Inert America: Crossroads to the Future

by Gary Griffin

  Unfortunately, what this translates into for the rest of us is a rat maze, where these theories are tested out in trial-and-error experiments. When the results come in and these theories are proven false, it is usually too late for many because their state has become far worse than it was before. You might ask, don’t people in the government and our elected officials know this? The short answer is NO! Politicians rely on economists to put forth theories that drive these policies, but few of them even understand the theories, much less the implications of the policies. It would seem rational that only those policies that are based on knowledge would be used to create the policies that affect the lives of the rest of us, but they rarely do. In the end, it’s just someone’s ideas. Some of those ideas had merit at a particular epoch in human history, but that time has now passed. Unfortunately, when that time came and went, the people forgot to change the theories. If those theories were ever remotely successful creating and supporting a growing economy, then the inclination of the economists who supported them was to push for more of the same. The fact that those ideas no longer applied to the world around us and are defunct and devoid of anything meaningful seems to go unchallenged; perhaps it’s professional courtesy, promotion of self-interest, or something else entirely. For most, it is simply a lack of understanding. For some, it is a matter of refusing to give up on that he/she holds dear. Change is difficult. This fact applies to economists as well. For example, look at John Maynard Keynes and the revival of interest in Keynesian economics as a response to the current financial crisis.125

  America is in transition, and the people are screaming for reform or change. What most do not recognize is why change is necessary, and what changes we need to make. The social changes we need today in twenty-first century America are reflected in the changes needed in America during the thirties or the era of the Great Depression. It was during the thirties that America need to transition from an agrarian society to one based on mass production and mass consumption. These changes required considerable structural changes within the country to make them possible.126 This transition was extremely difficult for the people of that time. To move from one way of life or style of living to another can be difficult. The interaction of the people with the overarching macro-level societal needs and resultant changes have implications beyond going from something old to something new. It should be noted that the Great Depression wasn’t just an economic condition; it also was a psychological condition. Psychologists don’t understand economics; economists don’t understand people or the psychology of economics. And politicians don’t understand either. There you have it.

  The social changes of today are no different. This is a different time period, but the conditions are the same. That is to say, we are now in another major transition period. This time we are moving from an industrial society to an information society with a knowledge-based economy. These social changes require significant structural changes.

  Knowledge is power. Knowledge resides within the individual—in his/ her brain. Within a system, power is the rate of transfer of energy to accomplish work. Work is the labor that is related to as system of production—it’s the productivity of the individual. The productivity of the production process resides within the capabilities of the means of production. In the twenty-first century, the macro-level shift that has occurred is that individuals are now the owners of the means of production. Not only do we have to shift our social structures to reflect this change, we must also make sure that the people make also make this transition. If the means of production now reside with individuals and consumption is not independent of production, then we must, as a society, get people to move to a state of productivity, so that our society can also move back to a state of productivity. Productivity at the individual level is the difference between eating and not eating—it is consumption. When you haven’t the means to meet the basic necessities of life, then that is poverty. At the individual level, it is a psychological condition. At the societal macro-level, it is a depression. At this level it is an economic problem. The two are interrelated. These conditions upset the economic theories of today.

  One fine example of this is Keynes theory of Propensity to Consume.127 The consumption at the individual level, where it involves the basic necessities of life and survival is not a choice. In order to survive, people must consume. A better use of terms and their descriptions would’ve been Necessity to Consume and Propensity to Produce. Given such a rephrasing, consumption becomes the unavoidable constant and production is optional. However, if one doesn’t produce, then one doesn’t consume.

  Keynes Propensity to Consume makes the assumption that consumption is a choice. Consumption is not a choice; it is a necessity for survival and 100 percent of the people on the planet must consume. A better way to look at his economic formulas is this way.

  Necessity to Consume X Productivity/

  Number of People Working X Hours Work = Total Productivity

  Total Productivity – Total Consumption = Standard of Living

  Instead of price related to supply and demand, we need formulas that estimate value based on the levels of productivity and consumption within a society. Some have argued that we need to return to the gold standard.128 I disagree. Gold is a finite resource that only a few have access to in any significant quantity. It is true that we need to anchor our money on something of value. To stabilize our currency and to drive up its value, we must base it on the productivity of the American population. This would also allow the government to better estimate the money supply. If people work and produce goods and services, then the money supply is increased. If they don’t, then the money supply is decreased. This would control the effects of inflation and deflation.

  If creativity is unlimited, then the ability to produce enough to get money for unlimited consumption remains a threat, since consumption is tied to finite resources on the planet. These are not unlimited. Therefore, the only system of taxation that makes sense is one that is based on consumption, as this would allow control of unlimited consumption based on wants. Needs are absolute, wants are not.

