Who are the wealth creators?

In the September 7, 2009 Salon article "Who are the wealth creators?," Michael Lind explains "the right says the answer is rich people, not workers -- who are wealth destroyers."

Today is Labor Day, when we celebrate the wealth destroyers – at least if the libertarian right is to be believed.

According to many free-market conservatives, economic growth is almost exclusively the result of investment decisions by a small number of rich individuals – the "wealth creators." The wealth creators, according to the conservative press, are constantly being threatened from above by government, which seeks to destroy wealth by taxation, and from below by workers, particularly those organized into unions, who threaten to destroy wealth by insisting that capitalists share a decent amount of their profits with employees. The entire basis of conservative "trickle-down" economics is the idea that the economy will grow faster if the supposed wealth creators keep more of the profits of private enterprise, with less going to taxes and worker compensation.

If you believe this theory, then Labor Day should be a cause for national mourning. We should all pause to mourn the loss of capital that might have gone to a fifth or a sixth mansion or a private jet, but instead was conscripted against its will to pay for a public school or higher wages in a factory.

We should weep for the capital that might have given its life for high-end caterers but instead was forced by government to be spent on public hospital nurses. And we should grieve for the dollars that were wasted on public police protection, when they might have gone instead to private security guards in a gated community.

But maybe instead of mourning we should celebrate. Maybe Labor Day should be replaced by a new holiday to celebrate the tiny number of brilliant investors who, more or less single-handedly, are responsible for long-term economic progress. We should abolish Labor Day and replace it with Capital Day – a festive time when we, the majority of parasitic wealth destroyers whose income comes from wages rather than investments, can give our collective thanks to the small number of people who have most of the money.

I'm not sure that the above would be recognized as satire in all quarters. Here, for example, is an article in Investor's Business Daily from last fall, denouncing candidate Barack Obama's plan to raise taxes on the top 5 percent: "At this delicate time in our economic history, talk of tax hikes on wealth creators and capital is irresponsible – a recipe for the kind of market meltdowns we've seen repeatedly in recent weeks. Spread the wealth? More like, destroy it."

You would expect that in Investor's Business Daily. But here's British Prime Minister Gordon Brown, addressing the British Chambers of Commerce back in 2003: "You are the wealth creators, the men and women who make our nation more prosperous." Really? So soldiers and police officers and research scientists and mechanics and teachers and nurses are not "wealth creators" who make a nation more prosperous? The statement was particularly odd coming from the future head of what is still called the Labour Party.

There was a time when even Republican presidents in America felt it necessary to defend labor against the claims of capital. Here is the first Republican president, Abraham Lincoln, in his first annual message to Congress during the Civil War on Dec. 3, 1861:

In my present position I could scarcely be justified were I to omit raising a warning voice against this approach of returning despotism.

It is not needed nor fitting here that a general argument should be made in favor of popular institutions, but there is one point, with its connections, not so hackneyed as most others, to which I ask a brief attention. It is the effort to place capital on an equal footing with, if not above, labor in the structure of government.

What on earth is he talking about? Lincoln appears to be referring to the theory of the "balanced constitution" or "mixed constitution," which goes back to ancient thinkers like Polybius. The idea was that in the ideal constitution, different branches of government represent different social classes with different functions in the economy and society. For example, the Roman constitution balanced aristocratic and popular branches.

Some of the nation's founders had argued that the U.S. Senate should at least informally represent the rich, to defend their interests against the more populist House of Representatives. For Lincoln, then, the demand of Southern slave owners – capitalists whose "capital" consisted chiefly of the human laborers they legally owned – that their interests be permanently preserved in the U.S. Constitution by the informal institution of the slave-state/free-state balance was a threat to popular democracy, in which all branches of government should represent only worker-citizens.

Having declared that the very idea of representing capital as well as labor in government is undemocratic, Lincoln goes on to demolish the assumption made by those today who talk about investors as "wealth creators":

It is assumed that labor is available only in connection with capital; that nobody labors unless somebody else, owning capital, somehow by the use of it induces him to labor.

