Although President Obama’s statement, “the private sector is doing fine” has largely been used as political fodder or spun as a misspoken statement, he is in many respects correct. The US economy has been expanding and the markets are bouncing around at about pre-Great Recession levels. Meanwhile, American corporations have billions of dollars on their books. Only in terms of unemployment is President Obama wrong.
The problem is that businesses do not produce jobs just because people need them; just as employers do not pay someone a better wage, because their current salary does not meet their living expenses. In other words, the economy is not built for sustainability or to address the interests, including jobs, of the majority of the People. Furthermore, the Great Recession destroyed a myriad of businesses, which translates into lost jobs, forced fundamental changes in business practices, i.e. positions have been permanently eliminated, revealed personal and institutional debt issues, which continues to hinder consumer demand, and outright drove individuals out of the economy. As such, employers either do not need more employees or they do not want the ones available. Meanwhile, the job creators of our economy are small businesses and new business ventures developing innovative technologies, but the main thrust of government policy, especially in terms of taxes, is not focused on these firms. This means we cannot grow our way out of our underlying economic problems. As such, our economic situation will continue to worsen until there is a restructuring of how our economy works.
Today, education is the most significant factor in determining income potential and upward mobility; however, an education does not safeguard individuals against the consequences of growing economic disparity. The reason political and civil rights leaders consider education to be the civil rights issue of the twenty-first century is that access to education is being threatened due to exploding costs at our academic institutions while there is comparatively less support from government due to budget constraints and political ideology. In addition, the liberals of today, like their conservative counterparts, have grown intellectually lazy while education offers activists some fairly straightforward, popular solutions, increased tax payer subsidies for example, so education is a clear choice for national leaders to market as the civil rights issue of the day. Unfortunately, it is only a piece of a growing social issue that demands a far more involved, ongoing endeavor. The civil liberty issue of the twenty-first century is, in fact, creating and ensuring greater access to viable financial opportunities for all.
Although education is an engine for personal grow and social transformation, extreme economic disparity seriously undercuts the benefits of an education as a lack of economic leverage disenfranchises individuals. In the twentieth century, the civil rights movement heavily focused on racial and gender disparity. Although a tedious process rot with blockades and missteps, straightforward solutions eventually presented themselves, including examples of meaningful, appropriate legislative action. Consequently, the civil rights movement largely succeeded, thus producing an ideological shift that no longer made it acceptable to value someone based solely on an innate characteristic or a single aspect of that person’s character. Unfortunately, the movement failed to address the broader injustice of inherited poverty that cuts across racial, gender, and cultural bigotry.
The consequence of this failure has been the continued shadow of discrimination in terms of the socioeconomic disparity experienced by generations of poor minorities and women. Sharing their struggle, there has long been a diverse segment of the population largely neglected by the economy while the ranks of the poor only continue to grow as well-paying jobs disappear and the broad consumer base, which brought about economic prosperity in countries like the US, dries up in an alarming number of communities. On the other hand, those firmly situated in middle class and wealthy families will be better able to compete for what fewer, more lucrative financial opportunities are expected to arise while those who cannot compete will be consigned to the working poor. Inequality among Middle Class and wealthy minorities will, therefore, disappear overtime, yet inequality will only continue to grow among the economically disenfranchised. Addressing poverty cannot, therefore, be solely accomplished by spurring additional overall grow. Disparity means most of the gains will go to those least in need. As such, the economy needs structural changes that afford the majority of individuals greater leverage over the economy.
Meanwhile, success in our economy hinges on an individual’s ability to function in line with employer and consumer expectations. As such, individuals seeking financial gains must have the resources to respond to the rapidly changing demands of the economy. Obviously, this is a serious roadblock that exists for the poor while government cannot hope to subsidize everything the poor need to succeed. In fact, doing so would only inflate those needs. If one considers education, not all educational experiences are equal in economic value, but an increasing number of associate and bachelor degree holders lessens the overall value of completing college, thus creating a glut in the jobs market for educated employees and degree inflation. Because those with more affluent backgrounds can better afford to pursue higher levels of education and stay out of the economy longer, they will undercut the educated poor, even when a formal, higher level education is not needed for a job. In other words, the children of the poor will continue to be “legitimately,” under our current thinking, poor, because they cannot compete for jobs against their more affluent counterparts. Consequently, civil rights leaders need to focus more on ensuring greater access to financial opportunities and economically empowering all individuals.
