Showing posts with label Nick Hanauer. Show all posts
Showing posts with label Nick Hanauer. Show all posts

Saturday, July 05, 2014

Billionaire Once Again Warns The One Percent

Nick Hanauer has done it again. His recent open memo to his fellow zillionaires is exceptional. Here are a few great pulls...

At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent. 

But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution. 

And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.

Of course, it's not just his fellow zillionaires that need to wake up. It's the 30 percent or so of voters who still buy into supply side economics. These are the people who believe that our nation is divided into two parts: the haves and the soon to haves. It's also no coincidence that these same people would like to see a return to the Antebellum South and its aristocratic framework. That's why the are fighting so hard to maintain the status quo. As Hanauer notes, however, it never works.

If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when. 

When, indeed. I challenge anyone to find an historical example that refutes Hanauer.

The most ironic thing about rising inequality is how completely unnecessary and self-defeating it is. If we do something about it, if we adjust our policies in the way that, say, Franklin D. Roosevelt did during the Great Depression—so that we help the 99 percent and preempt the revolutionaries and crazies, the ones with the pitchforks—that will be the best thing possible for us rich folks, too. It’s not just that we’ll escape with our lives; it’s that we’ll most certainly get even richer.

This is where the whole issue of hubris comes into play. Conservatives just don't want to admit that liberal policies will make wealthy people wealthier. They ignore how a minimum wage hike will give people more money to spend in the economy which will, in turn, lead to more hiring and more wealthy for the wealthy. It's as if the word "demand" has been excised from their brain stems.

I wanted to try to change the conversation with ideas—by advancing what my co-author, Eric Liu, and I call “middle-out” economics. It’s the long-overdue rebuttal to the trickle-down economics worldview that has become economic orthodoxy across party lines—and has so screwed the American middle class and our economy generally. 

Middle-out economics rejects the old misconception that an economy is a perfectly efficient, mechanistic system and embraces the much more accurate idea of an economy as a complex ecosystem made up of real people who are dependent on one another. Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around. 

Exactly right and props to him for coining middle out economics. It's exactly the kind of focus we need on demand.

So, Hanauer asserts that we need to dramatically raise the minimum wage.

The standard response in the minimum-wage debate, made by Republicans and their business backers and plenty of Democrats as well, is that raising the minimum wage costs jobs. Businesses will have to lay off workers. This argument reflects the orthodox economics that most people had in college. If you took Econ 101, then you literally were taught that if wages go up, employment must go down. The law of supply and demand and all that. That’s why you’ve got John Boehner and other Republicans in Congress insisting that if you price employment higher, you get less of it. Really?

Because here’s an odd thing. During the past three decades, compensation for CEOs grew 127 times faster than it did for workers. Since 1950, the CEO-to-worker pay ratio has increased 1,000 percent, and that is not a typo. CEOs used to earn 30 times the median wage; now they rake in 500 times. Yet no company I know of has eliminated its senior managers, or outsourced them to China or automated their jobs. Instead, we now have more CEOs and senior executives than ever before. So, too, for financial services workers and technology workers. These folks earn multiples of the median wage, yet we somehow have more and more of them. 

Fucking. Brilliant.

Next, Hanauer turns to the size of government and, again, makes a brilliant point.

I’d ask my Republican friends to get real about reducing the size of government. Yes, yes and yes, you guys are all correct: The federal government is too big in some ways. But no way can you cut government substantially, not the way things are now. Ronald Reagan and George W. Bush each had eight years to do it, and they failed miserably. 

Republicans and Democrats in Congress can’t shrink government with wishful thinking. The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won’t need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit. 

This may seem hard to grasp for those individuals who have a pathological hatred of the federal government but we can make laws that actually reduce the size and influence of our national governing body.

Hanauer closes with an argument I have made many times.

Capitalism, when well managed, is the greatest social technology ever invented to create prosperity in human societies. But capitalism left unchecked tends toward concentration and collapse. It can be managed either to benefit the few in the near term or the many in the long term. The work of democracies is to bend it to the latter. That is why investments in the middle class work. And tax breaks for rich people like us don’t. Balancing the power of workers and billionaires by raising the minimum wage isn’t bad for capitalism. It’s an indispensable tool smart capitalists use to make capitalism stable and sustainable.  

Amen. Let's get started!!

Sunday, June 16, 2013


Here is the full statement of Nick Hanauer, venture capitalist billionaire, given on June 5th of this year before the Subcommittee on Economic Policy (Senate Committee on Banking, House, and Urban Affairs).

For 30 years, Americans on the right and left have accepted a particular explanation for the origins of prosperity in capitalist economies. It is- that rich business people like me are “Job Creators” - That if taxes go up- on us or our companies, we will create fewer jobs. And that the lower our taxes are, the more jobs we will create and the more general prosperity we’ll have. Many of you in this room are certain that these claims are true. But sometimes the ideas that we know to be true are dead wrong. 