Lincoln goes on to point out that many Americans were self-employed, and that many others were laborers at one point in their lives and capitalists at others. With the war against the slave-owning South in the background, he concludes:

Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not existed.

While progressives and members of the labor movement are fond of quoting Lincoln's statement, conservatives and libertarians tend to ignore it or to dismiss it as reflecting the discredited "labor theory of value," shared by Lincoln with Adam Smith and Karl Marx, which, we are told, was replaced by the marginal utility theory of value. But Lincoln's statement is both historically and morally true.

Human beings labored for themselves for tens of thousands of years before the appearance of rentier elites like warlords, landlords and investors. Those groups, whether benevolent or parasitic, can exist only in a highly specialized society in which wealth creation is a society-wide enterprise, including peasants as well as knights, renters as well as landlords, and workers as well as capitalists.

How did we get from Lincoln, for whom labor was prior to capital, to the Investor's Business Daily writer for whom the "wealth creators" are the richest 5 percent of society? The answer, I think, is the machine. The dependence of the Southern slave owner on slaves was pretty obvious. But as machine production becomes more important in industry and agriculture, labor becomes only one factor of production along with technology. Technological progress means that fewer and fewer workers are needed to operate ever more productive machines.

The response of many 20th-century liberals was to make the consumer equal to, or superior to, the worker in economic importance. Fewer and fewer workers might be employed making goods, but economic growth requires an ever-growing number of prosperous consumers who can buy the goods. Since the Depression, Democrats and Republicans alike in practice have been Keynesians trying to prop up aggregate demand to keep the industrial machinery rolling. Democrats prefer redistribution or public employment, while Republicans prefer military Keynesianism and tax cuts whose real purpose is to encourage spending, not investment, by the rich. So maybe we need to replace Labor Day with Consumer Day, a holiday on which, instead of going on vacation, we will patriotically increase the aggregate demand by shopping.

In a "Fordist" society, named after Henry Ford's system of paying his workers enough to afford the cars they made, the producer and the consumer were joined in the well-paid factory worker. But factory workers were never more than a minority of the American workforce, and even in the absence of outsourcing their number would diminish as a result of automation. In a society where robotic factories and robot farms make almost everything, who are the wealth creators?

I suppose you could answer "the robots," but I doubt that theory will prove widely popular. That leaves only two possibilities: In the robot economy, the wealth creators are either the owners of the robots, or the public as a whole. The first theory might be plausible in the case of Rossum, the inventor-capitalist in Karel Capek's play "R.U.R. (Rossum's Universal Robots)" – which introduced the term "robot," the Czech word for worker. But in what sense are Rossum Jr. or Rossum IV "wealth creators" if they merely inherited title to the robot factory?

The alternative theory is that the true creator of wealth is, ultimately, the commonwealth – not only the political community, but the civilization that it shares with other nations. No technical invention or business innovation is a creation of something from nothing. All depend on the intellectual capital that the human race has accumulated since the Paleolithic period. The argument for property rights then becomes a utilitarian one – which set of property rights will spur individuals and groups and whole societies to engage in useful innovation? (Not all innovation is necessarily useful, as we have seen in the case of financial innovation.)

The commonwealth theory defines wealth broadly, as everything that conduces to the well-being of a community. Material production is only one of many activities that enrich a society. Public goods like safety and utilities and infrastructure and parks are part of the wealth that we share in common. So are many private goods that sometimes are best provided by the public, like public education and inexpensive healthcare.

By all means, then, let us celebrate virtuous capital owners and visionary investors as "wealth creators" on Labor Day. And let us celebrate as well as the other creators of private wealth, on the assembly line and in the office cubicle and in the janitorial closet, and the creators of public wealth in the form of roads and subways and parks, and the police officers and soldiers without whom a high level of public and private wealth could neither be created nor preserved. There are criminals and parasites among all classes of society, but most of us are wealth creators, and we deserve to be recognized as such.