If you’ve been following GOP debates lately, you’ve heard that Wall Street businesses are the real “job creators” of our economy, and that the best way to put Americans back to work is to remove all the troublesome fetters—like environmental and safety regulations, or taxes, or unionization rightsfor workers—that hold them back.
But Wall Street’s goal is to make money, not create jobs. Wall Street institutions view wages and worker benefits as costs to be minimized. Wall Street executives know that the most certain way to boost the share price of their company, and thereby pump up the value of their personal stock options, is to announce that thousands of people are to be laid off, their jobs eliminated or moved abroad.
Between 2000 and 2009, for example, U.S. transnational corporations, which employ roughly 20 percent of all U.S. workers, slashed their U.S. employment by 2.9 million even as they increased their overseas workforce by 2.4 million. The result was a significant loss of jobs nationally, as well as a net loss globally.
So who are America’s real job creators?
Main Street Job Creators
It turns out that most job creation in the United States is the result of Main Street entrepreneurs, not Wall Street financial wizards. In our new report, Jobs: A Main Street Fix for Wall Street’s Failure, we show that most jobs come from the 99 percent—and that the best way to support job creation is to support rights and protections for the 99 percent.
A series of Kauffman Foundation studies find that nearly all job growth in the United States comes from entrepreneurial startups, which by their nature are products of Main Street. It is equally significant that more than 90 percent of the entrepreneurs responsible for job growth come from middle-class or the top end of lower-class backgrounds. Less than 1 percent of America’s job-creating entrepreneurs come from extremely rich or extremely poor backgrounds.
Just as the Wall Street economy is about making money for the 1 percent, the Main Street economy is about middle class people self-organizing to make a living by creating businesses that serve community needs for goods, services, and livelihoods within a market framework. This is the market economy Adam Smith envisioned when he wrote The Wealth of Nations.
This is a critical insight. To unleash America’s job-creating entrepreneurial energies, we must advance policies that expand the middle class and build strong Main Street economies. We have seen this demonstrated by our own national experience.
After Wall Street financiers precipitated the Great Depression of the 1930s, America put in place corrective structures, including a highly progressive tax system, a strong social safety net, and effective regulation of Wall Street banks and corporations. These structures shifted the locus of economic power from Wall Street financiers to ordinary Americans who worked hard and invested their savings in job-creating businesses that served community needs and built community wealth.
From this strong economic foundation, the United States emerged from victory in World War II with a large middle class and an industrial and technological base that made us the world’s most powerful nation. A major portion of the society achieved the American Dream of a secure and comfortable life in return for hard work and playing by the rules. For a brief moment, the civil rights movement created hope that all Americans might eventually share in the dream regardless of their color.
How Wall Street Took Over
Beginning in the 1970s, Wall Street interests quietly mobilized to free themselves from regulation, unions, and taxes and to dismantle the nation’s economic and social safety nets. Their initiatives, which gained traction under the Reagan administration, reduced taxes on the rich, undermined unions, pushed down wages and benefits, eliminated and outsourced jobs, eliminated limits on usury and speculation, and redirected financial markets from long-term investment in real wealth creation to profiting from securities fraud, usury, market manipulation, corporate asset stripping, and the inflation of financial bubbles.
It may seem that America’s prosperity now depends on Wall Street. That perception is largely an illusion created by Wall Street success in rewriting the rules to gain control of the nation’s money, productive re¬sources, and politicians. Wall Street’s relationship to the United States is akin to that of a colonial occupier loyal solely to itself and devoted exclusively to expropriating wealth it has no hand in creating. Its institutions profit from eliminating jobs and worker benefits, depressing wages, evading taxes, denying health insurance claims, and pillaging the retirement accounts of the elderly.
Every need that Wall Street institutions fill is better served by Main Street institutions with strong community roots.
How To Restore the Job Creating Power of Main Street
Occupy Wall Street has focused a spotlight on the concentration and abuse of Wall Street power and opened a much needed conversation about how to restore the American Dream of a secure and comfortable life in return for hard work and playing by the rules.
The New Economy Working Group, which we co-chair, has just issued a report on Jobs: A Main Street Fix for Wall Street’s Failure. It examines the systemic cause of the current economic failure and outlines a seven-part program to restore the middle class,advance a power shift from Wall Street to Main Street, and get America working again.
- Redefine our economic priorities by re¬placing financial indicators with real-wealth indicators as the basis for evaluating economic performance.
- Restructure the money system to root the power to create and allocate money in Main Street financial institutions that support Main Street job creation.
- Restore the middle class by restoring progressive tax and employment policies and a strong and secure social safety net.
- Create a framework of economic incentives that favor human-scale enterprises that are locally owned by people who have a natural interest in the health and well-being of their community and its natural environment.
- Protect markets and democracy from corruption by concentrations of unaccountable corporate power.
- Organize the global economy into substantially self-reliant regional economies that align and partner with the structure and dynamics of Earth’s biosphere.
- Put in place global rules and institutions that secure the universal rights of people and support democratic self-governance and economic self-reliance at all system levels.
A serious jobs program will necessarily include short-term stimulus measures. Its primary focus, however, will be on structural interventions to shift the balance of economic and political power from Wall Street to Main Street and rebuild the American middle class.