Workers of the World, Invest!
Copley News Service, 09/04/2000
As we celebrate Labor Day 2000, it is instructive to look back at what Karl Marx predicted in 1848 about the plight of labor. “The modern laborer,” he wrote in the Communist Manifesto, “instead of rising with the process of industry, sinks deeper and deeper . . . He becomes a pauper, and pauperism develops more rapidly than population and wealth.” Capitalists—the owners of the means of production—Marx preached, are workers’ enemies who exploit them and keep them chained in poverty and misery. In his famous call to arms that rang through the years, Marx cried, “Proletarians of all countries, unite! You have nothing to lose but your chains.”
Isn’t it ironic that one hundred and fifty-two years later, the epitaph on Karl Marx’s tomb could read, “Workers of the world, rejoice. Karl Marx was wrong.” In democratic capitalist countries, workers and capitalists are not enemies; they are not even different people; they are the same people but at different stages of their lives.
Marx believed that private ownership of capital produced economic misery for workers. Today we have learned that widespread private ownership of capital is the key to prosperity and a rising standard of living for everyone. It’s when workers themselves can’t get access to capital and own assets that poverty is perpetuated and people get stuck on the lower rungs of the economic ladder. As Jesse Jackson put it some years ago, “capitalism without capital is nothing but an ‘ism.’”
The way to get capital into the hands of workers is not, as “Third-Way” politicians like Tony Blair, Bill Clinton, and Al Gore maintain, to have government tax capital and income away from one group of Americans and redistribute it to the worker. The problem is not too little redistribution, which doesn’t work anyway when it is attempted, but rather too high a tax rate and too much government regulation that impede workers from acquiring capital and creating wealth for themselves. It is not only taxes levied directly on workers’ labor income that limits their ability to save and invest. It’s also taxes that many workers don’t even pay, excessive taxes imposed multiple times on saving and investment—on capital itself—that dry up capital, restrict its flow to those on the lower rung of the economic ladder and inhibit the adoption of productivity enhancing technology that allows wages to rise leaving something left over for workers to save. Every time government puts a tax on capital, the burden falls on the back of workers.
When all is said and done, whenever government over taxes labor and capital and punishes success in the name of “protecting the people against the powerful,” it’s labor that ends up being punished by lower wages and higher unemployment. The “powerful force” standing in the way of workers and working families from which they are most in need of protection is over-reaching, misguided government that overtaxes its citizens and divides them with class warfare.
For example, Social Security payroll taxes, the working man’s income tax, confiscate 12.4 percent of workers’ wages and salaries and dump them into a socialist-style, unfunded, government-run retirement plan that promises an average return on investment of only 1.2 percent after taking inflation into account. That’s the “powerful force” standing in the way of workers’ owning assets and creating wealth of their own, not multinational corporations or the oil companies or the drug companies or any other private company. African-American workers, whose life expectancies are lower than average, get a particularly raw deal from Social Security since many black workers do not live long enough to recover all that they paid into the system.
Bad as this is, it will only get worse unless steps are taken to place Social Security on a solid foundation of real financial assets. According to the Social Security actuaries, after 2014 unless the payroll tax is raised or unless benefits are cut commensurately, there won’t be enough Social Security payroll tax revenue coming in to pay all the benefits promised. Over the long run, payroll tax revenue will cover only about 70 percent of promised benefits unless the payroll tax rate is raised to 18.5 percent.
The Gore-Lieberman ticket wants to make up this enormous Social Security deficit by raiding the Treasury of general revenues. No wonder the vice president so fanatically resists George W. Bush’s income tax cuts. But workers today are catching on. They are beginning to understand that raising more revenue through income taxes, capital gains taxes, estate taxes and the like will only retard economic growth and erode the value of their own mutual funds and private pension plans. The solution, therefore, is to do what Governor Bush proposes and allow workers to place a portion of their payroll taxes into personal retirement accounts that will raise the return on their investment and alleviate pressure on Social Security.
Marx did get one thing right. He thought the class struggle would come to an end when the means of production were owned by workers. Today, more than 60 percent of all Americans own stocks and bonds either directly, in mutual funds, through a private pension fund, 401-K plans or IRAs. The dialectic of modern capitalism is the transformation of the working class into an investor class. A President Gore would stop this transformation and make it difficult for many workers, impossible for some, to own assets and build wealth, leaving them imprisoned under the “protective” wing of government. Governor Bush and Dick Cheney want to hasten the transformation of America into a shareholder democracy by allowing every worker, from the first day on the job, to use a portion of his or her payroll taxes to purchase their share of the means of production.
Someone should tell Vice President Gore, the class war in America is over. The workers won, and our new motto should be: Workers of the world, invest!
