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Monday, January 17, 2011

A Modest Proposal To Restore U.S. Economy

Jan 17th, 2011

by Stephanie Baselice

The once mighty US economy remains in deep and dangerous waters. Although the markets have largely recovered from the “Great Recession” the general public remains wary and depressed, which is potentially bad for business. It is also a political minefield. Unemployment floats around 10 % by official standards, closer to 20% if one includes those who have ceased looking for work. Despite modest job gains in 2010 at current rates employment growth will take 5 or 6 years to reach pre-recession unemployment levels of 5-6%. Indeed, it may be that the problem lies deeper and that many of the workers recently laid off during this difficult time were comparatively unproductive and will not need to be replaced. We may well shoulder a 10% unemployment rate far into the future. In any case, once high hopes for “change” have been dashed against the rocks of a deep and extended downturn. Inflammatory rhetoric from liberal elites and labor groups about the possibility of shifting economic focus to risky and untried ventures in “green jobs” puts the American way of life at risk. Quality of life measures rank America lower and lower, and despite relatively high worker productivity, our creative and technological edge is growing dull. Rising nations such as India and China will soon surpass us in critical areas such as inventing new products. Education and healthcare are thankfully still private enterprises, yet they consume increasingly large shares of the economic pie for most families. National solutions to these problems are out of the question, of course. Any reasonable person understands that such solutions must be too expensive and disruptive to the profits of current business leaders to even be considered. Yet recent pro-business political gains may well evaporate if the recovery does not soon produce sufficient job growth to avoid a broad based re-evaluation of the political and economic system.

Of course when it comes to the job market, we have been in rough waters a long time. Over the past thirty years, the ever greater economic growth once fueled by manufacturing has been essentially replaced by highly lucrative financial services, largely related to consumer debt. Loose credit has been very, very profitable for a long time, allowing ordinary people to purchase more and more goods and services—far in excess of those enjoyed by previous generations. Yet the bill for this spending has now come due, and many cannot afford the interest payments. Today's young and middle-aged adults are the first in US history to face living standards significantly below those of their parents. One of the reasons for this is increased global competition for jobs. Companies naturally move production facilities to places with lower labor costs given the opportunity. With current communications technology, the same now holds true for office labor. Increasingly, well-educated workers in the developing world can often offer their services at a significant cost advantage over US based employees. This trend will likely continue as most US workers seem to be unwilling to follow their jobs abroad. The other main factor in the reduction of middle class living standards is a crippling debt load that remains stubbornly undiminished by the predominance of two income households. Austerity measures such as reduced consumption of consumer goods or moving to areas where cost of living is lower are not realistically available to everyone, nor are they desirable for the economy at large. After all, many people have already lost their homes and cut spending in every area they can imagine. Not everything is relative—cost of living does have some actual bright line minimums when it comes to housing, transportation, food and medical care. Meeting those minimums often means missed debt payments as well as reduced consumption. Both have a very negative effect on the economy as a whole. While interest on debt payments may have become a significant area of revenue for many businesses, let us not forget that consumption is the actual prime mover of our economic system and whatever is consumed must be produced at an ever lower cost. If economic growth and corresponding profits are to continue, any reduction in debt service payments must be counterbalanced by increases in productivity. US labor costs must somehow be brought down to become competitive with those of developing countries, regardless of relative cost of living.

But how to achieve this? Please consider the following modest proposal. One possible solution would begin with a return to the time-honored institution of working off a debt. Debt could be exchanged for labor contracts set at reasonable hourly rates (exempt from harmful and arbitrary minimum wage requirements), substantially reducing the costs and risks of collection while giving debtors an honorable option to resolve their obligations on a part time basis. Since many workers are already underemployed in part time service jobs, this option would effectively boost their incomes by directly offsetting their debt service payments. Those who find themselves working only enough to barely meet survival costs are neglecting debt payments all too often. This willful neglect enacts a cycle of debt and interest that has no possible resolution for many folks in today's job market, especially those whose skills have been rendered obsolete by globalization. Part time debt-service labor contracts would be a direct way to solve their financial problems; they would have the dual benefit of allowing debtors to work off their debt while providing a substantial boost to creditor's balance sheets. The return to profitability brought on by the financial sector bailout may well be short-lived if indebted customers continue to default on mortgages and credit balances. Part time debt-service labor could be profitably employed to address both concerns. If the skills of the labor did not effectively match the needs of the creditor, labor credits could be issued like stock and sold at a markup to corporations of all kinds to capitalize on the various skills of debtors—providing both income to financial institutions and low cost local labor for corporations. Even highly-educated skilled labor could be procured by these means, as many of today's most indebted workers began borrowing as early as college and are still carrying enormous student loans along with credit card balances and mortgage payments, making them prime candidates for a debt-service contract.

