Work obviously has economic value, at least some work. Economists treat land (nature), labor, and capital as the three basic factors of production, or the sources of economic value. Labor and capital are used to transform nature’s resources into things that have economic value. Some early economists attributed all economic value to labor. They argued that capital is acquired by underpaying or exploiting labor, making labor the sole source of new economic value.

Regardless, wages and salaries reflect labor’s direct contribution to economic value. In the U.S., wages and salaries account for more than 40% of the total economic value of goods and services, as measured by the Gross Domestic Product (GDP). Including fringe benefits, such as Social Security, Medicare, retirement, and pensions, total worker compensation accounts for more than 50% of total production costs. Even if labor is not the sole source of economic value, workers are major contributors to the U.S. economy.

From the workers’ perspective, wages and salaries account for about 50% of consumers’ disposable incomes. Payments linked to current and previous employment, such as employer-paid insurance and pensions, account for around 10% of disposable income. The rest comes from government transfer payments, investment income, such as interest, dividends, and rent, and profits from individually owned businesses. Most people can’t live on income from investments, rents, and profits. The economic value of work is critical to the well-being of workers.

However, work also has non-economic values. When people not only work well together but enjoy working together, work has social as well as economic value. Social value depends on the quality of personal relationships, not the efficiency of professional relationships. When personal and professional relationships conflict, both suffer. So, workers are often discouraged from forming personal relationships with coworkers or colleagues. However, personal relationships are more resilient than professional relationships. Personal relationships are reciprocal and forgiving, rather than transactional and demanding. They are cooperative rather than competitive. Succeeding together is more important than who gets credit.

Best friends are often formed among coworkers. “Friends for life” are often people who once worked together and have stayed connected. Many people learn to get along with people who are different from them and to bond with people like them on their first job. Working relationships provide an opportunity to learn what it means to be part of a community and society. These values of work can’t be measured in dollars and cents.

Work also has moral or spiritual value. If people are asked to introduce themselves, or to think about who they are, they are most likely to respond or think of themselves as what they do—their work. They may say “I work for ________, or I’m a stay at home mom, or dad”—doing the important work of raising the next generation. Or, “I am a farmer, factory worker, teacher, lawyer, doctor, nurse, first responder, homemaker, secretary, retired…“ Even when it feels like a burden, our work often provides the means for us to do the other things we feel we were meant to do with our lives.

In the words of Kahlil Gibran, a Lebanese-American writer and poet:

“Always you have been told that work is a curse and labour a misfortune.
But I say to you that when you work you fulfill a part of earth’s furthest dream, assigned to you when that dream was born,
And in keeping yourself with labour you are in truth loving life,
And to love life through labour is to be intimate with life’s inmost secret.”

He seems to be saying that when you work, you fulfill part of your purpose for being. Our purpose is not limited to working for money or to doing anything that we might call work, but when we work, we should understand that our work has purpose. Gibran suggests that working with purpose is an expression of love of life, or a belief in the inherent goodness of life. “And when you work with love you bind yourself to yourself, and to one another, and to God.”

“Work is love made visible. And if you cannot work with love but only with distaste, it is better that you should leave your work and sit at the gate of the temple and take alms of those who work with joy.”

Gibran goes on to suggest that all work is of equal inherent worth; that no one’s work or purpose is more important or valuable than anyone else’s.

“Often have I heard you say, as if speaking in sleep, ‘He who works in marble, and finds the shape of his own soul in the stone, is nobler than he who ploughs the soil.
And he who seizes the rainbow to lay it on a cloth in the likeness of man, is more than he who makes the sandals for our feet.’ But I say, not in sleep, but in the over-wakefulness of noontide, that the wind speaks not more sweetly to the giant oaks than to the least of all the blades of grass.”

Dr. Martin Luther King, Jr. also affirmed the equal worth of all work:

“If a man is called to be a street sweeper, he should sweep streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.’”

All of this seems pretty philosophical until you think about how people actually live their lives. Why do young people with the intellect and educational opportunity to start working at six-figure salaries take low-paying jobs as teachers, social workers, or with social justice and environmental nonprofit organizations? Why do artists, actors, musicians, poets, and writers continue creating and performing long after it becomes clear they will never earn more than just enough to get by—if they are fortunate enough to do even that? And why do so many people continue working after they retire, doing things for others with no expectation or desire for payment? These people must make a living somehow, but their career choice is not based on the economic value of work.

Admittedly, some people choose occupations where they expect to make the most money. Some stick with those jobs; some because they want to and others because they choose a lifestyle that makes them feel they have to. Others choose occupations they expect to bring them the greatest satisfaction; perhaps because they think they will like the work and the people they will work with, because they feel it is the kind of work they are meant to do, or both. If they can meet their basic economic needs while living the life they want, working with people they like who share their values, doing the work they feel they were meant to do, they know they have all of the money they need.

During the farm financial crisis of the 1980s, I was Head of the Agricultural Economics Extension Department at the University of Georgia. An important part of our responsibility was working with farmers at risk of losing their farms through bankruptcy and foreclosure, many through no fault of their own. Farmers had been misled into taking out large loans at record-high interest rates based on expectations of strong export markets that failed to materialize. Regardless, many farmers lost farms their families had owned for several generations. Depression and divorces were epidemic in rural areas, and farmer suicides were not uncommon—several occurring in Georgia.

As an economist, I couldn’t understand why losing the family farm would cause a farm couple to divorce or a farmer to commit suicide. I saw the farm as a business—a way to make money. I could understand that losing the farm income would place stress on the family, but I thought farm families would be strong enough to endure it. They could find another way to make a living, and perhaps have a better life elsewhere in a different occupation. I certainly couldn’t see why losing the farm business was a reason to commit suicide.

At that time, I didn’t understand the non-economic values of work. I didn’t understand that when farm families lost their farms, they lost their friends, their neighbors, their communities, and their sense of belonging and meaning. I didn’t understand how personal relationships among family members were interconnected with their farm. When they lost the farm, they became a different family, and in some cases, a family that no longer had a purpose for being together.

I obviously don’t know for sure what motivated those people. However, when a farmer, usually a man, lost a farm that had been in his family for several generations, he may well have felt that he had betrayed a sacred trust. He was the caretaker of the family heritage, and he had lost it. I have known many farmers who feel that farming is their purpose in life, their reason for living. Some farmers who lost a farm during the 1980s may have seen only its economic value, declared bankruptcy, and started over again in another occupation. I suspect those who became depressed or committed suicide felt they had lost far more than the economic value of the farm; they had lost their purpose for living.

This same kind of thing happened when workers in the U.S. lost their good-paying jobs as factories moved out of traditional industrial areas to exploit low-paid, non-union workers elsewhere and again when U.S. factory workers were displaced by economic globalization. Economists and politicians expressed concern about the economic value of work but largely ignored the social and moral values. The economic displacement of workers destroys not only people’s livelihoods but also their way of life and their life’s purpose—the social and moral values of work.

Economists and politicians once again seem completely unprepared for, or perhaps unconcerned about, the non-economic costs that artificial intelligence, or AI, will impose on workers. The experts disagree about many of the consequences of AI, but there is general agreement that AI will displace at least as many workers as globalization, and perhaps as many as were displaced during the Industrial Revolution.

When the so-called experts talk about the costs of job losses due to AI, their discussion is almost always about the economic implications of worker displacement and reemployment. What about the loss of friendships, the sense of belonging and self-worth, and the lost sense of purpose and meaning in life? When are economists and politicians going to wake up to the fact that work has values beyond economics?

John Ikerd

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https://www.reuters.com/business/us-workers-share-gdp-skids-fresh-record-low-2026-08-06/

https://www.congress.gov/crs-product/IF10501

https://fred.stlouisfed.org/series/DPCERE1Q156NBEA

https://www.poetry.com/poem/54030/on-work

However, much of nature has no economic value. Things have economic value only if they are scarce, meaning there’s not enough for everyone to have all they want. Things that aren’t scarce, like air, sunshine, and rainfall, are plentiful and free. The natural resources needed to produce food, clothing, shelter, transportation, fossil energy, and medicine, for example, are scarce and thus have economic value. These are called “provisioning services” because they provide for our basic human needs. The economic value or cost of these resources is reflected in the prices we pay for the finished products. To mainstream economists, the value of nature, with minor exceptions, is reflected in market prices for economic goods and services.

However, we get some provisional services directly from nature. We pay for them with our time and energy, rather than money. For example, we may get vegetables and fruit from home gardens and orchards; pick wild fruits, berries, mushrooms, and medicinal herbs; fish and hunt for wild game; or cut down trees for fuel. We don’t pay for these things, but they still have economic value. Substitutes for these goods and services are available in the transactional or market economy. For example, we can buy food, fuel, and medicines similar to those we get from nature. The economic value of provisions acquired directly from nature can be approximated from the market value of substitutes.

In addition to “provisioning services,” nature provides a variety of other non-market goods and services that have economic value. Provisioning services make up only about 10% of the total economic value of “ecosystem services “. The value of “habitat services,” including soil formation, nutrient cycling, and biological diversity, accounts for another 10% of the total. “Cultural services,” such as camping, hiking, recreation, and relaxation, account for about 20%. “Regulating services,” which include climate control and air and water purification, are the most economically valuable of ecosystem services, accounting for the remaining 60%. As with provisioning services, estimates of the economic value of all these services are derived from the transaction value of potential substitutes or alternative means of realizing comparable benefits. The economic benefits come directly from nature rather than through market transactions.

A recent journal article reviewed more than 1300 scientific estimates of the global value of “ecosystem services.” Estimates vary, but credible studies consistently place the total economic value of ecosystem services at more than 1.5 times the market or transaction value of goods and services included in the global Gross Domestic Product. For example, the Boston Consulting Group of the World Bank estimated the global value of ecosystem services at $179 trillion in 2023, 1.7 times greater than the global GDP of $105 trillion.^[i]

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Ecological economists contend that if an appropriate economic value were placed on ecosystem services, competitive markets would ensure that natural resources are used in ways that provide the greatest benefit to society. They call this process “internalizing ecological externalities.” Governments can internalize external costs and benefits through taxes, subsidies, use restrictions, and other policies. Once internalized, the value of ecosystem services would become important considerations in economic decisions. If internalized, the Earth’s economic resources would be used more efficiently, but nature has values critical to humanity that have no economic value to be internalized. These values arise from our non-economic relationships with the nonhuman elements or beings of nature.

We humans, may see ourselves as a unique and special species, but we evolved from nature and still share the same nature with everything else on Earth. The air we breathe, the water we drink, the minerals that make up our bodies, and the energy that fuels our bodies are the same air, water, minerals, and energy that make up non-human species and other elements or beings of nature. We may not recognize or appreciate it, but we have relationships with these non-human elements or beings similar to human relationships in friendships, families, and communities.

As with social relationships, our direct relationships with nature are personal, rather than transactional. We have particular places in nature that are special to us: the climate, landscape, plants, animals, sounds, smells—natural environments. We remember being in, and want to be or return to, these places when we feel lonely, afraid, sad, hopeful, or happy: like sharing our feelings with a friend or loved one. The saying, “There’s no place like home,” comes from a sense of personal connectedness not only to particular people but to a particular place. It comes from an intuitive or intellectual realization that we’re not only dependent on nature for sustenance but also share a kinship with the other beings of nature.

Our direct relationships with nature are reciprocal rather than instrumental. We expect to get something of value in return but, unlike economic relationships, have no specific expectation of what or when. When we go for a walk through the woods or along a stream, or lie on the ground looking up at the trees or clouds. We may expect to be rewarded with a sense of peacefulness and contentment, but the feeling will be different from one time to another. We vacation at the ocean, in the mountains, at a national park, or in a wilderness area expecting to rekindle our relationship with nature. Sometimes it works better than others, and sometimes not at all. As Thomas Wolfe wrote: “You can’t go home again.” Each return to the old homeplace is different, but we keep going. Our direct relationships with nature are reciprocal, not instrumental.

