By: Bob Lucore
“Among the business and professional classes and their economic supporters the conviction holds that any property or income legally acquired represents the productive services rendered by its recipient….” This statement was made by the brilliant British economist J.A. Hobson in 1938 during the Great Depression. Mitt Romney’s followers provide a modern example of the “conviction” of which Hobson spoke, when they say “We built that.”
Today’s Republican Party claims to stand for the view that those who are well-off got that way through hard work and independence. They want us to believe that none of their riches were gained due to unfair advantages, the fortunes of birth, the support of society at large, superior bargaining power or opportunities bestowed upon them by the government. They also claim that those not so fortunate are moochers who stand in the way of the job-creators.
Hobson thought that capitalism was challenged by an ability to produce that often exceeded the ability of buyers to consume. The system has always been hobbled by the fact that every business wants to keep its costs low, yet every cost to a business is also someone else’s income. Businesses can cut costs and increase profits by suppressing wages. However, if other businesses are keeping wages low at the same time, no one will have enough income to buy the goods and services that the business sector is trying to sell.
For decades after the Depression, the dominant view in economics (and politics) was that it made sense to tax those who had enjoyed prosperity to help those less well-off. In part this was an effort to overcome this internal inconsistency in capitalism. Hobson saw it as an effort “to set the production and distribution of income upon an equitable footing….” A progressive tax system helps put money in the hands of those in need. Making benefits available to the poor and the middle class helps ensure that there is enough demand to buy the goods and services that businesses are able to produce. If the demand is there, the economy can grow and create jobs.
It has been a favorite Republican talking point for some time that taxes need to be raised on the lower rungs of the income distribution to give these supposed “dependents” more “skin in the game.” The rich are the true job creators, they claim, so it is the rich who need tax cuts.
Hobson understood that those who benefitted most from the economic system were most likely to adopt the self-serving viewpoint that any money or property that they possessed was theirs by “right” and that they had no obligation to return the favors that the social order had granted to them by paying higher taxes.
Democracies put a limits on how much the rich can benefit without paying their fair share. However, as Hobson put it, “serious attempts by a democracy to set the production and distribution of income on an equitable footing will continue to be met by the organized resistance of the owning classes, which, if they lose control of the political machinery, will not hesitate to turn to other methods of protecting their ‘rights.’”
Therefore, were Hobson here today, he would not be at all surprised to see the recent efforts to limit the ability of large groups of Americans (including students, minorities, veterans and senior citizens) to vote. Nor would attempts turn our elections into auctions, based on advertising expenditures, amaze him. However, he would profoundly disapprove of these “other methods” of protecting the advantages of the rich. He would argue in favor of extending both democracy and economic equity.
Bob Lucore, a long-time ADA board member, is the former Director of Research and Policy for the United American Nurses and has worked for the Teamsters and the Department of Economic Research at the AFL-CIO. . He taught economics for several years at Centre College and Colorado State University and is currently studying Library and Information Science at San José State University.Back