Skip to main content

Marco Rubio Identifies the Underpinnings of an Emerging Economic Order of the 21st Century



Business Insider recently published an article about the Scandinavian Nations having one of the highest divides between the haves and the have nots. According to the justifying rational for the large divide in the distribution of wealth, between the many and the few, as advanced contemporary welfare states, the masses in Scandinavian countries have no need to own property. Property ownership, in this rational, is only necessary for the entrepreneurial class, which supposedly invests in business.

I haven't researched what goes on in Scandinavian nations to the depth which I have done so for Maine, but suffice it to say that what I know about Maine as a result of independent research is not common knowledge distributed in the media. Extrapolating the information gap between independent research based on reading the statutes myself and what I would know about if relying solely on the media, to the entire world, it follows to suppose that common knowledge about anything anywhere is controlled by a shadow government. Whether or not the Scandinavian entrepreneurial class is really investing in business is an unknown, but thanks to a new report by Senator Marco Rubio titled American Investment in the 21st Century, it is no longer unknown in the USA.

Marco Rubio's report addresses a major shift in the economic order occuring around the turn of the century. He begins with a description of the economic order to which we have become accustomed and is still generally assumed to be the way our economic order works:
Our first objective is a description of the assumed institutional arrangement of the U.S. economy. This is most clearly described as an intuitive understanding of the flow of money, a kind of “economic order” that the economy follows, which often operates in the background of public discussion of economic matters. It proceeds like this: financial institutions, such as banks or credit unions, lend money to businesses, who use the money to invest in projects and activities in the course of competition with other businesses. Workers receive wages from their employers, which they use to provide for their households, buying consumer products from other businesses and saving for their families’ future in banks and retirement accounts. Financial institutions then lend their savings back out into the cycle, which starts all over again with greater productive resources than it had to begin with. American Investment in the 21st Century by Marco Rubio pg 13
Rubio's report, documented with many statistics, identifies a newly operative economic order in which the role of macroeconomy business has shifted from that of investors in the economy to lenders to the economy. This shift has come about in response to shareholder primacy, as the dominate economic ideology within the macro economy since the 1970's. By this is meant that shareholders returns take precedence over earnings invested into new business growth. Instead of investing in non-financial business assets, such as equipment and labor, non-financial businesses are investing in financial assets (stocks) and the role of business in the macro (non-financial) economy is shifting from investment to lending. From there Rubio surmises that there has to be a borrower (investor) somewhere in the equation, and that it has to be government.
There must be a borrower. The sectoral balances described above are an accounting identity that must sum to zero. It is here that the rise of corporate lending in the U.S. has important implications. If the U.S. were to accept the permanent financial position of private business as net lender, then by definition it must have some other sector be its investor,and by process of elimination we wind up very quickly looking to the federal government to play the role. " American Investment in th e21st Century by Marco Rubio pg 20
A primary subject of this blog has been independent research into Maine economic development statutes and history,  since 1976 when Maine became a centrally managed economy. Analysis identifies the new economic order in Maine as a wealth redistribution economy composed of government and non-profits versus the part of the economy outside the wealth redistribution economy, which is identified as a free enterprise economy. I say "versus" because by definition a centrally managed economy cannot have anything existing outside of it, not being centrally managed.

Burton Weisbrod's "The Non-Profit Economy" was published in the eighties when the economy was considered to be composed of three separate and distinct sectors, the public, private and non-profit, but today all three can be merged into one. a perfect example of this state of affairs is the Maine Technology Institute, which was chartered by special act of legislation as a public charity, providing grants to the private sector for the purpose of developing products for the commercial market. The board of MTI is authorized by statute to make a private profit and to acquire ownership of intellectual property rights. In Rubio's analysis this is an instance of the government being the investor, if not the borrower. MTI is financed in part by public taxes and the rest remains vague, with the Department of Economic Development often willfully opaque to the public, as is the culture of public-private relationships. According to the MTI statute, all of this is IRS compliant. Perhaps it shouldn't be.

As large fortunes are accumulated by a small top sector of the economy, the holders of private fortunes create non-profit foundations. The funds are coveted by government, which along with the boards of non-profit foundations redistributes wealth. All of the corporations chartered by the Maine Legislature since the state became a centrally managed economy, provide that the corporation can accept money from "any source".