Our direct relationships with nature are also communal rather than individual. We don’t return to our favorite places because of the climate, a specific beach, mountain, landscape, stream, or kind of trees, plants, and animals. It’s not the specific elements, but the relationships that make our favorite places unique and special to us. The wholes of natural ecosystems are far more than the sum of their individual organisms, elements, or parts. If anything infringes on or alters an element of an ecosystem, it changes the whole. It becomes a different place. It’s the relationships, not the individual elements, that make special places in nature special.

However, the most important values are not economic or socioecological but moral. Our moral relationships with nature are neither transactional nor personal, but are metaphysical or spiritual. The American novelist, poet, and environmental activist Wendell Berry, in his essay “The Body and the Earth,” wrote: “And so I go into the woods. As I go in under the trees, dependably, almost at once, and by nothing I do, things fall into place.” “I enter an order that does not exist outside, in the human spaces. I feel my life take its place among the lives – the trees, the annual plants, the animals and birds, the living of all these and the dead – that go and have gone to make the life of the earth.”

When we connect spiritually with the other things of the Earth, life makes sense—we find purpose and meaning in our life. We can’t prove that life has purpose; we must accept it as a matter of faith. Without purpose, however, there is no way to distinguish right from wrong or good from bad. What we do or don’t do wouldn’t matter. Life would be meaningless. When we quiet our minds and listen to the spiritual voice within, we understand that we are both members and caretakers of the Earth’s integrally connected community.

Moral values are universal, rather than individual or communal. All members of the Earth’s community—human and nonhuman, living and nonliving—are of inherent worth. Everything is interconnected and interdependent. There is no way of knowing if any is more important than any other, so all are accepted as equally worthy. We don’t look, think, communicate, or act like other species. But this doesn’t mean our purpose is any more important than theirs. We can do things they can’t, but they can do things we can’t. We are all integral parts of the same universal whole.

Moral values are altruistic rather than instrumental or reciprocal. Nothing is expected in return from a moral act other than a sense of having done what we ought to do. If we expect an economic return or societal recognition, our actions are not moral but economic or social. We make altruistic investments only because we feel a moral responsibility to do so, and the only reward we reap is knowing we did so. The bounties of nature that we benefit from today are the returns on investments made by past generations of human and nonhuman life on Earth. We owe a debt to the past that we can only repay to the future, but our lives are made better with each payment on that debt.

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The bottom line: even if we found the collective will to work through government to “internalize the economic value of ecological externalities,” we would have accounted for only a small fraction of nature’s total value. When economists attempt to transform the socioecological and moral values of nature into economic value, they capture only those values that are individual, instrumental, and impersonal. For example, they ask people how much they would pay to visit a national park, how far they would travel, and how much they would pay for lodging. Such questions assume experiencing a specific national park has no personal, reciprocal, or communal value. It’s just another park to check off their list. For some individuals, this may be true. For many others, their experiences in nature are priceless.

Economists ask people how much they are willing to pay to ensure that an endangered species doesn’t become extinct. This ignores our moral responsibilities and rewards as caretakers of the Earth’s living community. If people put prices on their relationships with nature, it reflects a lack of understanding or appreciation of nature’s non-economic values. When economists suggest that studies based on such estimates reflect the “total value” of ecosystem services, it reflects the same lack of understanding and appreciation that nature is far more than an economic resource to be exploited for human benefit. Stewardship of nature is a privilege, not just a responsibility.

People who openly express their concerns about the economic exploitation of nature are often given labels such as: Tree-huggers, who value plants and animals more than people; Alarmists, who invent environmental causes to raise money and lead; Eco-radicals or Eco-terrorists, who would destroy human civilization to protect nature; Out-of-touch elitist, who are snobbish intellectuals out of touch with the economic struggles of everyday life; or Watermelons, who take “green” positions on public policies but are secretly socialists or communists trying to destroy capitalism by conserving and protecting the environment. There are probably enough people of each to give the labels some credibility, but I believe most advocates are simply people willing to defend nature’s multiple values. I think most Americans value their relationships with nature and thus are environmentalists at heart.

However, those who benefit from extracting and polluting the nation’s natural resources have convinced many Americans facing day-to-day economic struggles that out-of-touch elitists and radical environmentalists are the cause of their problems. In reality, there is more than enough income and wealth to meet the needs of everyone in the world today, but the exploiters are unwilling to share with the exploited. Those who are willing to exploit nature for short-term profits are also willing to exploit their workers, their neighbors, and their customers. That’s not the environmentalists’ fault.

One way to break the cycle of economic exploitation is to depend less on the economy and more on nature for our overall sense of well-being. We can find inexpensive ways to spend time in nature: camping, hiking, hunting, fishing, picnicking, or just walking through local parks or along tree-lined streets. We can return to special places in nature that help us reconnect with the living and nonliving beings of nature. We can do our part to preserve biological diversity, reduce greenhouse gas emissions, clean up polluted lakes and streams, and reduce the trash going into landfills. We can accept our responsibilities and reap our rewards as both members and caretakers of the Earth’s integral community.

We can’t solve all of today’s economic problems by reconnecting with nature, but it’s a good place to start. Nature’s total value is far more than the value of its economic resources.

John Ikerd

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^[i] Boston Consulting Group of the World Bank, https://www.visualcapitalist.com/sp/charted-the-economic-value-of-nature-vs-global-gdp/

https://www.sciencedirect.com/science/article/pii/S2212041624000123

https://www.visualcapitalist.com/sp/charted-the-economic-value-of-nature-vs-global-gdp/

https://zerocarbon-analytics.org/insights/briefings/finding-economic-value-in-nature-beyond-carbon/

https://pmc.ncbi.nlm.nih.gov/articles/PMC3839693/

https://www.google.com/books/edition/The_Art_of_the_Commonplace/sNoREAAAQBAJ

There is little doubt that education has economic value. The educational records of more than a million urban elementary school children in the U.S., grades 3 to 8, were matched with their adult income tax records to evaluate the economic value of education. The study concluded that parents of students in a class of 28 could justify paying $200,000 more per year ($7,000 per parent) to keep a “high-value” teacher.^[i] Each child in classes with a high-value teacher had about $39,000 higher lifetime earnings. U.S. Bureau of Labor Statistics data show that students with high school diplomas earn about 25% or nearly $10,000 more per year than those who drop out before graduation.^[ii] A bachelor’s degree adds another $30,000 per year. Doctoral and professional degrees add another 50% or $40,000 to annual incomes of college graduates.

However, students with “below-average” and lower elementary teachers miss out on the economic benefits of education, and about one-quarter of college graduates earn little, if any, more than high school graduates. In June 2026, the U.S. Department of Education announced a new rule requiring undergraduate education programs to demonstrate that their graduates earn more than typical high school graduates, and those with advanced degrees earn more than typical bachelor’s degree holders.^[iii] If a program fails to show financial returns for its graduates, it will lose eligibility for federal funding. The Under Secretary of Education said, “If a program cannot show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers.”

Administrators and bureaucrats claim that the purpose of education is to give students the intellectual knowledge, critical-thinking skills, social skills, and ethical values needed to develop their full potential. They promote education for personal development, economic opportunity, and informed participation in civil society. However, the performance of educators, schools, colleges, and educational policies is increasingly evaluated, attacked, and defended in terms of economic value rather than personal development or contributions to society.

The types of intellectual knowledge prioritized are those that promise the greatest economic opportunity: science, technology, engineering, and mathematics, or STEM. Critical thinking is narrowed to making logical choices that maximize economic self-interest. Values-based education, teaching basic social and ethical values, has been corrupted by politics and religion and is frequently marginalized or omitted by administrators to avoid controversy.

An emphasis on education for employment and economic development may be more defensible for those with the fewest educational opportunities and in the greatest need of basic goods and services. However, economic development in the absence of intrapersonal, social, and spiritual development is futile, as evident in the cultural, political, and military conflicts within and among nations that have prioritized economic growth over social and spiritual development. In these nations, economic, social, and political polarization has left governments unable to cope with persistent political corruption, violent crime, drug abuse, racism, misogyny, and environmental degradation. The costs of “forever wars” claim government funds that could be better spent in service to peace. The economic benefits, including profits from corruption and wars, go to those already wealthy.

Rather than helping students develop their full potential and lead personally fulfilling lives, the educational institutions in economy-driven nations have stifled their social and spiritual development. Education has left them striving for ever-more income and economic wealth, and unwilling to share with others, in a world of underappreciated and untapped potential for social and spiritual abundance.

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The American psychologist Abraham Maslow is noted for proposing a hierarchy of human needs. The most basic human needs are physiological: air, water, food, shelter, sleep, and warmth. Next is the need for safety: stability, security, protection from harm. Most of these needs can be met by economic means. So, the economic value of education is a logical priority for those whose physiological and safety needs are not met.

The next level in the hierarchy is the need for love and belonging: caring relationships of intimacy, empathy, and trust—typically met by family, friends, and communities. Next is Esteem: the need to be valued by others, for status, approval, and prestige. These needs are social rather than economic. Friends and lovers can’t be bought or sold. Fortunes may gain public attention but can’t buy public approval or respect. Prioritizing the economic value of education leaves students unprepared to meet their higher social needs for love, belonging, and esteem.

The typical apex of Maslow’s hierarchy is self-actualization: a person’s need to reach their full potential for self-awareness, personal growth, and peak personal experiences. Late in his life, Maslow added a sixth level to the hierarchy: transcendence.^[iv] Maslow and other scholars came to realize that self-actualization may be focused entirely on the individual. He concluded that people can become all they are capable of being, individually, and still show no real concern for others. They might take care of others, but only to satisfy their own need to be an individual who cares for others. Transcendence is about rising above the self and the ego to realize that they are inseparable from everybody and everything else. It is only at levels of self-actualization and transcendence that individuals realize that what they do or don’t do matters, that their lives have purpose and meaning beyond their individual self-interests.

Education that prioritizes economic value reinterprets self-actualization as the achievement of wealth, power, or fame —power and fame leading to wealth. Students are taught they can be anything they want to be if they work hard enough, long enough, and smart enough; suggesting they should aspire to become wealthy, politically powerful, or famous. Education that develops self-awareness and personal growth for purely societal or altruistic purposes is devalued. Life choices that benefit society, humanity, and the Earth are labeled “irrational” unless they also benefit the individual. Transcendence is treated as metaphysical, mystical, or religious dogma and has no place in education that prioritizes economic value.

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Living Values-Based Education (VbE) is an alternative to “economic-values-based education” that prioritizes helping students build strong character, make good life choices, and treat others with respect, honesty, and compassion.^[v] VbE puts social, ethical, and moral values at the heart of learning. An abundance of curricula, teaching materials, and learning opportunities is readily available to support values-based educational programs in classrooms.^[vi] The purpose here is not to critique values-based education but to suggest an approach to understanding, organizing, and assessing the multiple values of education needed to meet students’ diverse needs and aspirations: economic, social, and moral.

Values-based education is not a matter of absolutes, but priorities. Contrary to popular belief, Maslow did not suggest that lower levels in the hierarchy of needs must be met before advancing to the next higher level. He acknowledged that all levels of need must be met, at least to some extent, to make life both physiologically possible and psychologically worth living. Lower-level needs are priorities as long as survival and safety are at risk. As those needs are met, the needs for belonging, esteem, and then self-actualization and transcendence become progressively higher priorities. Priorities may change, but all levels of need from survival to transcendence are essential to being “fully human”—physically, mentally, and spiritually. It’s a matter of priorities.

Three basic types of values are involved in life and in living values-based education: economic, social, and moral values. Economic values are instrumental and impersonal, and accrue to the individuals involved in economic transactions. An economic transaction is made with the expectation of receiving something of greater economic value in return. Economic values are indifferent to the persons involved in a transaction. If something can’t be bought, sold, or traded to another person, it has no economic value. Markets respond to scarcity; the willingness and ability to pay, not to necessity. An aggregate economy is nothing more than a collection of individual economic entities, enterprises, or businesses. The only relationships that matter are those that benefit individuals, not communities or societies as wholes. In complex societies, economies make it easier for individuals to meet their basic physiological and safety needs.