  Our political and economic leaders seem perfectly willing to debate the problems facing America, especially middle-class America by standing firmly on their philosophical and political ideologies, so long as they and their families have food to eat. When the average American has nothing to eat, time seems to matter little. However, if our leaders had nothing to eat, they would find themselves in a position where they are a little more humble and a little more willing to compromise their principles, since principles won’t fill a belly.

  In the twenty-first century, individuals are the producers. In order to produce, they must also be free, that is, they must have liberty. Not some liberty, but absolute liberty because freedom of choice is what makes liberty possible. Choices are what drive a style of living or lifestyle, and a lifestyle is made possible by a standard of living.

  Of course, this type of liberty is not unrestrained and anarchistic as some would portray it. To maintain a civil society, we must adhere to the rule of law and due process otherwise anarchy would rein. This would not result in a productive society. Liberty such as this would also mean the elimination of time and space management instilled by industrial production process and Charles Taylor. This was necessary in the industrial society, but it is a dead idea in the twenty-first-century information society. We can no longer manage based on time and space, for they have no meaning. When you pick up a cell phone today and call someone on the other side of the planet tomorrow, then you know that something has changed. This is the final point: production processes have become decentralized. This is made possible by globalization.

  With the decentralization of production processes, the nature of such an arrangement makes it impossible to manage people based on time and space. They must now be managed based on performance or outcomes. This also means that people must be held accountable for the outcome and their actions. Responsibility is the new
word for this century. If society truly had an Age of Enlightenment, an Age of Reason, then now is the Age of Responsibility. While it seems few want to take responsibility for their actions, it must happen if twenty-first century America is to remain competitive in the world. Making this type of transformation in our style of living also has other advantages. This transformation of work literally makes it possible to produce twenty-four hours a day. This is what I term hyperproductivity, and this condition will take America into a new age. Why is his necessary?

  Work is how we create value through products and services. This value is how we restore and support the value of the American dollar. This is covered in more detail in this chapter on political economy. Suffice it to say here, decentralization of the production process also requires a decentralization of power. Currently the social, political, economic, and philosophical social structures in the United States do not lend themselves to this type of model. They are designed as means of control. If we don’t change these systems, prosperity will never return to the United States.

  How long it takes to achieve those outcomes is the critical success factor. The critical success factor is getting the work done by utilizing whatever resources necessary. This requires an entrepreneurial mindset.

  Price and value are often confused and used interchangeably. This is a misconception that I hoped to clear up in this chapter. What I explained in this chapter, many economists will not accept. Some may even feel nauseated by it. Nonetheless, this is the correct interpretation, and if America hopes to see its economy recover and our country return to prosperity, then we must implement models that follow a different logic than that espoused by current economists. If the economists have all the answers, then why don’t they have all the money?129

  Many classical economists, even Marxists and others, recognize that there is a relationship between money, commodities, price, value, and work. However, they have misinterpreted the relationship between the variables in their economic models. The key to understanding economics is to correctly connect the people, places, and processes involved in the production process. This is what makes the system churn, as it were.

  There are three major theories of value commonly used in economic texts— labor theory of value, subjective theory of value, and marginal utility theory of value. Logical these theories postulate the price of a given commodity in relation to certain variables that create the value of the commodity. What each of these assume is that price of a commodity is a direct result of the value assigned to the commodity based on specific criteria, including cost of labor that went into making the product, its subjective desirability by the buyer, and its marginal utility to the person who acquires the commodity. What I propose is that these theories have nothing to do with value. True value is intrinsic, and it cannot be defined simply by quantitative means of price. Moreover, I suggest that all these theories of value only contribute to the overall price for a specific commodity. The final price of a commodity is mediated by the law of supply and demand if left to natural operations of the law without interference from those who seek to benefit by manipulating the law.

  While modern economists have sought to establish price as a basis for an economic system that fails on one or the other side of this law—supply-side or demand-side economics. Both have failed to acknowledge and build into their models a true representation of value. This is especially true of monetarists who see money in terms of supply and demand only, and therefore attempt to use monetary system as a basis of controlling the law of supply and demand. Sadly, much of current fiscal and monetary policies established by the government are driven by these outdate theories of economics.

  It all centers on establishing true value. What is it, and how is it derived? Until value is determined and established, our economic system will continue through the business cycles of boom and bust, and American families will continue to pay the ultimate price. Here’s why.

  Work is value. In the knowledge-based economy, work is mental, intellectual. The most valuable commodity in this type of economic system is the human mind, as this is where knowledge is created and accumulated. It is a creative process. It is virtually unlimited. Current economic models assume that value is derived from commodities and their desirability in marketplace. They base their models on the finite natural resources grounded around assumptions of capital (money) and capitalistic motivations. This can be traced to the economic assumptions of the profit motive as incentive to invest in the production of commodities. Accumulated money is wealth, and wealth is power. The shift of wealth into the hands of a few capitalists means that they have all the power. The real underlying problem with this approach to economics is that the wealthy don’t work. They control the money supply, but they produce nothing themselves. That is, they produce nothing of value.