For thousands of years people were certain, positive, that earth was at the center of the universe. It’s not, and anyone who doesn’t know that would have a very hard time doing astronomy. My argument today is this: In the same way that it’s a fact that the sun, not earth is the center of the solar system, it’s also a fact that the middle class, not rich business people like me are the center of America’s economy. I’ll argue here that prosperity in capitalist economies never trickles down from the top. Prosperity is built from the middle out. As an entrepreneur and investor, I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all would have failed and all those jobs would have evaporated. That’s why I am so sure that rich business people don’t create jobs, nor do businesses, large or small. 

What does lead to more employment is a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. That's why the real job creators in America are middle-class consumers. The more money they have, and the more they can buy, the more people like me have to hire to meet demand. So when businesspeople like me take credit for creating jobs, it’s a little like squirrels taking credit for creating evolution. In fact, it’s the other way around. Anyone who's ever run a business knows that hiring more people is a capitalists course of last resort, something we do if and only if increasing customer demand requires it. Further, that the goal of every business- profit-, is largely a measure of our relative ability to not create jobs compared to our competitors. In this sense, calling ourselves job creators isn't just inaccurate, it's disingenuous. 

That’s why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer. Since 1980 the share of income for the richest 1% of Americans has tripled while our effective tax rates have by approximately 50%. If it were true that lower tax rates and more wealth for the wealthy would lead to more job creation, then today we would be drowning in jobs. If it was true that more profit for corporations or lower tax rates for corporations lead to more job creation, -then it could not also be true that both corporate profits and unemployment are at 50 year highs. There can never be enough super rich Americans like me to power a great economy. I earn 1000 times the median wage, but I do not buy1000 times as much stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, we go out to eat with friends and family only occasionally. I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or cars or enjoy any meals out. Or to make up for the decreasing consumption of the vast majority of American families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages. This is why the fast increasing inequality in our society is killing our economy. 

When most of the money in the economy ends up in just a few hands, it strangles consumption and creates a death spiral of falling demand. Significant privileges have come to capitalists like me for being perceived as “job creators” at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from “job creator” to “The Creator”. When someone like me calls himself a job creator, it sounds like we are describing how the economy works. What we are actually doing is making a claim on status, power and privileges. The extraordinary differential between the 15-20% tax rate on capital gains, dividends, and carried interest for capitalists, and the 39% top marginal rate on work for ordinary Americans is just one of those privileges. We’ve had it backward for the last 30 years. 

Rich businesspeople like me don’t create jobs. Rather, jobs are a consequence of an eco-systemic feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit- in a virtuous cycle of increasing returns that benefits everyone. I’d like to finish with a quick story. About 500 years ago, Copernicus and his pal Galileo came along and proved that the earth wasn’t the center of the solar system. A great achievement, but it didn’t go to well for them with the political leaders of the time. Remember that Galileo invented the telescope, so one could see, with ones own eyes, the fact that he was right. You may recall however, that the leaders of the time didn’t much care, because if earth wasn’t the center of the universe, then earth was diminished-and if earth was diminished, so were they. And that fact- their status and power- was the only fact they really cared about. 

So they told Galileo to stick his telescope where the sun didn’t shine –and put him in jail for the rest of his life. And by so doing, put themselves on the wrong side of history forever. 500 years later, we are arguing about what or whom is at the center of the economic universe. A few rich guys like me, or the American Middle class. But as sure as the sun is the center of our solar system, the middle class is the center of our economy. If we care about building a fast growing economy that provides opportunity for every American, then me must enact policies that build it from the middle out, not the top down. Tax the wealthy and corporations-as we once did in this country- and invest that money in the middle class-as we once did in this country. Those polices won’t just be great for the middle class, they’ll be great for the poor, for businesses large and small, and the rich. 

Since when did investing in our country's infrastructure becoming communism?

Thursday, March 14, 2013

Too Controversial?

Nick Hanauer has come up again in some various conversation I have had and I remembered that I wanted to put his TED talk (repressed for a while because it was deemed "too controversial") up here for all to see. Since when is income inequality controversial?

It's also nice to see the complete destruction, soundly and succinctly backed up with evidence, of the Right's vision of how the economy works. I guess the rich aren't job creators after all.

Monday, May 21, 2012

Too Political?

My oh my, what an interesting turn of events.

The sticking point appears to be Hanauer assertion that "rich businesspeople like me don't create jobs," but rather it's the middle class consumers who fuel business growth and subsequent job creation by spending their hard earned money on stuff.

How exactly is the illustration of a simple fact considered political?

(sniff sniff)

Smells to me like the Cult of Both Sides is up to its usual tricks again.