Figure 1: Three basic types of value

Social values are reciprocal rather than instrumental, communal rather than individual, and interpersonal or personal rather than impersonal. Social value depends on the specific persons involved in the relationships. Personal relationships may be among the most valuable aspects of a person’s life, but can’t be sold and thus have no economic value. There is an expectation of receiving something of value from social relationships, but no specification regarding what or when. Reciprocity is a means of maintaining the relationship, not of benefiting individually. The benefits accrue to the relationships, to the family, community, or society, not directly to the individuals. Social relationships fulfill the hierarchical human needs for belonging and esteem.

The third basic type of value is ethical or moral value. Moral values are altruistic, rather than instrumental or reciprocal. There is no expectation of receiving anything of economic or social value from an act of morality, only the sense of having done something right and good, regardless of whether it is recognized or appreciated by others. Moral values are universal, rather than individual or communal. What is right and good for anyone is right and good for everyone, including those of future generations. Finally, moral values are spiritual, rather than impersonal or interpersonal. Morality transcends the material world of economies and societies to access the spirit level of reality. Moral values fulfill the highest human needs: the needs for purpose and meaning in life.

Economic and social values may be confused because both are often associated with the same relationships. People benefit economically from business relationships with people with whom they also have social relationships—people they know personally and trust. Societies benefit from strong economies. But the two types of value are fundamentally different. If an economic relationship is fully exploited, the trust will have been betrayed, and both social and economic value will be lost. A society must give social relationships priority over its economic ambitions to avoid prioritizing scarcity over necessity and profits over people. Aristotle defined “virtuous living” as valuing society over self and the key to human happiness.^[vii] Meeting physiological and safety needs is but a means of reaching the higher levels of social and spiritual development.

Actions motivated by morality may also have positive social and economic consequences. And, some economic and social relationships may have positive moral consequences. In other words, it’s sometimes possible to “do well” financially or socially by “doing good”—and do good by doing well. However, the economic, social, and moral benefits in these situations are different. Philosophers debate whether motives are more or less important than consequences, but there is no moral value unless the motivation is altruistic. Moral values meet the human needs for self-actualization and transcendence: connecting the enlightened self to the whole of reality.

Contemporary education, intentionally or unwittingly, has prioritized intellectual knowledge and critical thinking over the development of social skills and moral values. Intellectual knowledge and information can be assembled, organized, and presented to students to support analysis, interpretation, evaluation, and synthesis. This type of education supports critical thinking and fits the industrial paradigm of specialization, standardization, and hierarchical administration or control. Education that prioritizes social and moral values requires an experiential approach to education grounded in social and moral principles and practices.

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The most fundamental purpose of values-based education is to help students understand how the world works and where they fit within it, so they can decide how to live their lives. Every student should understand that they have a unique purpose to fulfill in life. Their purpose will guide them toward what is right and good for them. Their purpose is no more or less important than anyone else’s; just different. Students also need to understand that they do not walk their path of purpose alone. Their life will be affected by others and others’ lives will be affected by theirs. Humans are inherently social beings who need to care and be cared for, to love and be loved. Students should be taught, and each classroom should exemplify, the core principles of positive personal relationships, including honesty, fairness, responsibility, respect, and compassion. They need to learn to trust and be trusted; to be kind and treated with kindness.

Students also need to understand the basic principles of economics, including scarcity, efficiency, and sovereignty or freedom of choice. Teachers can create situations of scarcity and allow students to explore competition and cooperation as means of sharing the scarce benefits. All of today’s major economies are mixed economies with public and private sectors. Students can decide which is more efficient or beneficial to the class as a whole. Competition and cooperation also help students discover what they do well, what they like to do, and perhaps could make a living doing, or at least while doing. They also need to understand the social and moral value of finding a way to make a living that contributes to the greater good. Caring for others and caring for the Earth are not sacrifices but give purpose and meaning to life. All are essential, but economic well-being is simply a material requisite for a social and moral life of quality and purpose.

The sustainability of human life on Earth ultimately depends on our collective willingness to prioritize moral values over social and economic values. Sustainability is the ability to meet the needs of all in the present while leaving equal or better opportunities for those of the future. No economic or social value can be gained from ensuring that everyone of present and future generations will have the opportunity to meet the basic needs for a purposeful life. There will be no economic return or social reciprocity from such investments.

Sustainability depends on a belief, by faith, in the inherent goodness of life on Earth, in the love of life and the Earth, and the hope or possibility that this goodness can be realized—on faith, love, and hope. Sustainable living is rewarded by a moral sense of well-being or happiness that comes from a life that values others over self—a virtuous life. Closing with a quote of unknown origin, sometimes attributed to Aristotle or Einstein: “Educating the mind without educating the heart is no education at all”

John Ikerd

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^[i] https://opportunityinsights.org/wp-content/uploads/2018/03/teachers2.pdf

^[ii] https://www.bls.gov/careeroutlook/2025/data-on-display/education-pays.htm

^[iii] https://www.ed.gov/about/news/press-release/us-department-of-education-issues-final-rule-hold-all-colleges-and-universities-accountable-low-earning-programs

^[iv] https://bigthink.com/neuropsych/maslow-self-transcendence/

^[v] https://www.21kschool.com/us/blog/value-based-education/

^[vi] https://livingvalues.net/

^[vii] https://pursuit-of-happiness.org/history-of-happiness/aristotle

A government is the social equivalent of a transactional economy. An economy provides an impersonal means of meeting our individual needs and wants. The economy lets us buy goods and services produced by people we don’t know, using money we earned by producing goods or services for other people who don’t know us. Economies let us move beyond self-sufficiency and gifting or barter, giving us access to a far wider range of goods and services at potentially lower costs while earning potentially higher salaries or wages.

“Potential” is a keyword here because realizing the potential benefits depends on economies serving the interests of all involved rather than serving some at the expense of others. Regardless, the value of transactional economies is economic value. Economic value is instrumental, individual, and “intra- or impersonal,” as explained in my previous post.^[i] The economy is indifferent to the specific persons involved in transactions. Whether or not we realize the potential value of an economy depends on how effectively it is governed.

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The value of governance is social rather than economic. Social value is reciprocal, communal, and interpersonal.^[ii] Social reciprocity or mutual benefit is a means of sustaining relationships, not of acquiring anything of economic value. Social values depend on relationships within families, communities, and societies as a whole, not on individuals. The specific persons in social relationships matter. Members of families, communities, and societies are not interchangeable. Societies create and govern economies, but the essential functions of governance are social rather than economic.

Governance begins with the individual’s own sense of appropriate behavior, analogous to economic self-sufficiency. This includes a sense of responsibility toward others, or lack thereof. The next level of governance, as with gifting and barter, is informal codes of conduct or understandings within families, among friends, and in other close personal relationships. Individuals who conform to these codes of conduct sustain social relationships. Those who violate them don’t. There may be economic consequences of failed personal relationships, but the cost, or lost value, is personal and social.

At this level of governance, the interpersonal, reciprocal, and communal nature of social value is clear. The specific persons involved in the relationships matter. There is an expectation of receiving something in return for the time and energy devoted to the relationships, but no expectation of precisely when or what will be received. The value is in the relationships, in having friends, being a part of a family or a caring community. Any economic benefit is incidental rather than essential. Otherwise, the relation is economic rather than social. Reciprocity is simply a means of sustaining the value of the relationship, not of making or saving money.

Most people probably think of government as county, city, state, and federal governments. At these levels, the “interpersonal” relationships among the governed are analogous to the “impersonal” relationships in transactional economies. The sense of belonging or connectedness is just weaker or less personal at higher levels of government than within families or friendships. At the state and federal levels of government, relationships may be little more than a sense of shared responsibility for or pride in a city or state, or patriotism. The reciprocal benefits of such relationships are reflected in a more desirable overall quality of life. Sociologists refer to the social glue that holds cities, states, and nations together as “thin reciprocity,” in contrast with the “thick reciprocity” of families and friendships. Nonetheless, the relationships of governance are social rather than economic.

At the highest or deepest level, governments reflect shared ethical or moral values. A society’s ethic is based on shared moral values about what is right or wrong and what is good or bad in relationships with each other and with the Earth. What is good for one is good for all. No amount of money can make right something that is morally wrong. In good governments, socially acceptable levels of moral responsibility and limits to individual behavior are defined through political processes and encoded in constitutions, laws, and regulations.

Now, to the case against corporations participating in the political processes of government. Corporations are legal entities that are created to allow people to pool their resources or invest for specific purposes. Nonprofit corporations are created for a variety of charitable, educational, religious, and other public purposes. The economic rationale for for-profit corporations is to accommodate larger economic organizations that can achieve “economies of scale,” which presumably reduce costs and benefit consumers. The large corporations invariably retain more cost savings as profits than they pass on to consumers, but that’s another story covered in previous post.^[iii]

The bottom line is that for-profit corporations are purely economic entities with no sense of or capacity for the social and moral values essential to good governance. For-profit corporations have a legally and ethically binding fiduciary responsibility to serve the “common interest” of their shareholders. While individual investors may have strong social and ethical values, once the number of shareholders extends beyond family and friends, there are no “common” social or moral values to guide the for-profit corporation.^[iv]

Investors in large publicly traded corporations are scattered around the world and include a wide range of ethnicities, religions, nationalities, age groups, education levels, and other demographics. Pension funds and mutual funds hold 40% to 50% of all stock market value, and the investors in those funds rarely even know how much of which stocks they own at a given point in time. Some traders own a stock for only a few days or minutes. There is no way that large publicly traded corporations can reflect the social and ethical values of their shareholders when they participate in the political process of governance. Their only common values are economic—their monetary returns on investment.

The Supreme Court simply has gotten it wrong. The legal precedent for corporate personhood dates back to a declaration by the Chief Justice of the U.S. Supreme Court in 1886. Before formal proceedings began, he said, “The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution which forbids a state to deny to any person within its jurisdiction the equal protection of the laws applies to these corporations. We are all of [the] opinion that it does” (Santa Clara County v. Southern Pacific Railroad Co. 1886). This was not a part of the court’s official opinion but simply a statement by the chief justice without any presentation of arguments. This precedent has been challenged periodically but has nonetheless prevailed.

In a 1949 dissenting opinion, Justices Douglas and Black pointed out that the Fourteenth Amendment was clearly meant to protect the civil rights of real people, especially recently freed slaves, not to protect the economic rights of corporations (Wheeling Steel Corp. v. Glander, 1949). In a 1978 dissenting opinion, Justice Rehnquist questioned the wisdom of extending political rights to corporations. He pointed out that the Fourteenth Amendment was intended to apply to real people, not legally created entities, and that there were real dangers in extending the political rights of people to corporations (First Nat’l Bank of Boston v. Bellotti, 1978).

The Supreme Court also got it wrong when it equated money to speech. The 1976 Supreme Court case established the precedent that limits on campaign spending violate the First Amendment right of free speech. The Court ruled that the government can limit direct campaign contributions but cannot place limits on campaign expenditures by candidates from personal resources or “independent” expenditures by individuals or groups that indirectly support political campaigns. It ruled that limiting independent political spending limits freedom of expression, which is protected by the U.S. Constitution (Buckley v. Valeo, 424 U.S. 1, 1976).

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This ruling represented a reversal of a long-term trend toward a more democratic form of government in which all have equal rights to participate—a social and moral government. The U.S. Constitution initially limited voting rights to white, male, property owners. This reflected a belief that the primary function of government was to protect private property. Therefore, only property owners should participate in governance. As the nation became more civilized and enlightened, voting rights were extended to others.

