With Liberty and Dividends for All by Peter Barnes, Berrett-Koehler, San Francisco, 2014
This book, With Liberty and Dividends for All, secures author Peter Barnes as a major public intellectual, rethinking the design of US capitalism. Building on his Capitalism 3.0 (2006) and his decades of experience as a successful entrepreneur of companies in the solar energy and telecom sectors, banker/economist Barnes addresses today's structural problems of unemployment, crumbling infrastructure, widening inequality and the disappearing middle-class. Unlike Thomas Piketty in his best-seller Capitalism in the 21st Century (2013), which rarely ventures outside economic orthodoxy, Barnes re-conceptualizes the US economy beyond economics, as a dynamic, complex system governed by feedback loops, and identifies pieces of its source-code which continue to drive and amplify all these current problems.
Barnes also pinpoints all the familiar policy bromides: more job creation, training, education, stimulus, innovation, and why these focus on symptoms rather than identifying the economic system's 80-20 power-law distribution discovered over a century ago by economist Vilfredo Pareto. Stimulus, whether fiscal, monetary or QE pump-priming, 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 US workers, while the top ten growth occupations are all in lower-paying service industries like home health care, food service, retail, etc. Education as a panacea is a logical fallacy: the fallacy of composition (i.e., what works for a few will work for all). Increasing the supply of college grads neither increases demand or pay rates for them, but will lead to falling wages for all graduates and more of the better-educated janitors and taxi drivers we see today. Innovation, the favorite US panacea, is now simply driving the automation and further digitization of sectors of the economy, from manufacturing and retail to the former white-collar professions in medicine, law and financial market mediation.
I agree with Barnes and join his call for redesigning the plumbing of US capitalism and adding the new pipes he describes so thoroughly in this book, opting for widening distribution models beyond jobs, wages, unemployment and welfare. Barnes reviews all the additional distribution mechanisms to provide the necessary purchasing power to sustain aggregate demand in today's high production efficiency economies: from Milton Friedman's negative income tax (and stimulation from helicopter drops of cash!) to the employee stock ownership plans (ESOPs) of Louis and Patricia Kelso, implemented today in over 11,000 companies; the direct cash transfers that have brought millions of Brazilians into the middle class and the unconditional guaranteed minimum incomes now being advocated in Europe and by such US policy analysts as Erik Brynjolfsson and Andres McAfee in The Second Machine Age, 2014, and Microsoft (MSFT) chief scientist Jaron Lanier in Who Owns the Future, 2013.
Barnes deftly leads us beyond all these remedies for more balanced, sustainable economies that might also reduce resource depletion -- most of which are government-initiated. Instead, as an enthusiastic successful capitalist, Barnes offers market-based solutions based deeply in private property traditions. He examines the role of rent, and how it has generally been extracted in many ways through manipulating tax codes, rules, subsidies, monopolies, as well as the externalizing of costs to taxpayers, society and in environmental depletion. Barnes then shows the other use of rent: recycled to sovereign wealth funds, as in Norway's oil revenues and Alaska's Permanent Fund. Instead of capture of publicly owned resources such as our electronic spectrum by telecoms and broadcasters, the user-fees from open auctions of such resources should go not to governments but be returned to their rightful owners: citizens as dividends. Barnes has spent decades studying such models, including those to charge fees for emitting pollutants into the public's air and water supply. He estimates that recovering such user fees could augment US wages with some $5000 annually, as non-labor dividends due to all citizens from such commonly owned resources. This income from ownership could stabilize the US economy with reliable purchasing power and aggregate demand, obviating the need for QE, stimulus and other often ineffective government programs in job creation and education.
Barnes reminds me of my friends Louis and Patricia Kelso (see Patricia on our TV show, Transformation of Work) 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: air, water or the electronic airwaves, we must charge proper fees for this use and fines for abusers. But let's not trust governments to collect our fees -- let's receive them regularly as dividends. Such fees and fines on all commercial uses of our global commons was proposed by the Global Commission to Fund the UN in The United Nations: Policy and Financing Alternatives (which I co-edited with Harlan Cleveland and Inge Karl, 1995, 1996, Elsevier Science UK).
Now that Wall Street and all financial markets are being dis-intermediated and asset managers and traders are sidelined by computers, HFT and algorithms as I pointed out in Global Finance Lost in Cyberspace -- Barnes' book's scenarios will be useful forecasts to all these looming changes. As Michael Lewis reminds us in Flash Boys, investors no longer need all today's unnecessary financial intermediation and complexification.
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