Of course debt-service labor would probably not be compatible with the current American sense of self and fairness. While many US citizens are direct descendents of slaves or indentured servants, very few seem to take pride in this fact. In the early days of this great nation, much of the actual building of cities and businesses was done by those in some form of bondage. Indeed, this tradition continues in large scale agriculture to this day with the nearly universal employment of competitively priced migrant labor. Despite these facts, most Americans prefer to view themselves as potential CEOs, rather than decendants of peasants with minimal likelihood of making more than their working or middle class parents and grandparents. Yet as we have seen so clearly in the past 30 years of political rhetoric, the national mind is indeed a highly malleable one, easily influenced by an effective marketing campaign. An instructive documentary on this is Century of the Self, which details the intentional creation of consumer culture over the 20th century using the tools of modern psychology. Today's political climate is perfect for a similarly bold venture into new horizons of economic relationships. Now is the time to vigorously promote the idea of debt-service labor contracts since the right to say whatever one gets paid to say has never been more assured. Recent victories such as the Citizen's United create a vast new realm of possibility for influencing policy. The timing could not be better since our nation is apparently in the midst of a re-evaluation of our basic concept of who we are. While there has been a recent resurgence of interest in the Constitution and the intentions of the Framers, very few folks have the time or inclination to pore over these actual documents with the level of critical thought required to understand their true implications for America today. For this task they look to staged readings by congresspersons, and to pundits of various stripes. These readings are easily purchased by anyone with the ability to pay. Naturally, emotion carries much greater weight than dry academic discussions, so the most emotive pundits have the most receptive audiences, regardless of the accuracy of their facts, or the long term implications of any particular viewpoint. Indeed, factual accuracy may well work against the objective of swaying public opinion as the American distaste for “intellectual elites” has been frequently well-employed to add weight to politically based arguments and to alter the perception of events both present and past. While various rewrites of history are indeed gaining momentum, further efforts will be needed to bring about the most beneficial mindset among the general population. Well orchestrated public discussion will be critical to bring average people around to accepting debt-service contracts in lieu of the well paid jobs they once looked forward to. The effort is off to a good start however. For example, popular TV personality Glenn Beck has a frequent guest-- Evangelical Preacher and one time Tea Party candidate David Barton, who advocates a return to “biblical” slavery (enslavement of non-Christians). While his idea may appeal only to a small audience on the far end of the conservative spectrum, it is valuable because it makes part time debt-service contracts look much less extreme, and therefore appealing by comparison. An additional advantage is that for companies a debt-service labor arrangement would also be cost effective, since unlike traditional slavery or indenture, the burden of meeting basic physical needs falls squarely on the shoulders of the employee/servant rather than the employer/master. Unfortunately, full time debt-service labor would likely generate too much opposition from bleeding heart liberals, and part time debt-service labor still fails to sufficiently address the sheer numbers of low cost workers needed to return us to greatness. For this, we will need a much larger pool of those willing to work for globally competitive wages.

Fortunately, the solution to this problem may already be underway. Over the past 30 years, the wealth of the nation has steadily shifted from the bottom 80% of the population to the top 1%, providing valuable investment capital directly to those few who really know what to do with it. This has already brought about conditions of financial desperation that could prove highly persuasive to many formerly middle class Americans. Additionally, deep erosion into the dangerous idea of “reproductive freedom” for women are slowly but surely bringing our society back to a manageable mindset of resignation to one's fate. If we continue to support “pro-life” public policy beyond simply rolling back abortion rights such as attributing legal personhood to zygotes and ineffective abstinence only education this will soon begin to dovetail with the total dismantling of the remaining social safety net. The inevitable result will be a large pool of poor, uneducated Americans who could be coerced by simple need and debt to work part time debt-service contracts for no or very low pay, returning us to competitiveness perhaps even in the manufacturing sector—such as we had when our country was truly great. To address the human need to emotionally justify one's lot, debt-service labor could be advertized as a form of service to the nation— a patriotic and responsible personal sacrifice to return us to our natural place at the top of the global food chain. This could be effectively tied to fundamentalist Christian “values,” to add weight to the argument. Certainly our many friendly advocates in the talk show/radio circuit could be employed to promote this idea with great success. When combined with deficit focused spending cuts in wasteful programs such as Social Security and Medicare, the pool of funds freed up for new investment would inevitably fund ever more speculative ventures with astronomical profit potential. This could be presented as visionary “Investment in America's Future”, while lining the pockets of those who really matter. In a comprehensive media environment of magical thinking, audiences would see themselves as potential beneficiaries of the enormous cash bonuses going to executives, and relish the pain and suffering of the weaker elements of society that used to benefit from the wasteful and ineffective social programs we endure today. There is no pleasure quite like that of the self-righteous enjoying the sense of superiority provided by being slightly better off than one's unfortunate neighbor.

