the correct relationship between labor and capital. Labor and capital are partners in an efficient and effective economy, and their mutual respect and collaboration are critical to the proper functioning of the economy. Because labor and capital are equal and essential elements of an economy, they must share power equally, both economically and politically.
In order not to appear vague, perhaps it would be best to think of capitalists as the individuals comprising the top 1% of the income/asset hierarchy and labor as those individuals comprising the lower 99% of the income/asset hierarchy. Capitalists use capital to generate an income, while workers use their labor (physical, intellectual or both) to generate an income.
The basic dynamic of an economy is the continuous cycle of demand, production, sale, consumption. The economy is driven by consumption and jobs are created because of consumption. When consumption is down, jobs are lost. When consumption is up, jobs are created. Businesses only create jobs in response to demand or consumption, both forecasted and actual.
A production or productive system is any system that produces goods or services. There are obviously a wide range of such systems. Some of the more common productive systems are manufacturing organizations, distribution and sales organizations, banking organizations, construction organizations, entertainment organizations, educational organizations, consulting organizations, software organizations, telecommunication organizations and health care organizations.
There are two basic components to a productive system: capital and labor. Capital can either be land (and the natural resources on the land), buildings, equipment, material, intellectual property, technology or cash/funds which can be used to buy the necessary assets and materials required by the productive system. Labor provides the ideas, designs, philosophy, direction, management, physical work, etc. that is required to generate the goods and services which will be sold by the organization. Labor can be either intellectual or physical. By intellectual labor is meant creative activities such as designing, developing, planning, organizing, managing, writing, etc. Physical work covers a wide range of activities from those involved in manufacturing and construction to playing sports to singing and acting to speaking to teaching to nursing. In the initial or start up stages of the production system, the capital is provided by individuals or capitalists. After the production system is operating in a profitable mode, the capital is no longer provided by capitalists but rather is generated by the system or organization itself. This is a very important point to understand. After an organization is generating a profit on its own, the organization itself generates its own capital. For a corporation that has been in existence for a few years, virtually all of the land, equipment, materials, assets, and cash that it owns has been generated by the organization itself and the workers who were responsible for producing the goods and services which were sold to generate the capital used to either buy or pay off the loans on the property, equipment, materials and other assets. After the corporation has begun to generate capital, the initial capital provided by the capitalists is no longer relevant and the capitalist provides absolutely no contribution to the enterprise. Virtually all of the assets or capital of the vast majority of corporations is capital that was generated by the organization itself through the labor or the workers.
Production provides the goods and services that satisfy the demand of consumers. Production always seeks to match demand. Every planning function within an organization is continuously working to forecast demand and match capacity, production, procurement and inventory to forecasted demand. Increased consumption (which increases forecast) increases production; decreased consumption (which lowers forecast) lowers production. Production of goods and services comes essentially through the labor of the working class (the lower ninety-nine percent of the population) facilitated by capital from the capitalist class (the top one percent of the population) assuming the organization has not reached the point where the capital of the organization belongs to the organization itself. In this case the profits from this joint venture of labor and capital must be equitably shared between labor and capital, that is, between the capitalists and the workers.
The working class constitutes the majority percentage of the consumptive part of an economy. Given that consumption drives the economic cycle and that the working class is the major part of consumption, it follows that the economy is driven by the working class’s consumption. However, the working class can only consume to the extent to which it is capable of buying goods and services. Since the working class is the main factor in both the production and consumption phases of the economic cycle, it must be given its fair share of the profits so that it can purchase and consume.
Unfortunately, what has happened and is happening is that the capitalist class has been taking far more than its fair share within the national production system. And because the total is limited, the more that the capitalist class has taken, the less there is for the working class. This has caused the great imbalance between capitalists and workers; the imbalance that is severely affecting the economy in a negative way as is seen in the high percentage of unemployed, under-employed, those living in poverty, homeless, and those living from paycheck to paycheck.
Over the past forty years, the wealth, financial stability and earning ability of the working class has significantly declined. Most working class families’ assets have shrunk. Twenty-five percent of the US population have zero to negative net worth. Over a hundred million people in the United States live from pay check to pay check. Tens of millions of families have had to resort to excessive debt to operate financially and millions of these will suffer from the burden of their debt which will never allow them to retire. There are over 48 million people living in poverty within the United States.
Because of the great amount of income spent on debt and interest, because of the lag in wages behind real inflation, and because of out-of-control costs, especially energy, food and health care; consumption by the working class has been and continues to be reduced drastically. As consumption by the working class decreases, production which is driven by and is correlated to consumption proportionately decreases. When production is down, businesses react by laying-off workers to reduce operating expenses. Of course, when people are unemployed, they have even less money to spend. This in turn leads to even less spending by the working class which businesses respond to by laying off more workers. This downward trend will continue without end except for the total collapse of the economy unless something is done to stop it. The United States is now is this downward trend with nothing to stop it because those who can stop it are politically powerless to act and those with political power are in fact responsible for the imbalance between capital and labor that has created this broken economy.
The vast majority of elected officials represent primarily the capitalist class. This means that their primary focus with respect to administering, legislating, and adjudicating is to promote the welfare and goals of the capitalist class. It has been and is this biased representation that has led to the gross imbalance between capital and labor which is the cause of this continuing economic crisis. These elected officials ignore the fact that they have been elected by the people and are obligated to promote the welfare of the general public, not a very small, select and elite group within the population.
These elected officials, who represent the capitalist class, have allowed and facilitated a virtual attack by the capitalist class on the working class. While it would be more appropriate to consider this assault on the working class by the capitalist class as a war, it is a one-sided war in that the working class has done nothing to defend itself. And, it is a pre-emptive war.
Within the domestic area, the United States government has eliminated the proper controls which seek to maintain the appropriate balance between capital and labor. Within the foreign area, the United States government has promoted and is promoting a global empire for the capitalists.
At the heart of the capitalist campaign is the fallacy of free market economics. The fallacy hides behind the misleading term ‘free’. Because everyone believes in and desires freedom, people blindly accept almost any concept that uses the word “free.” While people want freedom, they do understand that there is no such thing as absolute freedom; freedom