  There are certain side effects to using money as a commodity that are subjected to the laws of supply and demand. These side effects are inflation and deflation, and both are tied to money supply. Money is paper, and it actually has no value. What it represents is the time and labor contributed to creating something, a commodity. When money is decoupled from anything of value, and the money supply is decreased and increased by the Federal Reserve, this causes inflation and deflation. Both are bad because both affect the real value of the money—your time and labor. If money had any real value, do you believe that the Federal Reserve would destroy billions of dollars of old money every year. Of course not! If they did that then they would be destroying real value.

  Value is created by the work of human beings. The Federal Reserve does not create it. It is represented in goods and services we create for exchange. Money was created as a medium to facilitate that exchange. Somewhere, somehow, a few bankers got together and created a mechanism to control the money supply, and by so doing, they would control all the money, all the wealth, and all the power. What they failed to recognize was that money is just a piece of paper and has no real value. The real value rests with the producers—the people who are doing the work that produce the goods and services. It comes from work, and work in the information society is knowledge based. In this type of society, the magician’s trick of swapping paper for work doesn’t apply. Digits on a computer can also represent the medium of exchange. Once we understand and move to the digitization of money—a paperless society would have no paper money— then the means of control over the population disappears. The Federal Reserve loses its reason for being. If the people of the United States wake up and realize the trickery perpetrated by the Federal Reserve on the working people of this country, there would be a revolt tomorrow. While there may still be a place for the Federal Reserve System in the twenty-first century, it would not be the Federal Reserve in its current form.

  Poverty is the parent of revolution and crime.

  Aristotle

  THE POWER OF TEN

  In the twenty-first century, education is as important to the information society as the assembly line was to the industrial society. The first Model Ts off the assembly line weren’t that appealing, but they got America moving and ushered in new era of prosperity. Education can do the same thing for America in the twenty-first century. It’s not the education of yesterday though. It’s the education of the twenty-first century. We need a totally new education model. This model has to fit with the social, political, economic, and philosophical structures of a twenty-first-century American society. It has to support and facilitate a new way of teaching, a new way of learning, a new classroom model, and a new school model. In sum, we have to have a new education model. This type of transition won’t be easy, but it’s necessary. Prosperity of future generations depends on its successful implementation.130 As I illustrate in this chapter, we can show how and why education needs to change by simply taking the demographic makeup of ten American citizens and then based on a simple projection of those demographic trends over the next decade, see the clear direction of America if we continue down this path. It is the power of ten. />
  In order for America to stay competitive in the global economy, public education must do a better job of providing the next generation of Americans with the skills and education required for living and working in an information society and a knowledge-based economy. What has been done is not enough. We have unprecedented rate of dropouts in the United States every year, and while explanations are mixed, it is a clear message that education doesn’t meet the needs of the next generation. It is outdated. The signs of this are evident in a shrinking middle class. Wealth and power are increasingly concentrated in hands of a few. More money is going out of America than ever before along with jobs that are increasingly sent to Asian countries such as India and China. Unemployment is rising, and with the baby boomers retiring, this trend can have devastating effects on the American dollar. This is not likely to change anytime soon. In fact, all indicators point to it getting worse over the next decade and beyond. For a look at the future, consider this scenario.

  Around 2000-2001, a study was released that reported that 40 percent of America’s ten-year-olds cannot pass a basic reading test.131 Now let’s leap forward by twenty years. The year is now 2020, and America is entering the third decade of the twenty-first century. We now have the same statistic, but it reads a little differently—40 percent of America’s thirty-year-olds cannot pass a basic reading test. How can we run a technologically advanced society with people who cannot read? How does this support a knowledge-based economy? It’s not going to happen. How do these people get jobs? Quite simply, they don’t. So, four out of ten people can’t get jobs in the information society because they don’t have the most basic skills required.132 We also have an aging population with more people retiring in the next few years.133 Let’s say that three people out of those ten are retired. That leaves three working people. At least one of those people will be a child. That leaves two working people. If they make above average incomes of $50,000 a piece, this will translate into $100,000 dollars to divide up among ten people, assuming no taxes and that those two people are willing to share their money with the other eight. We now have $100,000 divided by ten, and that is $10,000 per person. The poverty level is currently around $15,000.134 So we now have ten people all living in poverty. However, if we could just get those other four people prepared for the future with skills that would allow them to compete globally in the information society with skills appropriate for a knowledge-based economy, this could translate into six people earning $50,000 a year. With $300,000 divided by ten, there is now $30,000 per person. That translates into much better numbers. That’s the difference between poverty in America in 2020 and prosperity. Over the next decade, prosperity in America is in jeopardy. We must have a clear direction with a clear vision for the future of America—one that leads us to prosperity, not poverty.