An Essay in Support of Community Capitalism

The only way ultimately to achieve the motivation and committed energy needed for major change is to offer a morally compelling realistic vision that goes … to the question of democracy itself.   –Gar Alperovitz, Professor of Political Economy at the University of Maryland

merica is at a critical crossroads.   About 30 years ago we veered from the pathway of democracy and in the direction of a plutocracy—toward a future of great wealth for the few and extreme poverty for the many.    Today the gap between rich and poor is at least 1,000 times worse than most Americans believe.   What’s more, the prospects for recovery are growing bleaker with each passing day.  We must begin the very difficult task of finding our way back in the direction of that vision set by our forebears.  Our circumstances are that dire, the time to act is now, and this essay outlines how we can begin the task of correcting many of our errors.

One of the great paradoxes of our time is this:  America has the most wealth of any country in the world, our gross domestic product (GDP) is higher than any other, and we generate more income than any other country.  At the same time we have the greatest inequality of wealth and income among world rankings.  A small number of wealthy hold nearly 90 percent of our national  wealth, their holdings are increasing with every passing second, while the bottom 50 percent have no wealth at all.[1]  Concurrently, we also lead all other nations in crime rates, incarceration rates, in mental health issues, in suicides, in illiteracy rates, in obesity rates, in teen pregnancies, in illegal drug usage, in social immobility, and we rank near the bottom in life expectancies.[2]  Unfortunately, as more and more income and wealth flow from the bottom and the middle to the top, fewer and fewer opportunities exist for those in the disadvantaged groups to be able to change their circumstances.  We are thus entrenched in a status quo that violates our founding principles, namely, that “all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty, and the pursuit of happiness.”   It is a set of circumstances that trivialize the words emblazoned at the base of the Statue of Liberty:  “Give me your tired, your poor, your weary, your huddled masses yearning to breathe free.” It has also pushed men and women of good will into a quandary about how to resolve our dilemma.   And, until now, there has been no acceptable way out.

Purpose:  The same deteriorating circumstances noted also give rise to an urgent need to begin the task of removing the impediments that are holding us back, and to start installing those changes that will reverse the negative trends.  We have the need, the means, and the opportunity to begin the task.   What we lack is the motivation and the commitment so that we can begin to take positive and decisive actions.  

In very few words, we lack a ”compelling vision,” a succinct rationale for reshaping the future into a truly shared democracy, and a plan for making it all come true .  Collectively, we need to know what America will look like when we have achieved our vision.  Individually, everyone needs to understand the answer to this question:  “What’s in it for me?’’  

The purpose of this essay is to lay out a clear and compelling vision for a greatly expanded economic structure in America called “community capitalism.”  It is a vision that taps into our honor, our heritage, our humanity. It includes you and me and our children and our children’s children.  It is as deep as our values and as tall as our spirits.  It’s about the survival and the rebirth of American Democracy.  It is attached to and draws upon the spirit of our Founding Fathers; it extends that common bond in which they pledged to each other their “lives, their fortunes, and their sacred honor.”  It embodies the heart and soul of who we are, what we stand for, and what we are willing to die to preserve.

The Challenge.  Many—but not all—of the wealthiest Americans are against any changes that might disturb the status quo.   They are so entrenched in their opposition to changes that would subtract one dollar from their income and wealth accumulations that they are willing to spend billions of dollars in support of those organizations and politicians who agree to demonize those in need and to spread an incessant propaganda about the good they do, and great financial support for those who will pass laws according to their mandates.   

I have cited these facts and data in many other essays:   We live in a plutocracy, not a democracy, that is ruled by the wealthy.  The rich have amassed nearly $60 trillion of wealth, and perhaps another $15 trillion in offshore tax havens.  Their hoarded wealth is the number one cause of poverty and all the social ills associated with poverty; their hoarded wealth prevents job creation—it does not create jobs—it is the reason why millions have no health insurance; it is the biggest obstacle to upward mobility for millions of Americans; and it is the biggest threat to life, liberty, and the pursuit of happiness for all Americans.  These statements are facts, not opinions.  Each is supported by economic principles and theorems,  and in particular by this relationship:   money in circulation (M1) times its velocity (turnover rate) = gross  domestic product (GDP).

If only $1 trillion currently hidden in offshore tax avoidance havens were put back into circulation, it would produce more than $6 trillion in GDP, more than $5 trillion in personal income, and more than 100 million new jobs paying $50,000 each.  It would also generate $1 trillion in new federal tax revenues.  

Please digest those numbers for a moment.  Just 1/60^th of the wealthiest American’s net worth would be enough to solve our unemployment problem, our federal budget deficit, and most of our pressing economic issues. Or 1/15^th of their offshore wealth would produce the same outcome.   Double that sum to $2 trillion, or 1/30^th of their net worth, and nearly all our social ills would disappear.  What’s more, $1 or $2 trillion is such a small part of their total, they would not feel the effects at all.  Indeed, in just the past 3 months their wealth increased by $3 trillion dollars.

Several questions surface from these data:  First, why won’t the wealthy simply pay the $1 or $2 trillion into a national pool to be added to M1 slowly over time so that all these issues could be solved? Here is the best answer we have:   A few are willing to pay their fair share.  Warren Buffett, worth about $50 billion, is willing.  Ted Turner and George Soros are willing to pay.  But there are 63,000 corporate CEOs and 3,700 private equity fund managers who could pay into this fund.  They will not pay.   They could solve all these issues 1,000 times over.  Still, they will not pay. 

We could change the inheritance laws and solve these issues in a few years.  There is huge opposition to that remedy.  We could modify the tax laws slightly and solve all these issues.  But instead of the wealthy paying a little more, they want to pay even less and thus make matters worse.   And their stooges in Congress are willing let the U.S. default on its debts to prevent the wealthy from paying more.