While glancing over a study guide on macroeconomic theory cowritten by Nobel Prize winner Joseph E. Stiglitz, I came across a particularly useful argument against certain subsidy policies. Subsidizing the steel industry, for example, cost the US government in terms of tax dollars and tax revenue, but it also drove a far larger sum of capital, due to investment and demand, away from other industries inside the domestic economy instead of attracting new investment as was the intended goal.
In terms of economic activity somewhat disconnected from the globalized economy, subsidies provide greater costs and fewer benefits to a domestic economy than should be assumed at first glance. In terms of subsidizing a globalized segment of our economy, the policies of a single nation, China or the US with regard to oil and agriculture as bold examples, can seriously hurt the economies of other nations and the global economy as a whole with few benefits going to the offending country. Inevitably, all countries must eventually pursue their own domestic interests over the interests of others while doing so can be damaging, or beneficial, to the International Community. Consequently, policymakers need to do a better job of recognizing the costs of their subsidy policies while economic researchers also need to offer better insight to the public.
Extrapolating from the original example, countries around the world subsidize a variety of segments of their economies via tax exemptions, tax credits, outright payments, discounted resources, and other mechanisms. In many countries, taxpayers receive a discount for the taxes owed on the returns of their investments, thus wealth is valued higher than earned income and intellectual property. In the US, what investment activities qualify for the capital gains discount has changed with the political climate. At times, policy swifts support the broader interests of the American People; other times, they favor only a handful of individuals while the capital gains tax has long been generous at around 20 percent under the Clinton Administration and around 15 percent under the George W. Bush Administration.
For most Americans, the discounted tax for capital gains serves as a long-term incentive to invest their monies as to ensure their financial future and the country’s economic stability. For wealthier Americans, however, the discount is not an incentive to invest; it affords them a windfall for monies they would have already invested, though altering it may change how they invest. As stock markets afford individuals a convenient vehicle for their investments, versus directly risking their savings in a business venture in a more localized economy, most people invest in our national/global economy through a 401K retirement plan, an IRA, a mutual fund, bonds, CDs, and other financial instruments. In terms of the above analysis, this means monies are funneled into investments sanctioned by the government with the greatest benefits going to those segments expected to grow the fastest.
The benefit to the economy is a readily available, broad base source of capital that can be used to expand economic activities in the Main Street economy. This has helped make the financial sector one of the strongest. Unfortunately, the financial sector does not demand a great deal of labor as compared to the greatly diminished manufacturing sector and the overall need. Consequently, steering too much money into the financial sector may well have hurt the economy as a whole, because doing so diverts money away from the economic activities that financially benefit the majority of Americans.
People need well paying jobs to sustain strong consumer spending, i.e. the lifeblood of the economy, and build their investment portfolios, i.e. access the benefits of economic growth and supply the economy with capital, while enjoying a comfortable lifestyle. When the majority of people lose their ability to both afford a comfortable life and invest for their future, the economy is unsustainable. From the 1970’s until about 2008, average income Americans were able to compensate for diminishing wages and lost financial opportunities by working longer hours, living on multiple incomes, decreasing family size, forgoing certain luxuries, relying on state support, and, in the case of the growing poor classes, forgoing necessities, thus ultimately hurting themselves in the future.
Furthermore, today’s economy is built on increasing returns to those can afford to be investors. This translates into a situation where an excess of capital is driven toward investments with the highest payouts, thus creating bubbles. Wall Street firms and affluent individuals have been increasingly able to use extremes in the markets to siphon capital out of the economy, especially with their use of exotic financial instruments and commodity futures. Because emerging economies often see periods of faster grow than developed economies, capital is being increasingly routed to outside ventures via investor choices, especially among professional investors, an over reliance on imports, outsourcing, and crescendoing commodities prices.