Money is a claim to private property, as are corporate stocks. Thus, the 1976 Court decision returned governing power to property owners, to the wealthy. Free political spending is not freedom of expression; it is freedom of political domination. Governments have a responsibility to protect private property. However, governments are not meant to be economic organizations that promote the accumulation of wealth but social and moral institutions that define the norms, rules, and frameworks of acceptable human behavior. Unless the U.S. government is nothing more than an association of wealthy property owners, the Supreme Court got it wrong.

In 2010, the Supreme Court went even further by ruling that for-profit corporations and other economic entities have the same rights as individuals and groups (real people) to unlimited spending in support of political campaigns. The Court held that “limiting independent expenditures on political campaigns by groups such as corporations, labor unions, or other collective entities violates the First Amendment because limitations constitute a prior restraint on speech” (Citizens United v. FEC, 2010). Federal election spending has nearly tripled since 2010, from $7 billion to as much as $20 billion. In the U.S. today, free spending equals free speech.

Again, the basic problem in equating money with speech is that spending is an economic right, but speaking is a social and moral right. Anything that can be bought or acquired by spending money, whether a tangible good, service, outcome of an election, or political influence, may have economic value but will have no social or ethical value. Social values are not transactional but interpersonal. Moral values are not instrumental but altruistic. Good governance cannot be bought or sold.

In addition, large, publicly traded corporations most certainly should not be allowed to spend money on political campaigns. They lack the capacity to reflect anything other than their narrow economic interests in their choice of candidates and issues to support. Labor unions have the capacity to reflect both economic and non-economic interests of their members. However, by prioritizing labor issues, they compromise their members’ diverse social and moral values. Labor unions may be more human than for-profit corporations, but they are not fully human—economically, socially, and morally.

Other special interest groups and corporations face the same challenge because their specific shared interests cannot include the full range of human values that real people reflect in their political choices. Admittedly, many individuals who participate in politics are money-driven, narrow-minded, single-issue voters. However, individuals are capable of fully expressing their unique social and moral values in political matters—if they choose to do so. For-profit corporations, labor unions, and other special interest groups lack this capacity. The only defensible political organizations are those representing the full spectrum of human values. Corporations are not real people, and free spending is not free speech, regardless of Supreme Court rulings.

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The only power greater than large, for-profit corporations and wealthy individuals is the power of the people, working together through government. Amendment V of the U.S. Constitution describes the process by which the Constitution could be amended to prevent corporations from participating in government and to declare that free spending is not free speech. Such an amendment has been proposed and is being promoted by the “Move to Amend” organization https://www.movetoamend.org/. The following are excerpts from the proposed amendment:

Section 1. [Artificial Entities Such as Corporations Do Not Have Constitutional Rights]The rights and privileges protected and extended by the Constitution of the United States are the rights and privileges of natural persons only

Section 2. [Money is Not Free Speech] Federal, State, and local governments shall regulate, limit, or prohibit contributions and expenditures, including a candidate’s own contributions and expenditures, to ensure that all citizens, regardless of their economic status, have access to the political process.

Section 3. [Protect Freedom of the Press] This amendment shall not be construed to abridge the right secured by the Constitution of the United States of the freedom of the press.

What difference does it make whether a government is an economic association or a social and moral institution? It matters because for-profit corporations use the government to promote economic growth and accumulation of wealth, rather than the social or moral well-being of society and humanity. Through unlimited political spending, corporations and wealthy individuals distract governments from their basic purpose of serving the common good and destroy governments’ ability to prevent the exploitation of people and the pollution and plunder of nature.

The economy and government are both important to society. The question is whether the government controls the economy or the economy controls the government. Corporations are not people, and money is not speech. It’s a matter of values, and it matters!

John Ikerd

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^[i] https://johnikerd.substack.com/p/why-to-we-need-an-economy

^[ii] https://johnikerd.substack.com/p/why-to-we-need-an-economy

^[iii] https://johnikerd.substack.com/p/why-should-we-care-about-competitive

^[iv] https://foodsystemsjournal.org/index.php/fsj/article/view/1172

“A cynic is a man who knows the price of everything, and the value of nothing,” was written by playwright Oscar Wilde in 1892. Author and academic Raj Patel paraphrased Wilde in his 2009 book, The Value of Nothing: “nowadays, people know the price of everything and the value of nothing.” We know how much things cost, but not how much they are worth. Cynicism has become commonplace; hopefulness, the exception.

We seem to think that if we had enough money, we could get all of those other things that have value. Our families would be happier without money problems. Our communities would be stronger with better jobs and more businesses. Our nation would benefit from less poverty, hunger, and homelessness. We would also have more money to reduce pollution, mitigate climate change, and care for the natural environment. No matter the problem, the solution seems to be more money. So, we prioritize things that have prices, or at least could be priced if we chose to. When people act otherwise, they are accused of being irrational or emotional.

None of this has proven true in the U.S. or elsewhere, but we are led to believe that’s just because we don’t yet have enough. If we just had more money, everything would be okay. However, the truth is quite different. Money doesn’t make families stronger; it just makes their weaknesses less visible. You can’t buy a friend, no matter how much you are willing to spend. Poverty, hunger, and homelessness are not the result of not having enough money but of living in a society where the worth of people is measured in money. Economic exploitation disguised as economic development is the cause of environmental problems, not the solution. No amount of money will make something that is morally wrong right.

I’m not trying to tell people what they should value, only that we can make better decisions when we understand what money can and cannot buy. Some of the most valuable things in life are literally priceless.

I asked an AI program, ChatGPT, for a list of the most fundamental challenges facing global society today. These may or may not be the most important, but they reflect what people are most concerned about today. The challenges were listed in five major categories: 1. Economic Inequality and Development; 2. Public Health and Resilience; 3. Governance, Conflict, and International Cooperation; 4. Environmental Sustainability; and 5. Technology Management.

ChatGPT volunteered that “many scholars would argue that nearly all global challenges fall under three overarching categories:” Managing our relationship with the planet (environmental sustainability); Managing our relationship with each other (governance, conflict, inequality); and Managing the power of our technologies (AI, biotech, and other transformative tools).

All of these challenges are the logical result of a society that prioritizes economic value. A dollar today is worth more than the promise of a dollar in the future, so maximum profits require maximum economic growth rates. In managing our relationship with the planet, we have extracted, exploited, and degraded the Earth’s natural resources at an unsustainable rate. The Earth’s productive resources are being permanently damaged and depleted faster than they can be restored and regenerated.

In managing our relationship with each other, the growing social and economic inequality, political conflicts, and loss of confidence in governance are natural consequences of a society preoccupied with individual economic interests. Personal relationships within families, communities, and societies are sacrificed in the pursuit of income and wealth. There is no economic value in doing something simply and purely for the benefit of someone else. Empathy is considered a personal weakness rather than a strength. Economic relationships are transactional and competitive, leading to conflict, inequality, and a lost sense of common purpose.

In managing the power of technologies, such as AI, biotech, and other transformative tools, for-profit corporations are allowed to develop and implement whatever technologies they expect to be profitable. Government regulations designed to ensure that technological innovations protect and benefit public interests are treated as obstacles to economic innovation. For example, AI will require tremendous quantities of energy, water, and rare minerals, and will replace or marginalize the occupations of millions of workers. However, the only costs given serious consideration are costs that can be expressed in dollars and cents.

We may not feel there is anything we can do about these “big challenges.” Regardless, we face the same basic challenges in our lives every day. We make decisions that reflect our preferences and priorities among values. We choose between investments of time, energy, and money that promise a quick economic payoff and those with prospects for long-term benefits for society and humanity. We make choices every day between spending time and energy making money or instead creating and caring for positive personal relationships—friendships, families, communities. We decide whether to try to keep up with every new technological development that appears in the marketplace or to consider the impacts of new technologies on nature and society.

Again, people ultimately have to decide for themselves what they should and shouldn’t do. No one else knows you as well as you do: your needs and wants, the purpose and meaning to your life. However, I am convinced that people will make better decisions, for themselves, for society, and the future of humanity, if they have the confidence and courage to value and prioritize the things in life that are priceless: if they consider the value of everything.

What are values, anyway? I was once told that we don’t need to be taught nearly as much as we need to be reminded, which is true of values. Values are the core ideals, principles, and beliefs that guide our decisions, relationships, and behaviors (one of many similar definitions). There are three basic types of values: individual (intrapersonal), social (interpersonal), and moral (universal). Individual values relate to beliefs that guide our decisions and actions as independent individuals. Social values pertain to how we relate to others, as members of families, communities, and societies. Moral values are the fundamental principles and standards that guide our behavior in relationships and actions that affect everyone under all circumstances.

Economic value is an individual or intrapersonal value. (Everything doesn’t boil down to economics.) Economies are created to make it easier to meet our individual needs and wants through relationships with others. When academics talk about gifting, barter, or social economies, they are talking about people meeting their individual needs through direct relationships. In these cases, the economic value is not the value of the relationship but the value received by the individuals. There may be social value associated with direct economic relationships, but the economic value of the relationship is impersonal or indifferent with respect to the persons involved.

Social value differs from economic value in that social relationships are personal rather than impersonal. This becomes clear when we compare economic and social value in today’s transactional economy of buying and selling, rather than gifting and barter. A social relationship among friends may be among the most valuable aspects of a person’s life, but purely personal relationships have no economic value. A friendship cannot be bought, sold, or traded to another person and thus has no value in today’s transactional economy.

Sociologists refer to economic benefits associated with social relationships as “social capital.” Economists point to lower “transaction costs” among people who know and trust each other. But the personal aspect of the relationship has no economic value. If the economic benefits of a social relationship are exploited, the relationship becomes economic, and the social value is lost.

Social value prioritizes relationships, not individuals. When something is invested in an economic relationship, there is always a specific claim and expectation of receiving something of greater value in return. There is also an expectation of receiving something from a social relationship, but no requirement regarding what, when, or how much. If you want to have a friend, you have to be a friend. If you expect to benefit from living in a civil society, you have to be a responsible, contributing member of that society. Social contracts are not explicit regarding benefits. Social relationships are sustained by reciprocity, not individual returns on investments.

Moral values are different from economic and social values. Rather than being individual or relational, moral values are universal. What is right for anyone is right for everyone, everywhere, at all times; and everyone benefits. The UN Universal Declaration of Human Rights and the concept of Crimes Against Humanity are attempts to identify universal moral values. Rather than being instrumental or reciprocal, moral values are altruistic. There is no expectation of receiving anything of value in return for an action based on morality, other than the satisfaction of doing what is right and good. Economic benefits may arise from moral behavior: “doing well by doing good.” But morality has no economic value. If the economic benefits of “doing good” are exploited, the moral value will be lost.

Finally, moral values are spiritual, rather than individual or interpersonal. The sense of what is right and good comes from the sense that we are a part of something bigger than the world around us, of some higher level of organization, or higher power that gives purpose and meaning to our lives. We may accept ethical rules of behavior that we learned from our religion or culture, but we also have a “small voice within” that tells us what we ought and ought not do. It is this same voice, this spiritual sense of connectedness, that rewards and penalizes us for moral and immoral thoughts and actions. The relationship is not individual or interpersonal, but spiritual.

In cases where economic values associated with social and moral decisions and actions are not reflected in markets, or in dollars and cents, economists develop estimates of the economic costs and benefits. For example, economists often attempt to internalize the environmental and public health costs of industrial development. They then propose policies to “internalize the economic externalities” through government regulations, taxes, or other means. However, this process leaves social and moral values uncounted and unappreciated because they have no economic value to internalize.

There is a natural hierarchy among these different types of values that leads to different levels of personal satisfaction, contentment, or happiness. American psychologist Abraham Maslow proposed a “hierarchy of needs”[i] to describe the sequential stages of human development: physical, mental, and spiritual. Maslow used the terms physiological needs, safety needs, the need to love and belong, for status and self-esteem, and finally, the need for self-actualization and transcendence. The hierarchy is generally interpreted to mean that lower-level individual physical and safety needs must be met before moving to social needs of belonging and status, and then to spiritual or transcendent need for self-actualization. However, Maslow considered the four stages of development as a hierarchy of motivation rather than of prerequisites.

