How to Organize a Free Market Economy that Pays for Everyone to Pull Together in the Same Direction, at the Same Time, Towards the Same Goals

A house divided against itself, as Lincoln once reminded us, will not stand. Yet even in the midst of our current economic meltdown, America continues to be a house that’s deeply divided (most politicians like it this way) along ideological lines.

Designed to Divide Instead of Unite
This is true because the two anachronistic (18th and 19th century) economic theories that still dominate 21st century thinking are themselves economically divisive. One system (capitalism) stacks the deck in favor of business owners and entrepreneurs at the expense of the working masses. The other (communism) stacks the deck in favor of the working masses at the expense of business owners and it systematically undermines individual initiative and entrepreneurship.

In other words both options presume that owners and workers are fundamentally different animals and as such they should naturally be pitted against one another. In any negotiations, when one side gains ground the other side loses ground automatically. Both represent zero sum games that actively promote division at the expense of unity.

Demming Weighs In
If he were still alive today, systems guru W.E. Demming would point out that if we want the country to come together and work together in order to dig our way out of our self created dilemma, we must first design a system that pays for us to come together, work together, and resolve this current dilemma. A system produces what a system produces, and if you don’t like what it’s producing, then CHANGE THE SYSTEM!

What Would a Unifying System Look Like?
So, what would that unifying system look like? To answer that question most succinctly let’s narrow our focus from the national economy to a fictitious corporation called XYZ,, Inc. In this company all the employees are paid a salary or an hourly wage, and they have benefits just like any conventional corporation. The difference is that all employees also own dividend yielding shares in XYZ, Inc.

In other words all the employees of XYZ, Inc. have two sources of income. One source of income is the labor/work they contribute to the corporation during their 40 hour work week. The second source of income is the dividend yielding shares they own.

So once the employee has proven himself or herself (there is a vesting procedure) XYZ Inc. makes a unique ownership commitment to that employee which transforms them from just another worker to an owner, a partner who wins when the company does well and loses when the company does poorly… a great incentive to help it do well.

Employees with an ownership stake in the future success of the business have a unique incentive to make productive decisions, contributions, and to make sure that those who are working alongside them are doing the same. Anyone who’s dragging their feet is potentially costing the entire team money. They’re effectively all paid to avoid foot dragging and to give it 100 percent.

An Ownership Union
In this scenario every employee in XYZ, Inc. is unionized on the side of the owners. When one wins they all win. When one loses they all lose. In other words everyone is paid to pull together, in the same direction, at the same time, towards the same goals. The Us VS Them mentality that’s so costly to conventional corporations is effectively eliminated and the need for a labor union evaporates into thin air.

Expanded to Include the Nation
Now let’s expand our focus to include the USA and its 300 million citizens. What would happen if each individual citizen owned dividend yielding shares in the Fed, the US Treasury, US Parks and Recreation areas, US natural resources, the US Highway System, the US Airways, (and that’s just off the top of my head in less than 5 minutes)? Under these conditions all US citizens would have an ownership stake, they’d be partners, and they’d have a unique incentive to pull together, in the same direction, towards the same goals, at the same time. BTW, that’s when miracles happen.

While Creating a More Perfect Union
The democratically elected government would of course collect taxes from everyone, instead of just the middle class (the lower can’t afford to pay and the fat cats find loop holes and park their funds in off shore accounts to avoid paying taxes). This systematic change would be anti-bureaucratic because the ownership power would be in the hands of individual citizens instead of the bureaucrats. It would underwrite instead of undermine individual initiative and entrepreneurship. And it would democratize the free market economy by virtue of altering the system…which by the way is the only way it can be done. And in the process it would finally create a more perfect union. Amen.

There's Plenty of Money in the System, But...

An old friend and I were recently discussing the economy when late in the conversation he said, “You know Rick, there’s actually plenty of money in the system. The problem is that so much of that money is in the hands of such a small number of people, at the expense of everyone else.”
We shook hands, wished each other well and went our separate directions, but after that every time I’d hear about the government pumping more money into the system in order to stimulate the economy I’d start thinking about my wise old friend’s comment.

US Population Figures
Finally I went to Google in order to see how the US population figures today compared to the population figures a decade ago. I discovered that in ten years our population has grown from about 270 million to a little over 300 million people, approximately a 10%increase.

Dollars Per Capita in the System
Then I looked into how many dollars were floating around in the system in 1998 VS 2008 so I could come up with an average amount for every man, woman, and child in the nation and compare those two figures. If there was an equivalent 10% increase in dollars available, and the distribution among the population was the same, then today’s economy would be flying as high as it was in 1998. On the other hand, if the available dollars per capita had decreased then it would explain the economic downturn and justify pumping dollars into the system, like we’re doing.

The Money Explosion Over the Past Decade
So, what did I find in this regard? I discovered that between the Bush administration printing money to support their war like there was no tomorrow, and the banks increasing the pool of dollars in the market exponentially every time they consummated a loan on a house or a car that got bundled sold, and re-sold again*, there was no way of telling ho much more money there actually is in the system today than there was a decade ago. One thing for sure, it’s lots more than 10%.
In other words the average number of dollars per capita in the system is vastly higher today than it was ten years ago, yet here we sit with companies around the nation closing their doors, workers losing their jobs, and unemployment lines growing longer every day all due to a shortage of money!

My Old Friend Was Right
So here’s the question. If there is lots more money per capita in the system than ever before, why is our economy teetering on the brink of disaster? The answer is that the distribution pattern has changed dramatically. In the words of my old friend, all that money is in the hands of a few (less than 5%) while the many (95%) are sucking air.
Can anyone say imbalance? Can anyone say redistribution is necessary and fast? Can anyone say “Why didn’t we read our frickin’ history books and know that this has happened before?” It was totally predictable while we ignored all the signs.


*With no regard to a corresponding increase in productive assets which is the classic formula for runaway inflation which started in our case with the housing market.