As we celebrate Labor Day 2000, it is instructive to look back at what Karl Marx predicted in 1848 about the plight of labor: "The modern laborer," he wrote in "The Communist Manifesto," "instead of rising with the process of industry, sinks deeper and deeper ... . He becomes a pauper, and pauperism develops more rapidly than population and wealth."
Capitalists - the owners of the means of production - Marx preached, are workers' enemies who exploit them and keep them chained in poverty and misery. In his famous call to arms that rang through the years, Marx cried, "Proletarians of all countries, unite! You have nothing to lose but your chains."
Isn't it ironic that 152 years later, the epitaph on Marx's tomb could read, "Workers of the world, rejoice. Marx was wrong." In democratic capitalist countries, workers and capitalists are not enemies; they are not even different people. They are the same people but at different stages of their lives.
Marx believed that private ownership of capital produced economic misery for workers. Today we have learned that widespread private ownership of capital is the key to prosperity and a rising standard of living for everyone. It's when workers themselves can't get access to capital that poverty is perpetuated and people get stuck on the lower rung of the economic ladder. As Jesse Jackson once put it, "Capitalism without capital is nothing but an 'ism.'"
The way to get capital into the hands of workers is not to have government tax capital and income away from one group of Americans and redistribute it to the worker. The problem is not too little redistribution, but rather too high a tax rate and too much government regulation that impedes workers from acquiring capital and creating wealth for themselves.
And it is not only taxes levied directly on workers' income that limits their ability to save and invest. It's also taxes that many workers don't even pay, excessive taxes imposed multiple times on saving and investment, that dry up capital and restrict its flow to those on the lower rung of the economic ladder. Whenever government overtaxes labor and capital and punishes success in the name of "protecting the people against the powerful," it's labor that ends up being punished by lower wages and higher unemployment.
For example, Social Security payroll taxes, the working man's income tax, confiscate 12.4 percent of workers' wages and salaries and dump them into a socialist-style, unfunded, government-run retirement plan that promises an average return on investment of only 1.2 percent after taking inflation into account. African-American workers, whose life expectancies are lower than average, get a particularly raw deal from Social Security since many black workers do not live long enough to recover all they paid into the system.
It will only get worse unless steps are taken to place Social Security on a solid foundation of real financial assets. According to the Social Security actuaries, after 2014, unless the payroll tax is raised or unless benefits are cut commensurately, there won't be enough Social Security payroll tax revenue coming in to pay all the benefits promised. Over the long run, payroll tax revenue will cover only about 70 percent of promised benefits unless the payroll tax rate is raised to an intolerable 18.5 percent.
But workers today are catching on. They are beginning to understand that raising more revenue through increased taxes will only retard economic growth, stunt wage increases and erode the value of their own mutual funds and private pension plans. The solution is to do what George W. Bush proposes and allow workers to place a portion of their payroll taxes into personal retirement accounts that will raise the return on their investment and alleviate pressure on Social Security.
Marx did get one thing right. He thought the class struggle would come to an end when the means of production were owned by workers. Today, more than 60 percent of all Americans own stocks and bonds, either directly, in mutual funds, through a private pension fund, 401(k) plans or IRAs.
A President Al Gore would stop this transformation in its tracks and make it difficult for many workers, impossible for some, to own assets and build wealth, leaving them imprisoned under the "protective" wing of government. Bush and Dick Cheney want to hasten the transformation of America into a shareholder democracy by allowing every worker, from the first day on the job, to use a portion of his or her payroll taxes to purchase their share of the means of production.
Someone should tell Gore that the class war in America is over. The workers won, and our new motto should be: "Workers of the world, invest!"