Another speech spiked of another true patriot

by | 20 May 2012 | Climate action economics | 0 comments

Nick Hanauer, TED Talk

Good Company: David Cunliffe can consider he is in good company. Nick Hanauer, founder of gear.com—which after various mergers was bought by Microsoft for $6.4‍ ‍billion—and co-author of The True Patriot has had his TED Talk banned by the site’s curator, for saying similar things, particularly the bankrupt all-pervading fiction that the rich create the wealth. image TED

It is clearly not working. Oil still flows thickly and the Earth disgorges myriad other minerals in unprecedented abundance, yet the wheels have fallen off the global economy—unemployment and underemployment are at record highs.

Global oil production, conventional and unconventional, is within a few years of peaking, which means that a rapidly increasing cost of extraction, and shortages, will soon begin loading sharply escalating costs on manufacturing, food production, transport, medicine, heating, cooling—in short, the cost of everything including wind turbines and photovoltaic panels.

Meantime, to avert runaway global warming, a mobilisation on a hitherto unseen scale is recklessly overdue. If the global capitalist system doesn’t work in the good times, before either the energy crisis or global warming have begun to bite deeply, it is certainly not capable of protecting humanity, much less leading anyone to a brighter future.

Gardens of Democracy cover art

Not The True Patriot: Art work from Nick Hanauer and Eric Liu’s 2011 book, The Gardens of Democracy, as opposed to that from their 2010 The True Patriot, which has a less-than visually arresting cover. image Random House

And yet the mainstream media talks of ‘recovery’ as though pre-2008 was a healthy place for the world and its economy to be.

This is why the Mahurangi Magazine reprinted ‘the New Lynn speech’, which would not have been necessary had the Labour Party found the courage to print it, or had allowed its writer, its spokesman for economic development David Cunliffe, to appear on The Nation following its delivery. Nor should its printing be seen to be a statement about the relative merits of David Shearer and David Cunliffe as party leader—it is about Labour Party policy, or the lack of anything that might resemble it. Besides, the magazine’s formal position on political party leadership is that leaders must be compelling communicators, and to be compelling communicators they need be attractive on television, or be Lucy Lawless.

By questioning the faith in the unregulated free market, and being censored for saying it, David Cunliffe is in increasingly good company. Richly successful venture capitalist and co-author of The True Patriot, Nick Hanauer, has had the ‘Job Creators’ TED Talk he gave in March similarly gagged, by the host’s curator who said that during an election year it was:

Superrich Grabbed Bulk of Gains

Top Twenty Trick: Drop the tax on the wealthiest 20%, and hey presto the 80% are poorer—so much for the trickle-down hypothesis. image TED

too political … a lot of business managers and entrepreneurs would feel insulted

The gagging attempt has backfired, with progressive mainstream publications including the Time Magazine covering the clumsy muzzling attempt. Sadly the same can’t be said for David Cunliffe’s speech, which has yet to be acknowledged by the mainstream media, much less its text be published by it.

The TED Talks are subtitled ‘ideas worth sharing’:

It is astounding how significantly one idea can shape a society and its policies. Consider this one: If taxes on the rich go up, job creation will go down.

This idea is an article of faith for Republicans and seldom challenged by Democrats and has shaped much of today’s economic landscape. But sometimes the ideas that we know to be true are dead wrong. For thousands of years people were sure that earth was at the centre of the universe. It’s not, and an astronomer who still believed that it was, would do some lousy astronomy.

Highest Income Households Sharpest Drops in Tax Rates

Tax Halved, Riches Tripled: ‘Since 1980, the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%.’ image TED

In the same way, a policy maker who believed that the rich and businesses are ‘job creators’ and therefore should not be taxed, would make equally bad policy.

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 have failed and all those jobs would have evaporated. That’s why I can say with confidence that rich 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. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me. So when businesspeople 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 capitalist’s course of last resort, something we do only when increasing customer demand requires it. 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.

Millionaire Tax Rate vs Unemployment

Just Drowning: ‘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.’ image TED

Since 1980, the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 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. And yet unemployment and under-employment is at record highs.

Another reason this idea is so wrong-headed is that there can never be enough super-rich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the median American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3000. 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 spiralling costs and trapped by stagnant or declining wages.

Wages Have Stagnated Costs Have Shot Up

Rich Can’t Spend it Fast Enough: ‘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.’ image TED

Here’s an incredible fact. If the typical American family still got today the same share of income they earned in 1980, they would earn about 25% more and have an astounding $13‍ ‍000 more a year. Where would the economy be if that were the case?

Significant privileges have come to capitalists like me for being perceived as ‘job creators’ at the centre 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’. We did not accidentally choose this language. It is only honest to admit that calling oneself a ‘job creator’ is both an assertion about how economics works and the a claim on status and privileges. The extraordinary differential between a 15% tax rate on capital gains, dividends, and carried interest for capitalists, and the 35% top marginal rate on work for ordinary Americans is a privilege that is hard to justify without just a touch of deification.

We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather they 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. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

If Median Household Income Had Kept Pace with the Economy

Good for Rich and Poor: ‘Rich businesspeople like me don’t create jobs. Rather they 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. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.’ image TED

So here’s an idea worth spreading: In a capitalist economy, the true job creators are consumers, the middle class.

And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and for the rich.

 

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