Maslow understood that all these needs are important at all stages of development. People who are socially, emotionally, and spiritually mature are still concerned about meeting their basic needs for safety and security. And people are motivated by their needs for love, belonging, approval, self-actualization, and transcendence, even when they face threats to their physiological safety or survival. Their physiological motivations for belonging, loving, and self-actualization are just not as high a priority until the more basic physical needs are met.

There are places in the world where physical survival and safety remain the logical priorities for most of the population. However, in the United States, Europe, and the so-called developed nations, the basic physical needs of most people, although not all, have long been met. The remaining threats to those lacking physical security and safety reflect a lack of willingness to share the abundance rather than absolute scarcity. Rather than moving up the hierarchy to the social needs for belonging, loving, and esteem, however, the political priorities remain the relentless pursuit of individual income and wealth.

A public sense of insecurity, precariousness, and fear is perpetuated by those in positions of economic and political power to keep people working harder and longer. More time and energy devoted to relationships that create social value and to causes that create moral value detracts from opportunities for profits and economic growth. The only relationships encouraged and cultivated are those of dominance, rather than reciprocity. Public investments made for the future of humanity, such as climate change mitigation, are labeled as fraud or a hoax. People are led to believe it is foolish to do anything for anybody simply because it is the right and good thing to do.

Much of the world seems stuck at the first level of Maslow’s hierarchy of needs. They seem oblivious to the fact that their lives could be fundamentally better if they devoted less time and energy to pursuing economic value and more to cultivating social relationships and fulfilling moral responsibilities that create social and moral value instead. As individuals, however, we need not remain stuck at the lowest level of human development. If enough of us change, our society ultimately will change. Economic, social, and moral values are all important, but different. With a bit of practice, we can learn to value everything.

John Ikerd

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[i] A. H. Maslow, A Theory of Human Motivation, Psychological Review, 1943, 50, 370-396.

Musk didn’t provide any timeline, but credible projections estimate that AI will replace roughly 6% to 15% of the U.S. workforce over the next five years, and could automate 30% of U.S. jobs by 2030.[ii] [iii] In addition, AI is expected to significantly change or “reshape” 50% to 55% of all American jobs.

AI’s primary benefits will be in automating tedious, repetitive tasks, including customer support, using information gleaned by analyzing and condensing vast amounts of data. AI could minimize human error and provide 24/7 operation of automated production systems. The selective use of AI could also simplify and streamline business and public administration functions by providing actionable data insights. This would allow management to focus on strategic oversight, coaching, and organizational leadership.

So how will AI affect the economy? People create economies to meet needs or wants that they can’t meet, or can’t meet as well, for themselves. Economies can span local communities, regions, entire countries, or the world. Transactional economies allow people to meet their needs through impersonal means by working, earning, buying, and selling, rather than personal means of gifting, bartering, or other forms of reciprocity. If societies were willing to return to self-sufficiency, gifting, and barter, there would be no need for money.

Economies also determine how societies utilize or manage their limited or scarce resources, including land/natural resources, labor, and capital, to meet their needs and wants. If the efficiency gains from AI decreased the need for natural resources, labor, and capital enough to make them abundant and free rather than scarce, there would be no need for an economy, work would be optional, and money would be worthless.

Where are the flaws in Musk’s utopian vision of the future, assuming it could actually be achieved? First, economies are created to sustain and enhance the quality of human life on Earth, not simply facilitate economic development or growth. While AI algorithms may be able to replace people as workers or producers, AI cannot replace real people as consumers and members of societies.

The needs and preferences of real people evolve as the world changes around them and they reflect on their uniquely human experiences, perceptions, and aspirations for the future. The economy should evolve accordingly. Real people also provide the spark of intuition or insight that ignites transformative economic innovations, such as the steam engine, electricity, the Internet, and AI. Real people must also define the social and political parameters within which the economy must function (laws and regulations) and determine or legitimize measures of economic progress and success (such as employment and the GDP).

Nine Types of Human Intelligence

Psychologists have identified nine types of human intelligence.[iv] Artificial intelligence is better at simulating some types than others and is incapable of acquiring some types of intelligence that are critical to determining the quality of human life. AI has exceptional intelligence in logical/mathematical, visual/spatial, and verbal/linguistic intelligence, and is gaining competence in musical/rhythmic, bodily/kinesthetic, and naturalist intelligence. However, AI has no ability to acquire intrapersonal/introspective, interpersonal, or existential intelligence.

Intrapersonal intelligence is the capacity of real people to understand themselves and their thoughts and feelings, and to use their individual knowledge in planning and directing their lives. Intrapersonal intelligence involves not only a person’s appreciation of themself, but also of other individuals with whom they interact in society. Interpersonal intelligence is the ability to understand and interact effectively with others, verbally and nonverbally. It involves not only intrapersonal intelligence but also the ability to distinguish among others, to be sensitive to others’ moods and temperaments, and to appreciate multiple individual perspectives. Existential Intelligence is the sensitivity and capacity to transcend self and others, to engage the deepest questions of human existence, such as the purpose and meaning of life, why we live and die, and what is worth living and dying for.

AI lacks existential and interpersonal intelligence because it lacks intrapersonal or individual intelligence. AI can analyze intrapersonal or individual experiences, to the extent they are recorded as searchable data, and can make predictions about future behavior based on past experiences. However, the experiences that are most important to a person are rarely, if ever, recorded in a searchable database. Some are too personal to share, and others defy expression. They are written in the heart and soul of the real person, and they affect how we think and act. These experiences provide the catalysts for the inspiration, intuition, and insight that motivate individuals to think and act in ways AI cannot understand or anticipate.

AI’s contribution to knowledge is similar to that of statistics, where characteristics of populations are expressed as means or averages and standard deviations, and the likelihood of future outcomes as statistical probabilities. Statistical estimates do not reflect any individual observation, but are characteristics of populations or groups that are unlikely to be present in any single individual or member. AI scans the internet for information related to the subject of inquiry and synthesizes a rhetorical average or consensus response. It uses this same basic process to respond to queries, create documents, and answer questions about financial reports. Individual assessments and opinions are lost in the process of synthesis.

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If AI can do most of the work, including management, why do economies need real intelligence? The critical concerns about AI are not so much about how it will affect the nature of work and employment, although these are major concerns that need to be addressed, but who will decide what work AI does and who it works for? Who will determine the purpose of the AI economy, whose interests it will serve, who will grant it power, and establish the bounds within which the economy must function? AI cannot make those decisions because it lacks the intrapersonal, interpersonal, and existential intelligence necessary to make purposeful and meaningful individual and collective decisions. Will those decisions be dictated by the corporate billionaires who now control the development of AI? Or will real people make those decisions individually and collectively through the processes of self-government?

Indications thus far suggest that wealthy individuals and corporations currently developing AI technologies are expected to control the AI-dominated economy. Since the launch of ChatGPT in November 2022, AI-related corporate stocks have accounted for 75% of S&P 500 returns and 80% of earnings growth.[v] Corporate stocks are claims to a share of future corporate earnings, and investors are betting that AI-related for-profit corporations will be the major beneficiaries of AI technologies. These corporations will prioritize private profits over public purpose.

As I have explained in previous “Why? Economics” posts, for-profit corporations are purely economic entities.[vi] They have no capacity to form or express social or moral values. They have no intrapersonal, interpersonal, or existential intelligence. Anything they do for the good of society or humanity is an unintended byproduct of their pursuit of profits and economic growth. If corporate billionaires are allowed to control the future of AI, the economy will be programmed to maximize profits through resource extraction and exploitation and to promote unlimited economic growth through endless technological innovation. People will be misled into believing that AI doesn’t need the Earth’s resources to create unlimited abundance and wealth.

If corporate billionaires are given a free rein to implement AI, they will use the government to serve their economic interests, rather than the common interests of the people. Musk has already proposed that the government should prepare to provide everyone with a “universal high income” so they can buy the things the AI economy will produce. This would eliminate the necessity for corporations to collectively pay their workers enough to buy the products they produce. Musk suggests the government should print money that, once spent, will go directly to AI corporations that are employing few, if any, workers. The money that would have been paid to workers, before AI, ends up as corporate profits.

Also, with for-profit corporations determining the purpose of the AI economy, there would be no incentive to produce so much that everyone had all they needed and wanted without paying anything. In the absence of resource scarcity, there would be no economic value, and thus no way to make a profit. A world where work is optional and money is worthless is nothing more than a utopian vision created to garner public support for unrestrained implementation of AI.

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Regardless of how much AI increases productivity, it is highly doubtful that it will do much more than remove some of the drudgery from routine work and perhaps shorten the work week. Similar opportunities to improve the overall quality of life have arisen in the past, but people have always found ways to expand their “wants” faster than economies have grown.

Noted economist, John Maynard Keynes, wrote in the early 1900s, “I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not – if we look into the future – the permanent problem of the human race. Thus for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.^[vii]

Industrial economies grew even faster than Keynes anticipated, and by the mid-1900s, global economic output was more than sufficient to meet the basic human needs of all.[viii] Still, there was abject poverty, hunger, and homelessness, because the wealth had not been distributed to meet even the basic human needs of all. Even in those nations, such as the U.S., where incomes have increased fourfold since the 1950s, the people’s wants have increased faster than their incomes, and poverty, hunger, and homelessness persist. The wants of the wealthy take priority over the needs of the poor. We don’t need AI to solve our economic problems. The economic problem was solved long ago, but we still have not learned to live “wisely, agreeably, and well.”

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The worst-case scenario is that once the purpose of maximizing profit and growth permeates the total AI ecosystem, there will be no way to rewrite the history AI’s actions have created and bring it back under the control of real people. Humanity will have to wait until the Earth’s ecosystems collapse to expose the myth of unlimited economic growth on the finite planet Earth. AI may expand the Earth’s potential, but it will not alter this reality. It makes more sense to ensure that the purpose and bounds of the economy remain under the control of real people with real intelligence.

Societies also need real intelligence in families and communities, where individuals gain a shared sense of purpose and values and develop a sense of responsibility to care for others and for the common good of humanity. Societies need workers with real intelligence, not only for innovations that improve the quality of work, but also to challenge corporate cultures that fail to serve the common interests of real people. Armies need soldiers with real intelligence to defend causes that are “just” and to defy orders that are unlawful or inhumane. Human societies have never lived up to their potential as intelligent beings. Perhaps the challenges of AI will cause us to pause and reflect on what it means to be fully and responsibly intelligent humans.

The emergence of AI presents two very different possibilities for the future. One is a technology-dependent world, with wealth and power concentrated in the hands of a few, who use AI to manipulate economies and governments to serve their narrow economic interests. The other is a world that uses AI to address persistent challenges, such as poverty, hunger, and homelessness, to free workers from strenuous, monotonous, and mindless labor, to shorten the time spent working, and expand opportunities for leisure, education, and creativity. Both futures are realistic possibilities.[ix] To realize the potential for abundance that serves human flourishing rather than narrow economic interests, the economy will need to be planned, organized, and controlled by real people who possess real intelligence.