In tandem, production is cheaper in underdeveloped countries due to abundant, underdeveloped natural resources, cheaper human resources, and a lack of important regulations while only a relatively few in these underdeveloped countries significantly benefit from the exploitation of their national resources. As such, excess capital does not primarily benefit the majority in developed countries paying the price for the capital gains subsidies in terms of expanding labor intensive industries. In fact, it is likely fueling the growth in underdeveloped counties that is undercutting labor intensive industries in developed countries instead of fueling novel industries throughout the world. Although the US, Japan, and Europe are stalwart economic safe havens, growing uncertainty in these economies and growing, yet fluctuating, confidence in emerging markets means capital is more often going to be diverted to developing nations in the future. Manufacturing, for example, has started to return to the US, but price instability for commodities like oil is helping to drive this resurgence; should costs stabilize and foreign imports continue to become more reliable as is needed, this industry and similar ones will once again see decline.
Consequently, the capital gains tax needs to be recalibrated to better reflect the interests of national economies. Beyond an immediate, honest effort to better understand and discuss the effects of tax policy, we need to hold a constructive public forum on the issue that actually leads to action. This starts with economic researchers developing economic models that do not over value wealth capital by undercutting the value of intellectual and labor capital. In the short-term, any action will likely facilitate already inevitable corrections in economic sectors where growth has been inflated and economic measures focus far too heavily on, yet over time it will stabilize our economy and promote sustainable growth where we need it the most. (As for double taxation, tax purchases made with already taxed earned income is a double taxation situation. Applying both a capital gains tax to funds subject to a corporate income tax is, at least, just as unfair, though governments often allow corporations some deduction or accounting trick to effectively reduce double taxation. When the capital gains tax is solely applied to the returns on an investment, not the original principle, double taxation is not at play.)
Action in the United States may well translate into capping the benefit of the capital gains income tax, so it can act solely as an incentive for middle income households. Paying down the National Debt is one option while shifting the tax savings associated with the truncation of the capital gains tax discount is another. Cutting overall tax rates would be nice, but governments might consider subsidizing another type of capital that would drive grow where it is most needed. With free trade, policymakers and economists assumed Americans would develop an economy fueled by the service sector and intellectual property. Clearly, this model does not provide for the interests of most Americans as most do not own significantly valuable intellectual property and service industry jobs are often low paying, but policy shifts can help better spur the good paying jobs people need.
Improved business models, technological advances, economic uncertainty, and a lack of demand have created an economy that does not need the skills and labor of millions. Innovations and the spread of new technology can, however, create good paying jobs by sparking novel industries. Coupled with improved patent laws, offering a tax discount on par with current capital gains tax deductions for royalty payments on novel technologies and other innovations would make them far more valuable. By making patents and other intellectual property more valuable, financial capital would be steered toward innovation, thus ultimately creating new industries and jobs.
It also means innovative individuals would enjoy a far more privileged position in our economy as they would be a more significant source of wealth and their intellectual property would afford them greater leverage in the economy. Additionally, instead of selling off old technology to foreign countries, which helps drive outsourcing, companies would have greater incentive to hold onto patents and production. Most importantly, businesses would be pushed into investing in research and development instead of simply waiting to purchase innovations at a discount. Moreover, financial capital is valued higher than intellectual and human capital, but changes in tax policy could fix this impropriety.
Democracy cannot be expected to yield the results we exclusively desire. In fact, it might not even serve our most vital interests, especially when considering a foreign democracy where outsiders have no right to democratic representation. Although they did have an advantage thanks to their well establish history, the Muslim Brotherhood and other Islamist fundamentalist representatives acquired power during a more or less legitimate democratic election. This may be unfavorable to the West and the Egyptian military, but the Egyptian Supreme Constitutional Court, which was built by the former regime, did democracy a great disservice, as well as itself, when it decided to imperil its legitimacy by dissolving the newly elected parliament. Among a backdrop of other dishonest moves by those in power to force their interests upon the Egyptian People, this latest actions means democracy has not yet taken root in Egypt. As the revolution evolves, this also increases the risk of largely peaceful protest turning into violent revolt and civil war. The affluent in Egypt must relinquish their power and forego their direct, immediate interests in order to ensure a better future for Egypt by embracing the democratization process sooner rather than later.