Ever more punitive debt laws could both add to the perceived need for more highly profitable prisons and at the same time create a means by which corporate entities could show their “compassionate conservatism” by offering debtors the more desirable alternative—a chance to work off the debt on a part time basis. Successful completion of high value job tasks could be rewarded by new credit to be used in a truck system or “company store” model to keep the debt levels high, insuring that very few would work their way out. Those few who manage by herculean effort or simple good fortune to resolve their debts within such a system would get rock-star media treatment, ensuring the continued pursuit by the majority of the New American Dream—to work one's way out of debt. Additional gains both in the hearts and minds of the people and in corporate profitability could be made if we offer options for mothers to care for their own small children at home by means of a small corporate subsidy in exchange for contracts for children's labor once they reach the age of seven or so. These contracts would continue until some fixed point in a child's teens when the cost of their care had already been well recovered. In this manner the children once viewed as a burden on poor families could be seen as valuable assets, effectively paying for their own care and providing lazy mothers with lots of free time at company expense. In addition, the practical job skills such children would acquire during their period of service would doubtless serve them well in the future as they grew up and joined the ranks of the adult labor force. Perhaps even greater value could be extracted from the aging Baby Boom generation if the elderly and the mildly infirm were given the opportunity to earn credits towards healthcare services with similar contracts for low impact jobs suited to their abilities; in store greeters for example, such as they use at Wal-Mart.

If we are to restore our natural place on the world stage as economic leader, we must first substantially boost our weakened economy. This will require bold steps by leadership to inject new actual value into the system without resorting to silly and untried “green jobs” or nonsensical demand boosting policies which put money in the pockets of those least equipped to take advantage of a cash infusion. In all likelihood, when money is put in the pockets of poor people, they will spend it immediately on such ephemeral items as food, clothing, shelter and medical care rather than put it to good use as investment capital. In order to return our economy to greatness, there must be also a willingness to sacrifice the personal hopes and expectations of the general populace. Part time debt-service effectively addresses both concerns. The troublesome problem of a population of debtors unable to keep up with payments could be solved by creating a system which allows them to work in exchange for credits towards debt payments. Skills could be matched to employer needs by means of monetizing the service contracts. The expense of the physical maintenance requirements of servants could be avoided by having them work only part time. In the remaining hours of the work week, they might be permitted to work at paid jobs in order to earn cash for basic living expenses. Additional profit might be realized by building rental housing near places of employment, and accepting some labor in exchange for rent. Also the possibility exists to thoroughly exploit this opportunity by reviving a more sophisticated truck system--offering bonuses or payment of credit in the form of scrip cards to workers, and then allowing them to purchase consumer goods from a commissary or website where the prices could be set by the issuer of the scrip. In this way, the vertical market for basic needs could be largely captured. Childcare and elder healthcare needs could be subsidized by companies in exchange for the labor of children and the elderly. Moral qualms about child labor could be effectively silenced by emphasizing the value to families of subsidized care by a child's own family, and the benefits provided by the job skills such children would acquire. In addition, the relative kindness of giving simple folks a way to fulfill their obligations would provide a valuable PR tool for maintaining the positive view of companies in the minds of the public. Popular pundits could be employed to extoll the virtues of pulling one's own weight and contributing to the patriotic project of restoring the USA to our rightful greatness. The current makeup of the Supreme Court provides an ideal legal backing for this beneficial program. For all these reasons, a detailed form of this modest proposal must swiftly be packaged and brought to the public for discussion as soon as possible before the new Congress loses favor with the public.

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