John Ikerd

[i]

[ii] https://www.bcg.com/publications/2026/ai-will-reshape-more-jobs-than-it-replaces

[iii] https://www.nu.edu/blog/ai-job-statistics/

[iv] https://www.uthsc.edu/tlc/intelligence-theory.php

[v] https://econofact.org/factbrief/fact-check-have-ai-related-companies-driven-stock-gains-since-the-launch-of-chatgpt

[vi] https://johnikerd.substack.com/p/why-not-treat-corporations-as-real?r=emtwy

[vii] https://www.marxists.org/reference/subject/economics/keynes/1930/our-grandchildren.htm

[viii] https://ourworldindata.org/extreme-poverty-in-brief

[ix] https://scheerpost.com/2026/05/26/the-ai-revolution-where-capitalism-meets-socialism-the-abundance-paradigm-part-2/?utm_source=substack&utm_medium=email

In the United States, tariffs were the primary source of government revenue until the early 1900s. The U.S. Congress authorized income taxes in 1862 to offset the printing of Greenbacks, a currency not backed by gold or silver. Greenbacks were used to finance the Civil War. However, congressional authority to impose income taxes was not clearly established until the 16^th Amendment to the Constitution was ratified in 1913, which authorized taxes on corporations as well as progressive taxes on individual income. Estate taxes, gift taxes, and Social Security payroll taxes were instituted during the 1920s and 1930s. Major changes in the income tax code were approved by Congress in 1981 and 2017, both of which reduced overall tax rates, but with disproportionate cuts for high-income taxpayers and taxes on capital gains and corporate profits.

Why have governments throughout history taxed the people they govern, and why have the people, at least the vast majority, agreed to pay taxes? The current U.S. government’s answer: “Taxes provide revenue for federal, local, and state governments to fund essential services—defense, highways, police, a justice system—that benefit all citizens, who could not provide such services very effectively for themselves. Taxes also fund programs and services that benefit only certain citizens, such as health, welfare, and social services; job training; schools; and parks.”

This statement reflects a very individualistic and instrumental perspective of public policy that treats society as nothing more than a collection of independent, self-seeking individuals. National defense, highways, police, and justice systems are justified as means of acquiring and protecting personal property and financial wealth. This suggests that everyone benefits from the government securing the right to private property, but not from the other functions of government.

The statement about “programs and services that benefit only certain citizens” fails to acknowledge, as the late Senator Paul Welstone said, “We all do better when we all do better.” Everyone benefits from living in a society where the government assists those who need health care, are hungry, homeless, or living in poverty, are unemployed, or are disabled. Life is better for everyone in a society where everyone has a good basic education and lives in a clean, healthy environment with access to public parks and nature areas.

Everyone benefits from a society that ensures everyone has enough to live with dignity and self-respect, including those who help pay for but don’t benefit directly from most government programs. Contrary to popular belief, members of the U.S. Congress are not elected to serve the direct personal or economic interests of their constituents. Instead, they are elected to represent their constituents’ perspectives on how best to meet the needs of the nation as a whole.

The government website also states: “Taxes reduce taxpayers’ income. As a result, taxpayers have less for personal goods and services, savings, and investments. The more services the government provides, the more taxpayers have to pay for them. Whenever new public goods and services are proposed that require new taxes, taxpayers must decide whether the additional benefits are worth the reduction in income.”

The first two sentences of this statement are true but misleading. Paying taxes obviously reduces the amount of money available to taxpayers for other uses. However, when the government spends money on national defense, highways, social welfare, unemployment benefits, education, or other public services, the government spending adds to the incomes of the public service providers. So, government spending on public goods and services adds income that offsets income removed by taxes. The spending may add more or less income than taxes subtract, and add or subtract more to the incomes of some than others, but taxing and spending is not a simple matter of the government using taxpayers’ money to buy public goods and services.

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As I have explained in previous “Why? Economics” posts on the national debt and budget deficits, the U.S. government can create as much money as it needs for any purpose authorized by Congress. (State governments do not have this authority.) The U.S. Treasury uses its checking account at the Federal Reserve Bank to pay its bills. It deposits tax revenues, receipts from the sale of government securities, and other revenues in this account. However, government spending is not limited by the amount of money it collects from taxes or borrowing. The U.S. Treasury can and does create deposits at the FED whenever necessary to cover government spending. These deposits, which the government uses to pay providers of public goods and services, are backed by the “full faith and credit” of the United States. The deposits are new money. The only legal limit to government spending is congressional authorization, not taxes or borrowing.

The U.S. Treasury doesn’t have a monopoly on creating money. Congress authorized the Federal Reserve System, or FED, in 1913 to serve as a central bank of the United States, and charged it with maintaining a safe, flexible, and stable monetary system. The FED manages the money supply primarily by regulating interest rates, which affect how much money investors and consumers are willing to borrow and spend. Commercial banks can legally loan out more money than they have on deposit, as I have again explained in previous “Why? Economics” posts. Whenever a bank’s loans exceed its deposits, it puts new money in circulation, in much the same way as government spending. It creates deposits for the borrowers that are backed by the full faith and credit of the U.S. government. These new deposits are new money.

The only significant difference between money created by government spending and by commercial lending is that public goods and services are not sold to the public. For example, when government funds are used to build bridges or repair highways, assist the hungry and homeless, or engage in military conflicts, those who benefit pay nothing for the public good or service they receive. New money is spent into circulation, but nothing is produced to be bought with the money. Government spending is included in the national accounting of the total value of goods and services produced, or GDP, but nothing is produced to buy with the new money.

On the other hand, when commercial investors borrow money, new goods and services that have market value are produced for sale. Consumer borrowing, however, is more like government spending in that it allows consumers to spend money before they have earned it, putting new money in circulation before there is an increase in earnings from new production.

However, after those who provide public goods or services and those who provide marketable goods and services are paid, there is no difference between money put into circulation by the government and commercial banks. Recipients of both public and private funds deposit their money in commercial banks. This provides additional reserves for commercial banks to make more loans and create more money. Each new round of depositing, lending, and spending creates additional money. The only difference in money created by government spending and commercial bank lending is in the first round of spending. After that, all new money circulates in the private sector of the economy.

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If the U.S. government can pay for anything Congress authorizes it to buy, why do we need to pay taxes? One reason for taxes is to redistribute income from those who have profited most from the economy to those who have benefited least, to maintain some sense of economic equity and justice. Many wealthy people in the U.S. started from positions of economic privilege and are wealthy not because of their contribution to society but because their money makes money for them, as I explained in a previous post on “Why Tax the Rich?” Some taxes are imposed for specific purposes, such as payroll taxes to fund Social Security and Medicare, excise taxes on tobacco, alcohol, and gasoline, and tariffs on imports. However, the most important function of taxation is to limit the risk of price inflation associated with both public and private spending.

“The Equation of Exchange” (MV = PT) is an economic concept that explains the relationship between the money supply and prices. It is not a theory but simply two ways of expressing the same thing. M is the amount of money in circulation. V is the number of times the average dollar is spent during a given time period. P is the aggregate price of all goods and services produced during that period. And T is the total transactions involved in the production of goods and services. P times T equals the GDP, the total value of all goods and services produced by the economy.

The velocity of money, or V, can change, but is typically relatively stable from year to year. So, if there is an increase in the money supply, M, through government or commercial spending, there must be either an increase in goods and services available to buy, T, or an increase in the prices of goods and services, P. If the increase in the total money supply exceeds the increase in goods and services, which is typical, the result will be higher prices, or inflation.

The actual economy is complicated, but the basic principle is quite simple. If you spend $10 for 10 apples every week, the price of each apple will be $1. If you are then given $20 to spend, but there are still only 10 apples to buy, the price of an apple will be $2. You might say you wouldn’t spend twice as much for the same number of apples, but if everyone else also has twice as much to spend on apples, you would have to pay $2 per apple to compete. People obviously wouldn’t spend all their money on apples. But, when prices (P) relate to everything produced by the economy (T) rather than just apples, there is nothing else available to buy with an increase in the amount of money (M). If the money supply increases faster than the production of things to buy with money, the result will be inflation.

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There are three basic means by which money is removed from circulation to offset the new money put in circulation by government spending and commercial bank lending. Congress delegated its authority to regulate commercial bank lending to the Federal Reserve System with the mandate to maximize employment and stabilize prices. The FED raises interest rates to reduce incentives for borrowing, which reduces the money supply and restrains inflation. It lowers interest rates to incentivize borrowing, to increase the money supply, and stimulate employment. The FED has a responsibility to accommodate whatever government spending, taxing, and borrowing policies Congress may authorize to maximize employment and stabilize prices.

The U.S. Treasury can remove money from circulation by borrowing money from the public. The government borrows money by selling government securities to the public. The FED can also buy and sell government securities to help manage the money supply. The proceeds from the sales of securities are deposited in the U.S. Treasury’s account at the FED and are used to finance government spending. The more money the government borrows from the public, the more money it removes from circulation.

Taxes are the third means by which the government can reduce or increase the money supply. When the government raises taxes, it removes money from circulation and reduces the risk of inflation. When it reduces taxes, it leaves more money in circulation, increasing the risk of inflation. So we need to pay taxes to control inflation by helping offset increases in the money supply that exceed increases in the nation’s total production of goods and services.

Increases in government spending may or may not require any increases in “tax rates” to limit the money supply and minimize inflation risks. Whenever government spending increases the productivity capacity of the economy, through public transportation, communication, and other infrastructure, or through education, research, or economic opportunities for those marginalized by the market economy, taxes paid on the resulting increases in marketable goods and services may more than offset the first-round cost of non-market public goods and services.

The risk of inflation rises as the economy approaches full employment, meaning it nears its maximum production capacity. It then becomes increasingly difficult to increase production of goods and services to offset the new money placed in circulation by government spending and private-sector lending. The ultimate limit to a nation’s economic well-being is the total productive capacity of its economy. Government taxing and borrowing, and private-sector lending and spending, are all means of keeping enough money in circulation to support market transactions but not so much as to create inflation. Viewing taxes simply as a means of paying for public goods and services is misleading and limiting.

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The basic question for lawmakers is whether society as a whole would benefit more from the proposed public good or service or from more individual choices of goods or services by taxpayers. These decisions by lawmakers affect how the nation’s productive capacity is allocated between public and private goods and services. The government can always pay for whatever public goods and services Congress chooses to authorize. We don’t need to pay taxes to allow the government to spend money. But we do need to pay taxes to help control inflation when we demand more total public and private goods and services than the economy can supply.

Claims that the government can’t afford to pay more for social services, such as health care, education, food and housing assistance, child care, job training, schools, and parks, are not true. This is simply a matter of politicians prioritizing government spending on programs that protect private property and the accumulation of wealth, including tax cuts, rather than programs that serve the public interests of society. These political proprieties are obscured by a general lack of understanding of why we need to pay taxes.

John Ikerd

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Appendix

The U.S. federal government collected $5.3 trillion in taxes in 2025. Federal income taxes accounted for 50% of total tax collections, and payroll taxes to fund Social Security and Medicare accounted for 34%. Corporate income taxes made up less than 10% of the total (the blue unlabeled area of the pie chart below). The states collect sales taxes and property taxes.

https://taxfoundation.org/taxedu/primers/primer-history-of-taxes/

https://apps.irs.gov/app/understandingTaxes/teacher/whys_thm01_les01.jsp

https://usafacts.org/reports/state-of-the-union/budget/

The United States spends approximately five times more on administrative costs than the average of other wealthy countries, more than $1,000 per person. It spends more on administration than it spends on long-term health care. This is out of proportion with the relative spending of other OECD countries. Sweden, for example, spends 22 times as much on long-term care as on administrative costs.

In recent years, health care has accounted for one-sixth to one-fifth of the U.S. GDP, between 17% and 19%. U.S. healthcare spending was generally in line with other countries until the 1980s, when healthcare spending in the U.S. began to grow at a significantly faster rate relative to its GDP. In 1970, health care accounted for 6.0% of the U.S. GDP, compared to 4.9% for other wealthy countries. When the COVID-19 pandemic hit in 2020, the U.S. spent a record 18.7% of its GDP on health care, while spending in other wealthy nations peaked at 11% to 13%. By 2024, U.S. healthcare spending had dropped back to 17.2% of GDP, but other wealthy countries spent an average of only 11.2% of their GDP on health care.

Higher healthcare costs might be justified if higher spending had resulted in better health outcomes, but it didn’t. Despite spending twice as much per person and devoting 50% more of its GDP to health care, the U.S. does not achieve better health outcomes. By many measures, the U.S. ranks among the worst. For example, the United States ranks among the worst of the wealthy OECD nations in life expectancy, infant mortality, unmanaged diabetes, safety during childbirth, heart attack mortality, and death from avoidable and treatable diseases. It is difficult to understand why we in the U.S. pay so much for health care but get so few positive health outcomes in return.

