In the midst of one of the worst economic downturns since the Great Depression, thanks to the COVID-19 pandemic, the American stock market, despite fluctuations, remains near historic highs, adding support to the belief that the economy is rigged in favor of a few and built on the backs of the many. When the people are suffering while billionaires become even wealthier, something is clearly wrong from my perspective, and I ask those who face me across the political gulf to explain how three Americans — Jeff Bezos, Warren Buffet, and Bill Gates — holding more wealth than the bottom fifty percent is a working expression of freedom. They might tell me that everyone has the chance to rise to those stratospheric heights, but this belief ignores the power that such concentrated wealth that those three and their economic class possess has the ability to protect itself. The wealthy buy politicians and police forces to guarantee that the system will remain on their side.
Our current system is based primarily on the freedom of privately owned wealth to be used for economic activity. More about this in a minute. The general point here will be that the way value enters and grows in an economy.
Through much of human history, the assumption was that natural resources were the sole legitimate origin of value. A nation was rich if it had extensive fertile fields and gold mines. Christianity declared that any effort to make money on money was a sin, leaving loans to the Jews to offer until the Knights Templar came up with tricky means of charging fees to replace what they could earn in interest. The nobility declared that they owned the land and complained whenever they found themselves cash poor — a condition that persists among farmers today. Any notion of economic growth was rudimentary at best, since land and what is found in it are finite. Growth did happen, but it was often not noticed or was seen as something immediately to exploit for the benefit of the kings.
The Renaissance and Age of Discovery are the children of many parents, but in economic terms, they opened up realms of opportunity that led philosophers — Adam Smith being the most famous to the general public — to realize that the old model was insufficient. As religion was driven back by people who wanted to build wealth and as the influx of natural resources, along with the niches that were vacated by victims of the Black Plague, capital — assets that can be used to generate more assets — moved into prominence. And the ability of one type of capital, namely money, to move about the economy and to stand as a marker for other kinds of wealth has certainly made this source of value worthy of that attention.
But as large portions of the population moved into cities to work in factories, the experience of labor changed. As Karl Marx explained, work in the past was done either for one’s self or for people living nearby, and the devoting that each laborer put into the effort was greater as a result. If you did shoddy work, you suffered from the deficiencies or you knew the person who suffered. Industrialization caused this labor to be alienated from the workers. When your job is to turn one screw over and over on a product that you will never see nor often be able to afford, the only reason you have for giving good work is if you are satisfied with the pay. As labor unions realized and used for a period in the late nineteenth century until the Reagan overthrow, value does enter the economy through labor, and without labor, the economy would shut down.
These are the sources that show up in ordinary discussions of economics. But popular consciousness of the subject needs to grow. For example, the creative person who comes up with the good or service to sell is also an essential part of the economy — and these people are often working for government laboratories or institutions of higher learning. Tim Berners-Lee was an employee at CERN, the European physics research facility, when he developed the tools that now make vast sums of wealth generation possible. Labor, capital, and resources can only bring value when someone realizes how to use them. And if no one knows about the thing being sold, its value is purely theoretical. Thus, and it is painful to admit this, advertising is also a source of value. I am not talking about moral or aesthetic value, of course, though a thing for sale can be the best in existence, and if it sits in the wilderness without anyone attending to it, its value is effectively zero. Doubt this? As a novelist.
As much as I have wondered what value managers add, I have to admit that they are another source for the economy — recognizing that in each of these categories, value is dependent on the quality of the source. This does not have to be a single person. The manager could be the entire body of employees if they are able to work together in a timely manner to set policy. But there has to be someone steering and someone setting the direction. Rush’s line from “Closer to the Heart,” that “you can be the captain, and I will draw the chart” sums this concept up — sums up a lot of what I am saying here, in fact. But a business that will make money will have to be led somehow, and so that leadership counts as a source.
Another source is distribution. If what is on sale is beyond the reach of the customers, what good is it? The Interstate Highway System is an illustration of this, having given people an easier means of getting from one place to another. The same would be true if we invested in railroads and trains, and we would save fuel and emissions, touching on natural resources. This points out that sources of value compete with each other, often.
The last item on this list will raise the hackles of right wingers: regulation. To the laissez-faire crowd, regulation reduces value, but the reason that we generally do not have to worry about poison in food, cars that fall apart after a few miles, or bank accounts that evaporate. Prior to the collusion between Democrats and Republicans to deregulate Wall Street, we could have a lot more to rely on in the financial sector of the economy. Regulation makes economic exchanges more reliable in that all participants can believe that the process and the things for sale will be honest. If they are not, the law provides a remedy.
All of these matter: resources, capital, labor, ideas, advertising, management, distribution, and regulation. To quote “Closer to the Heart” again, “philosophers and plowmen, each must know his part.” Anger and suffering build whenever any of these get out of balance, as capital has been allowed to do. We have cut regulations, leaving companies free to cheat. We have raped the environment for one-time use of natural resources. We have treated labor as commodities, denying workers a living wage and healthcare. If we expect a peaceful and productive society, we have to acknowledge the equality of all sources of value. Yes, executives will make more than line workers, but as groups, labor and management should not be compensated at wildly divergent levels. Moving goods around the country is important, but the environment matters as well. None of these sources can be denied their places without consequence, and economic theories that do not take all of them into account are doomed to failure.