Losers Magazine (tm) Article No. 7 (10/5/95) by Carl E. Person Other Reformers Come Close to Recognizing the Major Problems and Solutions

First Published 10/5/95; Last Correction (Links, Technical Only) on 11/21/03

I have looked carefully since the early 1970's to see if anyone else comes close to seeing these major problems, which ultimately have resulted in a major observable deterioration of the U.S. economy during the past few years.

I have not seen anyone with similar ideas. This is not to say that others don't have the same concerns. It's possible that the ideas are not commercial so that most publishers won't risk any money to publish them, expecting that the book wouldn't sell. They may be right.

Yet, I see the beginnings of recognition of the major problems in some recent works, although none of them truly hit the mark.

The most impressive works from my standpoint (and I have not read everything I should add) are: (i) Who Will Tell the People - The Betrayal of American Democracy, by William Greider (Simon & Schuster, 1992); (ii) Opposing the System, by Charles A. Reich (Crown, 1995); and (iii) The End of Affluence - the Causes and Consequence of America's Economic Dilemma, by Jeffrey Madrick (Random House, 1995).

The End of Affluence, by Jeffrey Madrick

Madrick traces the nation's economic growth for a 100-year period, through the early 1970's, which he states was an average growth of 3.4%, adjusted for inflation. This rate was phenomenal and accounted for the nation's prosperity. But the prosperity did not last, Madrick wrote, because the rate of growth for the past 22 years was only an average of 2.3% per year, a decline of about 33%. Furthermore, Madrick points out that this decline, if it had not occurred, would have provided the resources needed by the U.S. to have pay for many of the economic problems which are now being debated, such as social security, loss of rising income, healthcare, pensions, plant improvement to maintain global competitiveness.

But Madrick blames the economic decline on the reduced productivity of the American worker, which results from the change from mass production to batch or flexible production (where equipment is changed by computers to turn out different items as distingu ished from identical items, with lower profit margins) and higher competitiveness of other countries, such as Japan. Also, the United States was slow to respond to this change from mass production techniques with needed capital investment, which lost som e market share and productivity.

Madrick does not explain satisfactorily the causes for the decline, and his work is more valuable as proof that there has been a decline, which most people do not dispute.

Madrick is a journalist and not a professional economist, and he probably did not come across the works of any economists explaining the micro-economic causes of the economic downturn because most economists blame the larger, macro-economic factors which conveniently hides the blame for what went wrong.

The micro-economic factors are discussed at length in my 3-part electronic book found elsewhere in LawMall (tm), which include the various restraints against competition in education and competition for capital, among others, which inevitably has taken it s toll on the U.S. economy, and must be corrected to enable the economy to go back to where it was. I don't know if the U.S. economy can regain its relative advantage over the competing economies of the other countries, but I suspect that the U.S. could pay off its indebtedness and substantially improve the present standard of living of this country's residents with little difficulty.

In my electronic book, I explain how the career field I'm creating of the Personal Assistant, by itself, could result in many billions of dollars of increased economic activity for this country. And this is only one change.

Madrick places his blame on the failure of the country's major corporations to adjust to changing economic conditions, but this doesn't go into the problem of the individual in the United States outside of the major corporation. Major corporations have b een going outside of the U.S. to use others to do their work at lower rates, and Madrick should have considered whether there is some other way than through major corporations for individuals in the U.S. to continue at work.

The problem, differently stated, may be presented as whether the labor of U.S. residents should be bypassed when the entity which refuses to hire them is bloated with excesses (market domination, excessive profits for shareholders, excessively-high capita l values to be maintained at all costs, excessive salaries for the managers at the top), which forces the corporations to turn elsewhere for lower-cost labor to maintain their excesses.

Individuals in the U.S. could do the same work and maintain the same level of productivity if they knew how to organize and distribute their activities, and had the availability of capital for their new associations to put their skills to work. This webs ite, LawMall (tm), suggests a most obvious way in which the rejects of major organizations can organize themselves in a most competitive way, to provide goods and services at prices substantially lower than the competition of major corporations which, lik e the nation's educational systems, are stuck with bloated and inefficient organizational costs.

