Corporations Are Not Humans : Not Even Close --- Episode 62

                             AGENDUM FOR CHANGE
                                       (continuation )


                RECLAIMING OUR ECONOMIC SPACES

   Both capitalism and communism acknowledge a basic truth expressed by the popular aphorism, "He who has the gold rules." Communist theory explicitly calls for worker ownership of the means of production. Adam Smith implicitly assumed worker ownership in his vision of an ideal market economy composed of small farmers and artisans, a circumstance in which owner, manager, and worker are commonly one and the same. In practice, both communism and capitalism have failed to live up to their ideal. Communism vested property rights in a distant state and denied the people any means of holding the state accountable for its exercise of those rights. Capitalism persistently transfers property rights to giant corporations and financial institutions that are largely unaccountable to even their owners. 
   There is an important structural alternative : a market economy composed primarily, though not exclusively, of family enterprises,small-scale co-ops, worker-owned firms, and neighborhood and municipal corporations. Malaysian consumer activist Bishan Singh calls it the community enterprise economy, as it melds the market forces of the money economy with the community forces of the social economy. Historian and political economist Gar Alperovitz argues that such a major restructuring of the American economy is already under way : 

   led by civic-minded entrepreneurs, innovative labor unions and effective local governments. The number of firms now experimenting with worker-ownership approaches 10,000, involving perhaps 12 million people --- more than the entire membership of private-sector trade unions. There are also more than 30,000 co-ops, including 4,000 consumer goods co-ops, 13,000 credit unions, nearly 100 cooperative banks and more than 100 cooperative insurance companies. Add to this 1,200 rural utilities and nearly 5,000 housing co-ops, plus another 115 telecommunication and cable co-ops. 

   A common element of these ownership innovations is that they establish local control of productive assets through institutions that are anchored in and accountable to the community. This tends to make capital patient and rooted, an essential condition of stable, healthy communities. Such initiatives are thus vitally important in building the foundations of healthy societies, but they are seriously disadvantaged by economic policies and institutions that favor the large, the global, and the predatory. Reclaiming our economic spaces requires that we transform such policies and institutions to shift the advantage in favor of the small and the locally accountable. To do so, we will need to restore the integrity and proper function of our financial institutions and systems, shift the social and environmental costs of production to producers and the users of their products, eliminate subsidies to big business, localize markets, deconcentrate capital ownership, establish corporate accountability, and restore market competition. The term transform is used advisedly. If these measures seem to run counter to the current trend toward the big and the global, that is precisely the intent. The goal is to transform an undemocratic and rapacious capitalist economy into a democratic and socially efficient market economy. 

                     FINANCIAL TRANSACTIONS TAX 

  A small tax on the purchase and sale of financial instruments such as stocks, bonds, foreign currencies, and derivatives would be a disincentive to very short-term speculation and arbitraging and remove an important source of unearned financial profit. 

 GRADUATED SURTAX ON SHORT-TERM CAPITAL GAINS

   Capital gains on assets held only for a brief time are usually a form of unearned income and are appropriately taxed at rate higher than the rate of tax on earned income. A surtax on net short-term capital gains above and beyond the normal income tax would make many forms of speculation unprofitable, stabilize financial markets, and lengthen investment perspectives without penalizing long-term productive investment. The capital gains surtax on the sale of an asset held less than a week might be as high as 80 percent on the otherwise untaxed portion, falling to 50 percent on assets held  more than a week but less than six months, 35 percent on those held for more than six months but less than three years, 10 percent for assets held from three to six years, and 0 percent beyond that. 

One Hundred Percent Reserve Requirement On Demand Deposits

 AS far back as 1948, Henry C. Simmon, founder of the conservative University of Chicago school of economic monetarism, argued for a 100 percent reserve requirement on demand deposits to limit banks' ability to create money and to restore the money creation function to government. Many economists have since called for a similar measure The reserve requirement in the United States currently averages less than 10 percent. Phased in over several years to allow the financial system to adjust, this action would deflate the borrowing pyramid and help restore the connection between the creation of money and the creation of wealth. 

     TIGHT REGULATION OF FINANCIAL DERIVATIVES 

   Many forms of derivatives are basically high-risk gambling instruments that serve primarily to generate fees for the investment houses that package and sell them while creating dangerous financial instability. Like any other form of gambling, their creation, sale, and purchase should be tightly regulated and heavily taxed. Pension funds and other funds managed as public trusts should be strictly prohibited from trading in instruments so classified and from investing in companies that do. All publicly held corporations that engage in derivatives trading should be required to include a full report each quarter on their derivatives trading activities, report their potential financial exposure on such instruments, and reveal the proportion of their financial assets held in derivatives.