In Rubio's language terms, wealth redistribution is called investing or allocating funds. The Senator has not yet identified that it's not only government allocating funds (investing), it is also the non-profit foundations. Wealth redistribution does not, in itself, create wealth. It is only the free enterprise sector which creates wealth, by necessity, since by the operative definition used by this author, free enterprise, is that part of the economy excluded from the wealth redistribution food chain, as well as its governance. With wealth redistribution comes control over aspects of the traditional business function of wealth creation, not necessarily understood as it relates to specific businesses by the boards and bureaucrats and/or law makers of wealth redistribution institutions. Often there is an attempt to change the role of business from that of creating wealth to that of creating "social justice". An example of this is minimum wage, once a fair job training wage available to all sectors of the economy, is now being construed as a living wage entitlement, and a living wage is no longer associated with an earned wage, representing an exchange of value between employer and employee. This is a spin off of the problem identified by Rubio when, in the 1970's, the macro-economy adopted the ideology of shareholder primacy. That meant that instead of investing earnings in business, more earnings were distributed among shareholders. In turn that meant that worker wages did not increase, as available resources for increasing worker wages went instead to shareholder payouts, and the gap between the haves and the have nots grew wider.

However the solution undermines  nonfinancial non-corporate or micro-economy businesses  most often thought of as small businesses, which remain  net borrowers reinvesting in business growth but do not have as available access to government subsidies covering the cost of worker training as their macro-economy counterparts. A better solution would be to target the minimum wage increase to the sector which is prioritizing shareholders over business investments and/or receiving government subsidies to cover worker training expenses. That may be a moot objective in Maine since the exchange for corporate welfare involves hiring x number of workers at above average wages and benefits as determined by the State. In that case, minimum wage is not an issue, but inflation might be.


Comments

Popular posts from this blog

An Incomplete Theory of Inflation Made to Order for Mass Consumption.

M oney is not what it used to be, so must our ways of thinking about it adapt. jaakko-kemppainen-unsplash The message treads across the media terrain, beating louder and louder as if to drown out the beat of the distant drummer. W arning! The only thing the stimulus will stimulate is inflation. The people will pay as the wealthy elite invests their windfalls in financial assets. Doom and gloom set to march across the land to the beat of the distribution of stimulus funds. In recent years as past predictions of fiscal disaster following stimulus spending failed to materialize and so the thinking about national debt and deficits has evolved, most noticeably with the development of  Modern Monetary Theory . In the   fall of 2020,  National Affairs  published a story,  Does the Debt Matter ? by Peter Wehner & Ian Tufts. Peter Wehner is vice president and senior fellow at the Ethics and Public Policy Center and served in the last three Republican administrations. Ian Tufts is a recent g

Why are social impact investors trying so hard to defeat smaller shelters for the homeless?

  "Social Impact” developers in Portland, Maine seek to squelch a referendum for smaller shelters called for by qualified practitioners with concrete experience in the field. A large sign says Vote C to support the Homeless, small handmade sign next to it says Untrue! That sign is paid for by developers who want / Photo by Jess Falero In   the 1970s under Governor Longley , Maine became a centrally managed economy that expanded Maine’s wealth gap and merged, almost seamlessly, the public and private and the non-profit and for-profit economic sectors into one mutually beneficial wealth-concentration & distribution system. Currently, mutually benefitting factions are coming together once again in hopes of building a mega-shelter for the homeless in a Portland, Maine industrial development district. In addition to beds for the homeless, the project will include, dining, and locker facilities, as well as offices and an attached health clinic. The promotion  describes the facility

JECD Group Holds Master Plan Pow Wow for Boothbay Peninsula

The most honest statement to come out of the ringleaders of the Joint Economic Community Development Group in their first workshop program was "none of us are experts on economic development", which in my most humble opinion is evident in the fact that the JECD begins with the premise that economic development can be master minded by central management. The article in the Boothbay Register begins with this paragraph: The Joint Economic Development Committee master plan workshop on Thursday, Oct. 12 discuss findings from stakeholder interviews conducted early last month. The interviews centered around building an overall economic development strategy for Edgecomb, Boothbay, Boothbay Harbor and Southport. Who are the stakeholders?  A search for articles in the Boothbay Register comes up short. Why is the public not told who the stakeholders are. Since the taxpayers of Boothbay and Boothbay Harbor footed the bill for the JECD's consultants, why are they not the stakeh