What seems to be wrong with the U.S. economy is that we as a country of monopolistic businesses (with the U.S. as their base) were unable to maintain their monopolies in the world marketplace and refused to give up their monopolistic positions in the U.S. to make an effort to compete in the worldwide market. New types of associations with workers are needed to harness and pay for the power of the U.S. worker instead of going to other countries to purchase labor to create products and services to sell in the United States to persons who increasingly have no work or income with which to pay for these foreign-based items.

The major corporations are themselves a star system, a system which pays more for services than is necessary, which adds unnecessarily to the costs and market prices of their products and services, which makes the major corporations less competitive in th e worldwide marketplace. A case in point is in the purchasing of legal services.

Why do major corporations pay $300 to $400 per hour for a significant part of their legal services (disregarding the frequent problems of double and triple and phantom billing) when equally competent lawyers are available for $125 per hour? Why are compa ny C.E.O.'s paid $50,000,000 or $100,000,000 or more per year in some cases when realistically you or I might well do the same job for $250,000 or so per year, if given a chance.

Opposing the System, by Charles A. Reich

Reich comes close to identifying the problems, as I seem them, but veers away into an accounting argument as his way to change the system. He correctly identifies the economic power of big business (the invisible, economic government) as the cause of the economic evils and the way in which these interests, or the rich and powerful, have captured (or created) big government as a partner in the activities which cause the economic decline for many of us, but not for the rich and powerful.

Also, Reich agrees with me that the major corporations are as a practical matter the way in which a person can sell his services for higher amounts of money, and enjoy significant participation in the economy, but without such opportunity the person winds up in the deteriorating economy. Reich fails, I believe, in recognizing what can be done to correct this problem. His solution, in addition to the one-line aside that we need to enforce the nation's antitrust laws, is that the country should be made aware (presumably by the media owned by the invisible economic government, or perhaps the captive government) that the present and prior systems for accounting for gross domestic product (and its predecessor, gross national product) fails to take into account the damages caused to the overall economy by the excesses of big business and big government, such as the waste of human assets represented by the unemployed and underemployed, the loss of services handled by families when families are caused to break up by present economic deterioration, that depletion of natural assets are not subtracted from the income recognized when the commercial transactions take place (e.g., that the costs to the environment of pollution and cleanup are not deducted from the gross income received when the polluting factory sells its products).

I find a lot of merit in Reich's argument that we don't keep our books correctly, which enables big business to make more money than it should, but I don't believe that letting people know that the rich are stealing from the rest is going to solve the pro blem. The stealing will continue.

What I would have liked to see is an analysis of the micro-economic problems which collectively have created the present deterioration of the economy. I wanted to read about the specific reasons that capital is not available for small businesspersons to compete with big business; that government (dominated by big business interests) create unequal licensing conditions to prevent competition from small business; that educational opportunities have been systematically denied to the public through the publi c monopolization of education at the K-12 level, where the ones who are unable to provide the needed education are in charge of educational policy and nobody can do anything about it; and at the post-secondary (beyond high school) level, in which the stat e and federal governments control education through financing, the licensing of the right to grant degrees selectively (to non-profits and government-owned schools for the most part, and not generally to non-profit schools (although some for profit colleg es do exist, I might add). In New York, the Department of Education has refused to permit any proprietary schools to convert to degree-granting status because of the fear of competition, that the new non-profits would take away financial aid money from t he present colleges and universities. These are all micro-economic restraints which collectively take their terrible toll on the economy, but Reich did not analyze the problem from this standpoint.

If you add up all of these micro-economic restraints, the total is more than enough to balance the U.S. budget, provide medical care for the needy, provide good-paying jobs and non-job economic opportunities (i.e., business activities) for all who want to work for others or for themselves. For example, the costs of excessive bureaucracy is billions of dollars, far more for the damage to the economy than the amount of money directly wasted on salaries and offices for the unneeded bureaucrats. Also, consi der the value of the time wasted by motorists who wait at toll booths, I've calculated the dollar amount of damage for the New York Port Authority (with toll booths at the various entrances into New York City), and arrived at many billions of dollars of d amages. These costs can be found in many places and collectively they deprive the U.S. of its wealth and future.