The main reason we pay so much for so little is the blind faith of our political leaders in so-called market-based solutions to every problem. Among the 13 wealthiest nations in the OECD, the U.S. is the only nation that doesn’t provide universal healthcare coverage. Even though Medicare and Medicaid account for about 40% of total U.S. healthcare spending, medical services for these programs are provided by private physicians, hospitals, and other providers. Increasingly, Medicare programs are being administered by private-sector insurance companies through Medicare Advantage programs. For-profit corporations also produce the prescription drugs and medical supplies covered by public healthcare programs.

The U.S. government has consistently favored private healthcare options. The first prepaid hospital or private health insurance plan was Blue Cross/Blue Shield during the 1930s. The government subsidized and promoted employer-paid private insurance plans as a defense against growing demands for public health care during the 1940s and 1950s. The government also provided subsidies for the construction of for-profit hospitals to accommodate the increase in demand associated with the expansion of health insurance. During the 1960s, Medicare and Medicaid were grudgingly accepted as a compromise to stave off demands for universal public health care. Part of the compromise was that the government healthcare programs must function within the existing healthcare system, and the government must “negotiate” with private providers of pharmaceuticals and medical procedures.

HMOs or private health management organizations became popular alternatives to traditional health insurance in the 1970s. Deregulation of healthcare markets during the 1980s led to the rapid corporate consolidation of hospitals and medical services, including those previously provided by local governments and charitable and religious organizations. During the 1990s, Medicare Advantage programs brought the medical and pharmaceutical industries under the control of a few large corporate organizations. The Affordable Care Act of 2010 expanded access to health insurance for those with preexisting conditions and other high-risk groups, but did so through generous subsidies to the corporate healthcare system, rather than meaningful healthcare reform.

As of 2023, just four companies controlled 50% of the health insurance market, while six companies account for 30% of all U.S. healthcare spending. The four largest pharmacy benefit managers control 70% of the U.S. market. Many regional markets are virtual monopolies. A study based on 2022 data for commercial and Medicare Drug plans found that CVS Health’s Caremark controlled 21.3% of the pharmaceutical market, followed by UnitedHealth Group’s Optum Rx with 20.8%, Express Scripts with 17.1%, and 10.3% held by Prime Therapeutics.

Corporate consolidation typically takes place through mergers or acquisitions. Mergers occur when two companies of similar size agree to combine their assets and take on a new name. In the case of acquisitions, a larger company buys the assets of a smaller company, and the smaller company ceases to exist. Acquisitions may be friendly or hostile. When a company acquires or merges with a competitor, such as mergers between two hospitals or healthcare systems, it’s called horizontal consolidation. When a company merges with or acquires another company in its supply chain, such as hospital systems acquiring satellite specialty clinics and pharmacies, it is called vertical integration. Both forms of mergers and acquisitions reduce competition and increase costs for patients while often decreasing the quality and availability of care. Numerous studies have shown that horizontal integration has led to price increases in hospitals between 20% and 40%. Vertical consolidations have been shown to increase prices by up to 33%.

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The primary motivation for privatizing a healthcare system is to gain the economic efficiency of competitive markets. Healthcare providers competing for patients are assumed to keep costs to patients at a minimum, create incentives for technological innovation and product development, and keep patients informed of opportunities to choose healthcare providers that best meet their individual needs. To realize these benefits, patients must be free to choose among alternatives. Unfortunately, none of these assumptions is valid for the healthcare industry today.

To ensure competitive markets, there must be enough providers of the same basic good or service that the actions of no single provider significantly affect either the availability or cost of that good or service. In other words, in a competitive market, any hospital or pharmaceutical company could go out of business or double its production without significantly affecting healthcare costs. Any provider that charged more for its products or services than the minimum amount needed to stay in business would not be able to sell its products. Other providers would offer lower prices, expand production, and take their customers. Those that couldn’t compete would go out of business.

Obviously, these conditions do not exist today, when four companies control 50% of the health insurance market, four pharmacy benefit managers control 70% of prescription drugs, and six companies account for 30% of all U.S. healthcare spending. The executives of the large corporate providers can “legally collude” through professional relationships and industry organizations. They collectively establish “industry standards” of profitability that satisfy their shareholders. They essentially establish “shared monopolies,” managing their corporations and setting prices to maximize profits to benefit themselves and their corporate shareholders. They compete only if one is trying to gain market share or take over another.

In competitive markets, it must be easy for individuals and organizations with better products and methodological innovations to offer their services to those who might benefit from them. And those whose products or services become obsolete must be able to transition or exit the market without disrupting the market. Businesses cannot be allowed to stifle innovation or become “too big to fail.”

Again, these conditions obviously do not exist in today’s healthcare markets. It typically takes years of research and testing to bring a new drug to market. Manufacturers can patent drugs for 20 years, but often find means to extend exclusive rights to 40 years or more for the best-selling pharmaceuticals. The development and patenting of new drugs are timed to maximize profits of existing pharmaceutical companies, not to health or healing. They only develop drugs and procedures they feel they can mass market at a profit. The government conducts basic research on the drugs that are necessary for society but not sufficiently profitable for private research. Startup costs make it virtually impossible to establish a new hospital or healthcare facility today, and the closing of a hospital can be devastating to a rural community or other underserved area. Hospitals exist where they are most profitable, not necessarily where they are most needed.

For markets to function effectively, consumers must also know the cost and understand the benefits or satisfaction they can expect from whatever they are purchasing. For health care, patients must know the cost and understand the potential health benefits and risks associated with the drugs they take or the medical procedures they choose to undergo. Pharmaceutical companies and healthcare providers are required by law to make this information available. However, patients typically follow their physicians’ advice, and perhaps review the risks of procedures and potential side effects of drugs if they encounter problems. If drugs and medical procedures are covered by medical insurance, the patient likely knows nothing more about the cost than their co-pay or deductible, and the cost has little, if anything, to do with their medical decision. Patients covered only by Medicare and Medicaid are limited to whatever the programs offer. There is no way of knowing which drugs or procedures patients prefer, since physicians, insurance companies, and government agencies make most of the important decisions.

Finally, competitive markets require that consumers are sovereign, meaning free to choose to buy or not buy what is being offered for sale, without persuasion, coercion, or any sense of urgency or necessity. In this case, consumer advertising of drugs and the influence of medical companies on physicians are concerns. However, the greatest concern is the sense of urgency and necessity typically associated with medical procedures. If someone is in urgent need of medical treatment, they will accept whatever is available at the time, regardless of the cost. Treatment for profuse bleeding, a rapidly spreading infection, a heart attack, or a stroke is not a procedure that a person shops around for to get the best deal. In summary, healthcare markets exhibit none of the essential conditions of competitive markets. There is no reason to expect positive outcomes.

The primary responsibility of medical corporations is to generate profits for their shareholders, not to ensure public health. Patients are their customers or consumers, and healthier consumers/patients buy fewer healthcare products and services. The doctors, nurses, and other healthcare workers may well be caring people who dedicate their lives to the health and well-being of their patients, but most are forced to work within the corporate healthcare system. In the absence of effective competition, there is no economic incentive for the large medical corporations to cure sick people, keep healthy people healthy, or make healthcare affordable for everyone. In fact, they may find it advantageous to do the opposite.

The task of keeping people healthy is made more difficult by unhealthy diets and living environments, which are the natural consequences of corporately controlled, profit-driven systems of production. It is more profitable to produce ultra-processed foods, filled with calories but lacking in nutrition, than to produce healthful, minimally processed foods. And it is cheaper to pollute the environment than to protect public health. People are unhealthy for the same basic reasons that they lack access to affordable health care.

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If healthcare markets were perfectly competitive, healthcare costs would be lower, but markets would still not provide even the most basic health care for everyone. Inadequate health care, like hunger and homelessness, is a market failure. The healthcare markets would likely provide excellent care for those in the U.S. who are wealthy or can afford good health insurance, as they do now. However, without government healthcare programs, too many people would receive inadequate care, and too many would receive too little too late. Markets respond to scarcity, or the ability to pay, not to necessity.

The U.S. government has recognized health care as a market failure by providing various public healthcare programs, notably Medicare, Medicaid, and, more recently, the Affordable Care Act. However, this hodgepodge of government programs has left about 5 million people, or 8% of the U.S. population, without healthcare insurance, and millions more with poor coverage and high deductibles and co-payments that often keep them from seeking medical treatment or taking costly prescription drugs until they are seriously ill. Their treatment then becomes more costly, and successful outcomes become less likely.

Every other high-income country in the world recognizes that access to health care is a market failure and provides universal health care, administered and paid for by the government. Their healthcare costs are lower, particularly administrative costs, and their health outcomes are better. Fewer babies and mothers die during childbirth, and people are healthier and live longer. Many people in the United States pay a very high price, many with their health and some with their lives, for the nation’s blind faith in markets.

John Ikerd

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https://www.pgpf.org/article/how-does-the-us-healthcare-system-compare-to-other-countries/

https://www.commonwealthfund.org/publications/issue-briefs/2023/jan/us-health-care-global-perspective-2022

https://www.kff.org/health-costs/ten-things-to-know-about-consolidation-in-health-care-provider-markets/

https://communitycatalyst.org/posts/putting-people-over-profit-the-hidden-costs-of-health-care-consolidation/

https://www.kff.org/health-costs/what-we-know-about-provider-consolidation/

https://www.healthleadersmedia.com/payer/7-biggest-health-insurance-companies-control-almost-75-market

https://www.fiercehealthcare.com/payers/ama-study-four-largest-pbms-control-70-market-nationally

https://www.kff.org/health-costs/ten-things-to-know-about-consolidation-in-health-care-provider-markets/?utm_source=chatgpt.com

https://publications.lawschool.cornell.edu/lawreview/2023/07/25/pharmaceutical-patent-protection-beyond-the-twenty-year-statutory-term/

The U.S. is one of the wealthiest countries in the world. The median household income in 2024 was $83,730, certainly more than enough for the middle class to afford enough food and a decent place to live. However, more than 10% of Americans, or 36 million people, lived in “poverty,” meaning in households with incomes less than $32,150. Six out of seven U.S. households had enough food in 2024 for active, healthy lives, but one out of seven, or 13.7%, did not, at least not consistently. More than 20% of Black and Latinx households were food insecure. Overall, food insecurity today is about the same as it has been since the USDA started reporting it in 1995, generally ranging from 11% to 13% of all households. Food insecurity is a persistent problem.

Food insecurity in “households with children” has been consistently higher than for the general population. In 2024, nearly one out of five children, or 18.4%, lived in food-insecure households where they couldn’t be sure there would be enough food to go around. One out of twenty children, 5.4% or 14 million, missed meals, lost weight, or suffered from malnutrition. This was slightly higher than the first official USDA estimate of “very low food security” in 1995, and is about the same as the unofficial estimate reported in the influential 1968 CBS documentary, “Hunger in America.” In other words, there has been no progress in alleviating hunger in America in more than 65 years.

Equally troubling, the “cheap food” that many low-income families feel forced to buy creates an additional kind of food insecurity. Obesity among adults has tripled since the early 1960s, from 13% to 40%, and childhood and adolescent obesity has quadrupled, reaching more than 20%. Obesity has been linked with diabetes, hypertension, heart disease, cancer, and other diet-related diseases. A 2012 global report by 500 scientists from 50 countries suggested that “obesity is a bigger health crisis than hunger.” Cheap food is not a solution to hunger.