Google is an amazing company that produces extraordinary products and services that its users can use at little to no cost. It also aims to be a moral company, not just an ethical company, with the morally binding motto “don’t be evil.” This is why Google is one of the most profitable, most influential companies in the world while it continues to expand at a more than impressive rate with an increasingly diversified line of products and services. Not only does Google have an annual revenue stream greater than the GDPs of somewhere around half of all the world’s nations, its products and services have been so successful that web developers are essentially redesigning the internet around Google. This means Google’s policies and actions hold greater weight in global affairs than most governments.
Google failing to fully recognize this influence is like saying the policies and actions of the United States, Russia, and China do not have an overwhelming impact on most other countries. A company like Google, which has more economic and soft power with far greater direct influence over individual behavior than most nation-states, becomes unethical and immoral when it starts to address its interests without considering the interests of others, especially the little guy. When companies like Google do not adequately address concerns about their conduct, issues like net neutrality and corporate morality, or even ethics, become little more than excuses to disarm critics and governments from regulating growing monopolistic conglomerates like Google. If Google fails to correct its blind pursuit of its own interests without, at least, openly recognizing the interests of the non-affluent, undervalues its influence, seeks only to discredit/silence its critics, and/or fails to institute its moral objectives as an integral business function, the result will be an extremely dangerous future-Google. Considering Google’s thorough saturation of the internet and the mounting cases of legal action against Google, this is a very real possibility.
Although I enjoy Google’s products greatly with few complaints, I have experienced the brute, merciless power of Google first hand. The experience was quite unsettling. In the wake of the 2008/2009 Great Recession, which was caused by business leaders who manipulated an entire industry to service their own interests without regard to the interests of the non-affluent many, thus doing great evil against the many, the Occupy movements, which originally targeted the harmful disregard on the behalf of the affluent for the interests of the many, and the ongoing Arab Spring uprisings, which the inspiring actions of Google executive Wael Ghonim helped make successful, Google should be far more aware of the potential harm it can cause the global economy and society, thus a morally motivated Google should move to correct any potential moral and ethical issues. With the return of Larry Page as CEO and a renewed pledge to meet its moral obligations, I felt Google would begin addressing outstanding issues in a more responsive matter, not circumventing them. To date, the issue I had with Google’s heavy handed policy has not been addressed.
A few years ago, I created three webpages within a journalist community website before I eventually signed up to use Google’s Adsense program. Almost two years ago, my account was suspended for “invalid activity.” When I tried to work with Google to address their concerns, my multiple appeals resulted in seemingly automated denials, near precisely one week after they were submitted. Trying to contact someone at Google, I found a heavy handed, unresponsive corporation that left me wondering if anyone was listening. To be clear, what Google did was bar me from an essential source of revenue for a lifetime. With the ever expanding pervasiveness of Google Adsense and ad revenue a key part of the “new economy,” which is based on intellectual property and the internet, this means Google has the power to cutoff anyone from a major segment of the “new economy” for any perceived violation of their user agreement without explanation while its current policy is a permanent ban. This is not only harmful to society, especially to the poor and non-affluent, but a failure to offer offenders a chance at redemption for such petty “sins” and/or offer them meaningful representation has been considered evil since the time of the American Revolution. At most, the “invalid activity” in my case would have given me $50 worth of revenue, if Google had not refunded all of the ad revenue on my account to its clients.