We need to eliminate these micro-economic restraints, and let the economy reach its full potential. We can't sell the output of hundreds of millions of persons caught in traffic at toll booths, or waiting for the weekly parades in New York City in which all streets are blocked off for several miles while the National Association of Racing Turtles parades to hundreds of persons in New York City each year.

We have to set up systems for the individual to be able to sell his/her services other than by being favored employees of big business. Internet obviously is a way in which persons can make the availability of their services known to the world in a low-c ost way, and this will help to reduce the costs of services for small businesses, and will enable small businesses to find the specialized services they need to buy on an independent contractual basis.

There ultimately will be thousands of LawMall (tm) type websites for persons of all types to make their specialized services available at prices which the non-wealthy can afford, which will enable small businesses to compete with major corporations. The justification for major corporations seems to be that they are more efficient, but this is not true because their efficiency is a result of favored treatment by government, from tax benefits, training programs (colleges and universities train persons to w ork for big business, not to go to work for small business or for themselves, a major rip off which nobody ever has seemed to comment on).

The governments (state and federal) have elaborate laws prohibiting a gas station or car repair business from raising capital, and we wonder why independently-owned gas stations and car repair businesses aren't able to expand or compete with big business. We need to eliminate these little-known laws (state blue sky laws and federal securities laws) which are as complex as federal tax laws and collectively prohibit any raising of capital by small or new businesses, unless they go through elaborate, costly legal rituals to obtain permission, and then the capital markets are not willing to raise money even if permission is granted.

We have got to change these restraints and permit small people to invest in small business, and this alone will enable small persons to prosper, far more than they now have the opportunity to prosper.

Governments require enormous performance bonds from small business as a condition to doing business with the government, and these bonds are no more than an expensive toll bridge set up to enable large companies to contract with government but prevent sma ll business from competing for the same business by setting the toll too high for small business to meet.

Also, the failure of the courts to have sufficient financing to handle the amount of business being handed to the courts (what the wealthy and their media call court congestion) is no more than political underfinancing of the only opportunity for small pe ople to obtain relief from the branches of government dominated by the rich and powerful (legislative, executive and administrative). Unless we have an independent judiciary, adequately financed, we will have significant problems in trying to correct inj ustice on a case by case basis, which adds to the economic deterioration of our country by preventing economic justice to those who deserve to profit from their activities, but are unable to do so because of the way in which the courts work.

I leave it to the reader to figure out what happens to a plaintiff's lawsuit when it is being handled by a judge who has 5,000 active cases at any one time, and can only try 20 cases per year. Guess what happens to the other 4,980 cases?

Who Will Tell the People - The Betrayal of American Democracy, by William Greider

Greider explains how the big corporations and wealth persons have purchased the national government, through campaign contributions, lobbying, public relations firms, and opinion-polling firms, with the result that government acts in a way to favor big bu siness and waste billions of tax dollars in the process. This results in a denial of benefits and opportunities for the non-favored groups. The economy is good for the rich and powerful, as we hear on national television and read in the daily newspapers and national slick magazines.

Greider asks where are the institutions which were supposed to offset this, institutions such as union, political parties and the press. The answer is that the press is part of the rich and powerful, a spokesperson for their interests; unions are less po werful through a decline in union membership.

Greider does not mention the important exceptions, which are the teachers' union for K-12 teachers in NYC, for example, and the union (American Association of University Professors or AAUP) representing college and university professors, which in concert with federal and state governments have been able to destroy any meaningful competition in education, produce abysmal results in grades K-12 in many public schools, and have resulted in excessively high costs of education in the post-secondary (beyond hi gh school) educational system throughout the United States.

Greider asks how we can get the country back on track. He mentions that the country's system of checks and balances obviously is not working, that Congress is not held in check by the other branches of government, and the same for the other branches (Exe cutive and Administrative). Nor does the judicial branch do its job of protecting the rights of individuals to engage in business from destruction by the other branches, which the U.S. Constitution was designed to do.

Greider is right in pointing out that the vested interests have caused the deterioration of the economy for others than the rich, and that something should be done.

His solution is that people must work out a political solution to the various problems, which does not give much direction.