We know that just 3 percent of all wealth is held by churches, schools, and charities, and that is a relatively constant percentage  over time.  That outcome means that 97 percent of all wealth that is left when someone dies goes to individuals.   And 97 percent of all inherited wealth goes into new wealth.   Thus by the laws of probability and logic, we know that 94 percent of all wealth in America is inherited, directly or indirectly.   And that means that today’s holders of wealth did nothing at all to earn it.

There is a very simple formula for finding the amount of our national wealth at any point in the future.  We simply establish what the compound annual growth rate has been for the past 50 years, and project that same growth rate forward.   Let’s do that now to see what the wealth total will be 50 years from now in the year  2063. 

Historical and projected U.S. net worth:[3]

  Net Worth, 1963 =  $2.48 trillion

  Net Worth, 2013 =  $70.35 trillion

  CAGR = 6.92 percent.

  Future Net Worth, 2063 = $70.35 X 1.0692 ^50 _˜ $2,000 trillion

  Likely distribution:  Top 20 percent = $1,800 trillion  (90% of total)

   Middle 30 percent = $140 trillion (7% of total)

  Bottom 50 percent =  0.

The projected values assume the same compound growth rate during the coming 50 years that occurred during the past 50 years.  The only caution about that rate (6.92 percent) is that the historical accumulation was produced during and from  an average real  GDP growth rate of 3.3 percent.   That rate is probably too optimistic for the future given the fact that our economy is encountering many headwinds in Congress that are likely to continue for an indefinite period of time.

The Census Bureau  also projects the U.S. population will double in the coming 50 years, from our present total of approximately 310 million to 620 million by 2063.  The bottom one-half of that population (310 million) would still have no net worth inasmuch as zero raised to any power is still zero.

Now, given that these projections are reasonable because they are based on facts and sound projection methods , what are the most likely outcomes? 

Perspectives.  Ask a dozen economists if the U.S. net worth accumulation can build to $2 quadrillion dollars while 310 million Americans have no opportunity to share in any of it, they would almost certainly agree that such an outcome could not possibly be sustained.  An economic  collapse would occur long before a wealth gap that wide developed.   Ask a dozen historians the same question, and they would almost certainly agree that a bloody revolution of historical proportions would occur within 20 or 30 years.     

Before I offer a response to the same question, let’s first define this thing called democracy—what it means, and why it is worth preserving.

Democracy is a form of government in which all eligible citizens have a say in the decisions that affect their lives. It traces back to classical Athens in the 6th century B.C.  It is also plausible to assume that democracy in one form or another arose naturally in many well-bonded groups around the world such as within tribes.  Democracy is based on the fundamental premise that people will support a government and a way of life when they have a voice in who runs it, in how it conducts its affairs, in how its wealth is created and distributed, and the extent to which its citizens have access to its institutions such as education, health care, and the opportunity to pursue their destinies without undue interference from others.  According to Thomas Jefferson and the other signers of the Declaration of Independence, each of our destinies in the United States is inextricably linked to life, liberty, and the pursuit of liberty.

The Vision:   Any vision for America must honor our past, it must embrace our values, and it must give every person who lives in this county the hope for a better life and the opportunity to achieve it.   America was not founded on rule by and for the wealthy, and our future cannot consist of dynasties of incredibly rich families while a growing under class of poor, unemployed, and underemployed expands and expands.   The time has come for all citizens, all permanent residents, and all hopeful citizens to coalesce around our founding values.  Clearly, we are no longer guided  by those values, nor are we on course to achieving any of them.  It is time that the bottom 90 percent began to compete against the top 10 percent, economically, morally, and in the marketplace of ideas by reshaping our country away from corporate capitalism and into a greatly expanded community capitalism.  Competition is the key to our future.   Only by redirecting capital away from large banks and large corporations and into smaller local banks  and credit unions can we expand local businesses, job growth, and future opportunities.  We must reject the notion that any corporate executive is worth hundreds of millions of dollars in income, perquisites, golden parachutes, bonuses, stock options, chauffeured cars, yachts, memberships in exclusive clubs, and the like.

The Plan:   Ultimately the plan is to create or expand 1million businesses in and around every community in America.   They will be entirely dependent on what each community wants and needs.   Startup capital must come from corporate bank account depositors.   If 10,000 depositors moved $10,000 each from their large corporate bank to a local credit union, that would shift $100 million dollars away from  the hands of corporate CEOs and into the hands of local entrepreneurs and businesses.  Repeat that procedure 70,000 times, and $7 trillion will have been moved into local communities.   Then local communities would be on a par with the 63,000 large corporations.   Time frame:  20+ years.

A new website will offer articles, and in-depth information about  various businesses, co-ops, banks, credit unions, success stories, how much capital is being shifted, and a host of other items.  That website is:  www.AmericanWealthNetwork.org.   You can click onto it soon after July 4, 2013.

What’s in it for you (The Motivation):   First and foremost, this is the way to win America back. It is mainly for the bottom 90 percent, but we will welcome even the richest among us who genuinely love our founding principles and who want to see a stronger, growing America where there are good paying jobs for everyone,  access to health care for everyone, many worker-owned businesses, and a large increase in private businesses.  In addition there will be greatly expanded educational opportunities for all, many more home ownerships, secure Social Security and Medicare programs.  We expect to win back America via the mechanism of competition, the essential feature of capitalism.   Instead of profits flowing into narrow vertical channels to a handful of CEOs  at the top, profits will flow horizontally into an interconnected network of community-based businesses.     As community capitalism grows and expands, corporate capitalism will shrink and become less influential in all aspects of American life.

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