panacea is a logical fallacy: the fallacy of composition (what works for a few will work for all). Increasing the supply of college grads neither increases demand or pay rates for them, and in fact will lead to falling wages for them. Innovation simply drives automation further, from manufacturing and retail to medicine, law and finance.
I agree with Barnes and join his call for redesigning the plumbing of capitalism and adding the “new pipes” he describes. Barnes reviews other proposals, from Milton Friedman’s negative income tax (and helicopter drops of cash!) to the employee stock ownership plans of Louis and Patricia Kelso, the direct cash transfers that have brought millions of Brazilians into the middle class, and the guaranteed minimum incomes now being advocated in Europe. He deftly leads us past all these, which are mostly based on larger government, to a market-based solution based on common property. He examines how rent has been extracted by the wealthy through tax codes, subsidies and monopolies, and shows how, instead, rent can be equitably shared through sovereign wealth funds as in Norway and Alaska.
BARNES HAS spent decades studying such models, especially those that would charge for emitting pollutants into the public’s air and water. He estimates that charging appropriate fees could generate up to $5,000 annually in dividends to all Americans. This ownership income would stabilize the U.S. economy with reliable purchasing power, obviating the need for stimulus and other often ineffective government programs.
Barnes reminds me of my friends Louis and Patricia Kelso and their memorable quote, “If the machine is taking your job, you need to own a piece of that machine.” Writ larger, if companies are exploiting our commonly owned resources, we need to charge them for this use and return the proceeds to all of us as equal dividends.