My solution is also political to a great extent, but one which may already be beginning (to a very limited extent). The country needs to undergo deregulation across the board, especially in the two most important areas of capital formation and education, the foundations of economic opportunity. Also, this deregulation should eliminate the thousands of restraints in the economy all put in to allocate the economy unfairly to a favored few at the expense of the rest. As Greider points out, that as long as the economy produces in superabundance, the diverted income and opportunity represented by the restraints is less noticeable to the non-favored persons, who are doing fairly well anyway.

But now that the economy is unable to provide for a large number of Americans who previously had no problems, these restraints must be eliminated by political process, or by judicial process. Judicial process is quite difficult, and often does not succee d, which is part of the problem. The Constitution seems to create rights, but the courts have sided with the people in political power too frequently, which results in the lack of the checks and balances which were thought to be built into the Constituti on.

Elimination of the restraints in the economy (for example, by allowing competition across the board in all areas of education), would reduce the standard of living for the favored employees of educational institutions who now cannot be fired regardless of how poorly they perform. These persons receive far more than they are worth because of various strikes or threats to strike and a most effective political action program. But the time has come for these protected groups to give up their preferences, bec ause the damage they do to the economy are causing the rest of the economy to suffer. Competition would bring education back to a reasonable cost and a high level of efficiency. Good teachers would do better than they are doing now, but bad teachers woul d be eliminated right away, and would have to do something else for a living, as the rest of us are forced to do.

Legislators should try to review all laws to eliminate all of these needless restraints. They exist all over the place, such as the requirement in NYC and other cities that taxicabs have medallions, with a limitation on the number. The medallions in NYC are now sold for about $250,000, and the persons driving the medallioned-taxicabs earn about $6 per hour ($72 for a 12-hour day). Taxis are not available in sufficient numbers during rush hours and other times when desired (such as during bad weather), and the cost of taxi rides are too high (to pay for the $250,000 medallion), which adds to the costs of doing business, and eventually drives business and opportunity out of the city.

The main fault, I think, is that government has a desire to expand by creating new laws, new agencies, new jobs (which only hurt the economy), and pay off political debts in the process. Government has got to be held in check in some fashion so that it d oesn't add to regulation and restraints, and instead spends time to eliminate restraints. I have proposed in one of my pamphlets published in LawMall (tm) that legislators be given reasonable incentive compensation to encourage them to do the right thing . Thus, legislators in a state could be given a percentage of the increase in economic activity in the state, which would cause them to set up committees to learn how to stimulate such activity instead of stealing the opportunity through the creation of restraints.

Perhaps in state elections this type of approach might work, to have individual legislators run on a ticket of government reduction coupled with reasonable incentives, to more than offset the small amounts which legislators obtain for giving away billions of dollars to the rich.

I tried to create a comparable system situation to cure the evils of the governmental court systems by setting up a national private court on a for-profit basis, in which the judges who did the best job would be in the greatest demand and could charge the highest rates for their services. This still seems like the way to go, and dovetails into the governmental courts by enabling the parties in a lawsuit to jump between a state or federal court for some purposes and a private court for others (for example, you could have a state court select a jury, and by consent of the parties have a private judge function as the judge, and ultimately be able to go back to the governmental judge if any problems develop which need the ultimate power of the governmental co urt. In this way court congestion could be cured by private act of the parties involved in a specific dispute. My booklet for the National Private Court is included in the publications published at this LawMall (tm) website.

There are many ways to cure the economic problems which this country is now experiencing, but most people have no idea what needs to be done, which is because the persons who would lost most from the change are in charge of the means by which the public s hould be informed.

If enough people learn what the problems are, the solutions will be easier to implement.

Internet may well be the way in which this type of information can be disseminated at the outset, to be picked up later by other media when the ideas can no longer be kept from the public.

Copyright 1995 by Carl E. Person. Permission is given for non-commercial users to send a copy of the data processing file for this work by electronic means to a specific individual for his or her own use, and then only if the entire file is sent, including this copyright notice, but no permission is given for anyone to copy or transmit this file for or to any person for public viewing or downloading. It is intended by the author of this work that the work shall be made available in electronic fo rm only through LawMall (tm).