Two years later, I re-launched my one webpage as an independent website, yet Google’s policies continue to deny me access to this important source of revenue and segment of the economy. I understand Google needs to protect its advertisers in order to build confidence in the Adwords/Adsense programs, but automatically suspending an Adsense account for a lifetime without a warning, a full explanation, or a transparent appeals process is terribly heavy handed. Quite frankly, even the Chinese, Iranian, and former Egyptian governments have been far more lenient and understanding than Google’s Adsense policies. This overly hawkish approach to punishing Adsense “partners” for irregular site activity, whether it is knowingly their fault or not, is harmful to all users and serves as an example of the harm Google can offhandedly cause our economy/society.
Investigating Google’s charge on my own, I discovered some of my friends and family were just clicking on all the ads, thinking they were helping me. Thanks to a variety of reasons, my webpages had very little traffic, so this helped significantly inflate my ad revenue. I immediately told them not to do so. In addition, I believe I inadvertently violated Google’s user agreement as a result of the fact I plainly forgot what the Adsense agreement disallowed. Google encourages a culture of logical and intuitive thinking, so I managed my ads in a manner that was logical and intuitive. Considering Google has a history of offhandedly imposing its own interpretation of intellectual property, privacy, and regulatory laws to pursue its own interests in a logical and intuitive manner, Google should afford its affiliates and partners a similar consideration. Google does not.
For background, one of my webpages was entirely devoted to learning about and supporting innovative technologies while the other two were dedicated to discussing politics and music. Given the eerie relevance of Google Ads, it is only logical that I would want to discuss and would want others to discuss their contents on my webpages while Google’s clients should want the same. I did, in fact, often find the ads quite interesting and informative, so I wanted to discuss them. My intuitive understanding of the valid activity clause in the user agreement was any activity that revolved around genuine interest; my interpretation was apparently an unacceptable conclusion. Meanwhile, it is only logical that website managers need to be able to review and control the content on their websites. As such, I got into the habit of viewing the ads to learn about the products and services they advertised. There were even some I would prefer not be on my webpages, though I was given no recourse. Given time constraints and other factors, I would often come back to the same ads a few weeks later. I also came to use the phrase, "Check out these products and services to support this webpage" to introduce my ads. Not only did I have these titles on my ads for over a year and a half without receiving a warning from Google, the fact that I was encouraging visitors to take greater interest in displayed products and services is beneficial to Google’s clients, so I felt I was in compliance with Google’s user agreement.
As soon as I discovered Google had disabled my Adsense account, I immediately and openly moved to correct any and all potential violations I may have committed without regard to the logic of my argument and the fact Google offered me no real insights. Clearly, I tried my best to understand what had been done wrong while I was more than willing to work with Google to resolve any violations. Google, on the other hand, would only send me an email which bragged about its “sophisticated” filters that the world should simply trust to work effectively and for our mutual interests. Meanwhile, I tried to offer Google suggestions for a better way forward. Instead of assuming guilt and creating disruptions to ads on a website, thus causing harm, Google could, and should, have found a way to stop payment for the suspicious activity and/or displayed charitable ads while offering a warning, so Adsense “partners” can address the offending issues. As Google is a rather talented company, I am absolutely certain that it could address this issue in a less harmful manner while fully protecting its interests, if it would choose to do so. Instead, Google chooses to use an appeals process that blatantly favors its prejudgment with little regard for what their Adsense “partners” have to say while it bans users for a lifetime. Quite frankly, Google should be able to offer suspended users a far better explanation than we’ve made a decision as a domineering corporation while suspending an account should be a last resort. At the very least, users should not be handed down a life sentence the first time Google notices a user is in violation of its agreement.
It appears Google designed its Adsense policies to simply address its own interests and the interests of its large corporate advertisers, while offhandedly neglecting key interests of its low profile Adsense “partners.” This is strong evidence that Google is well on its way to abandoning the aspirations of its founders. When there is no chance of correcting oversights and misdoings, Google is acting more like an oppressive, monopolistic dictator than a moral and ethical company while they are demonstrating that they do not trust, support, or respect their Adsense “partners” and other affiliates. Moreover, Google does a lot of good for the world and engages in many grand gestures of good will, but how it treats the little guy hints at its moral and ethical future.
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