As with food security, most Americans can afford a decent place to live. The median home price in the U.S. in 2025 was $410,800, although prices vary widely among locations for similar houses. The median home size was more than 1,800 square feet. So, most of those who can afford homes have more than enough living space for comfort. About 35% of U.S. households rent or lease rather than own their homes. The average monthly rental rate for an apartment in early 2026 was just under $1,750, with about a third of U.S. rentals falling between $1,000 and $1,500 per month. Again, rents vary widely among locations, but most Americans can afford a decent place to live, whether they rent or own.

However, many Americans cannot. An affordable home price is generally considered to be about three to four times the homeowner’s annual income. This means families with poverty-level incomes of $32,150 can only afford houses priced less than $100,000, certainly not $400,000 houses. As a general rule, households can’t afford to spend more than 30% of their incomes on housing. Thus, households with poverty-level monthly incomes of less than $3,000 can’t even afford $1,000 monthly rent, and certainly not the $1,700 median rent. Poor people in America can’t afford a decent place to live.

More than 770,000 people were homeless at some time during 2024. Homelessness increased by 18% from 2023 to 2024, and more than 80% of HUD’s regional offices that deal with homelessness experienced increases. This continues a more than 40-year trend of increasing homelessness in America. By most estimates, fewer than 200,000 people in the U.S. were homeless in the early 1980s, when Reagan cut the federal budget for public housing. By the late 1980s, the number had risen to 400,000 to 600,000. Homelessness continued to increase in line with population growth until COVID-19, before increasing by 23% between 2019 and 2024.

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Hunger and homelessness persist because in the U.S., the market economy has been allowed to decide who has enough food to eat and a decent place to live and who doesn’t, at least for the most part. Both problems are the result of what we economists call “market failures.” A market failure is a situation in which markets fail to allocate the use of resources—land, labor, technology, capital—to promote the general welfare or societal well-being. Market failures sometimes result from a lack of competition or market efficiency. For example, corporations are often able to keep consumer prices higher and prices paid to suppliers lower than in competitive markets, retaining excess profits for shareholders, and failing to benefit either consumers or suppliers. In the cases of hunger and homelessness, however, even perfectly efficient markets would not ensure that everyone has enough nutritious food to eat and a decent place to live.

Markets do not respond to people’s needs but to their willingness and ability to pay for what they want as well as what they need. In any society, there are always some people willing and able to pay more for things they “want but don’t need” than others can pay for things they “actually need.” For example, Americans willingly buy gasoline with ethanol added for their cars, which results in farmers being paid more to produce corn for ethanol than they can earn producing food for hungry people. Builders can make more money building million-dollar homes, second homes, and vacation homes for wealthy people than they can make building affordable housing for poor people. Markets respond to money, not to the needs of the hungry and homeless.

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Hunger and homelessness in America are not necessary but are discretionary or optional. There is more than enough money earned and spent each year by individuals and the government to ensure that everyone has enough food to eat and a decent place to live. Those who have more than enough, however, have not been willing to do or support the things necessary to ensure that everyone has at least enough. There is a tendency to blame poor people for their problems and to see social welfare as enabling their bad behavior. If they were willing to get an education, work harder, go out and look for a job, get off drugs or alcohol, quit faking a disability, or whatever their problem may be, they would be able to make ends meet. The children, the disabled, and the aged may deserve some help, but the rest are only getting what they deserve.

Many people don’t understand, or don’t want to understand, that in market economies, there have always been and will always be people who are unable to meet their basic needs. Some people are not genetically hard-wired to develop the physical or mental ability to compete in today’s market economy. Many of those with the genetic potential are born into abject poverty, or with parents addicted to alcohol or drugs, or otherwise incapable of responsible parenting, which has lasting effects on their physical and mental development. Schools in many low-income areas are underfunded and lack the teacher and parent support and involvement found in higher-income neighborhoods. Some poor people gave up on life early because they were made to feel worthless and thus become hopeless.

Some have been able to escape poverty, and an exceptional few have become wealthy, but most have not because they simply cannot. Some who succeed are exceptionally talented in music, sports, mathematics, electronics, or something else that society is willing to pay for. Other poor people are also exceptionally talented, but their talents, though valuable to societal and ecological integrity, have no market value. Some people are just lucky, and others aren’t. The percentage of poor people who are lazy, lacking in ambition, or lacking moral character is probably about the same as that of the general population.

The U.S. government has grudgingly accepted hunger and homelessness as market failures, but has never made a serious commitment to dealing with either. Hunger wasn’t officially recognized as a market failure until the 1960s. Food Stamps (now SNAP), assistance for women with infant children (WIC), and child nutrition programs, including subsidized school lunches, were initiated in the 1960s. State funding is generally limited to some portion of administrative costs. Federal funding for food assistance grew to $50 billion per year (2024 dollars) during the 1980s, topped $120 billion following the 2008-2009 recession, and peaked at $182.5 billion during COVID-19 in 2021. Funding has since dropped back to $145 billion in 2024.

The persistence of food insecurity suggests that increased government food assistance has done little more than offset the negative impacts of increasing economic inequity. The “wants” of the increasingly wealthy have taken priority over the “needs” of the poor. The 2025 federal budget bill includes generous tax cuts for the rich but reduces government food assistance by $187 billion over the next ten years. The current government apparently has decided to force more people to work or starve.

The government’s attempts to address the problem of homelessness have been similarly ineffective. The Department of Housing and Urban Development (HUD) was established in 1970 and had a budget of about $23 billion (2024 dollars) by 1975. The HUD budget had grown to around $50 billion by the 1980s and has since remained at that level. HUD spent just under the $52 billion in 2024. The Biden administration’s FY2024 budget proposal targeted about $10.3 billion for homelessness assistance, adding rent vouchers and project-based aid to support roughly 4.5 to 5.1 million households.

The Trump administration reversed these programs by implementing work requirements, mandatory treatment for addiction and mental illness, and support for law enforcement to clear homeless encampments. The Trump budget cuts HUD funding from $58.4 billion to $31.7 billion, by nearly one-half. The five HUD programs that were cut had previously housed 4.5 million households. The changes are projected reduce that number to 2.4 million households, by nearly one-half. The homeless have been migrating to Democratically-led states, particularly those in warmer climates, presumably to find a more hospitable political and physical living environment. Federal budget cuts will only make the homeless problem worse.

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Like the hunger problem, the problem of homelessness is deeply rooted in American Society: persistent poverty, the inability of the poor to compete with the wealthy in housing and rental markets, inadequate government assistance, and continued discriminatory policies and practices that make it harder for racial minorities, single mothers, and other groups to find affordable housing.

The nation will not solve its problems of hunger and homelessness until it abandons the blind faith in “free markets” as the solution to every problem. The primary purpose of private businesses, especially for-profit corporations, is to make profits for their owners. Providing employment and meeting consumer needs are simply means of making money. Businesses have no legal obligation to pay workers enough to afford enough good food or decent places to live. They don’t have any legal responsibility to produce food or build houses that poor people can afford.

The vast majority of poor people are doing the best they can. Nobody wants to be forced to eat cheap junk food or starve, or to see their kids malnourished or go to bed hungry. No one wants to be unemployed if they need to work and have an opportunity to make a decent living. People who are addicted to drugs or alcohol need public assistance rather than public condemnation, and they need good food and a decent place to live while they are recovering. Of course, there are welfare cheats, but no more than the white-collar criminals who steal billions rather than hundreds of dollars from taxpayers and usually get away with it.

There aren’t any easy solutions to the problems of hunger and homelessness, or they would have been solved long ago. Market economies do some things very effectively and efficiently, but never have and never will ensure that everyone has enough of the things they need to lead decent and dignified lives. In democracies, people need to start by recognizing that everyone has a basic human right to enough good food and a decent place to live. There are other market failures, such as health care, but securing food and housing as basic human rights is a good place to start. The government won’t find ways to do it until there is consensus that it needs to be done.

People are hungry and homeless because people who have enough don’t care enough about people who don’t have enough to do anything about it. Simply giving a few dollars to charity and supporting ineffective government programs is not enough. Doria Robinson has been working with an organization called Urban Tilth for nearly 20 years to find new and better ways to ensure food security for her low-income community in Richmond, CA. The people of her community have transformed an abandoned rail line through the city center, a twenty-block area, into an urban garden and orchard to provide fresh food for the community. They have had government help, but they did the planning, learning, and hard work themselves. They are now developing a large urban commercial farm nearby with the mission of ensuring food as a basic human right.

Why are people hungry and homeless? I shared a keynote address with Doria Robinson at the EcoFarm Conference in California in 2018, where she concluded: “People are hungry [and I would add homeless] because we simply don’t care enough to change the way we do things.” I agree!

John Ikerd

Notes:

HealthCare.gov. Federal Poverty level. https://www.healthcare.gov/glossary/federal-poverty-level-fpl/

ERS-USDA. Household Food Security in the United States in 2024. https://www.ers.usda.gov/publications/pub-details?pubid=113622

Food Security in the U.S., ERS, USDA. https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/key-statistics-graphics

Carr, M. (Writer & Producer), & Davis, P. (Writer). (1968). Hunger in America, Part I: A CBS Reports Program. Carousel Films.

USA Facts. (2025, November 5). US obesity rates have tripled over the past 60 years. https://usafacts.org/articles/obesity-rate-nearly-triples-united-states-over-last-50-years/

Dellorto, D. (2012, December 14). Global report: Obesity bigger health crisis than hunger. CNN News. http://www.cnn.com/2012/12/13/health/global-burden-report/

Nord, M. & Andrews, M. (May 2002) Reducing food insecurity in the United States: Assessing progress toward a national objective (Food Assistance and Nutrition Research Report Number 26-2). USDA Economic Research Service. https://www.ers.usda.gov/sites/default/files/_laserfiche/publications/46632/31197_fanrr26-2_002.pdf?v=22648

St louis Fed, Median home size, United States https://fred.stlouisfed.org/series/MEDSQUFEEUS

Rentcafe.com. Average Rent in the U.S. https://www.rentcafe.com/average-rent-market-trends/us/#:~:text=Highlights,$1%2C669

The [F]law, Homelessness in America-40 Years of Crisis. https://theflaw.org/articles/homeless-in-america/

ERS-USA. Total Spending on USDA’s food and nutritional assistance programs. https://www.ers.usda.gov/data-products/chart-gallery/chart-detail?chartId=58388

Urban Wire, SNAP Cuts in One Big Beautiful Bill Act https://www.urban.org/urban-wire/snap-cuts-one-big-beautiful-bill-act-leave-almost-3-million-young-adults-vulnerable

Urban Institute: https://www.urban.org/urban-wire/trump-administration-has-proposed-27-billion-cuts-block-granting-housing-assistance

National Alliance to End Homelessness: https://endhomelessness.org/state-of-homelessness/

EcoFarm Keynote- 2018.

At first thought, meritocracy seems like a good idea. We get what we deserve out of life. We are rewarded in relation to our worth. So, what’s wrong with merit-based societies? Nothing in theory, but it is difficult, if not impossible, to assess individuals’ contributions to the good of their society. As a default, meritocracies have tended to judge people by their contributions to the economy. Income and wealth become the default measures of merit or worth.

There has always been a strong meritocratic influence on the American democracy. The nation’s founders were not only all white men, but were also mostly well-educated, wealthy landowners. Voting rights in most states were limited to white, male, landowners until the mid-1800s. It took the Civil War to gain voting rights for Black males. Women and Indigenous peoples weren’t allowed to vote until the1920s. Immigrants have always faced difficulty in gaining voting rights. Merit, rather than discrimination, was always the basis for limiting rights to participate in government. Women, Blacks, Indians, and those without property had not demonstrated their worth by contributing to the economic good of the nation.

Americans have always prided themselves on the opportunity to succeed; to live “the American Dream.” We are told that if we work hard enough, long enough, and smart enough, we can live any life we want to live and be anything we choose to be. Admittedly, some have a head start on others because they are born into wealthy families. But if they grow their inherited fortune rather than squander it, they are still deemed worthy of high esteem. Particularly high esteem is ascribed to those from humble beginnings who rise to positions of wealth, power, or fame. “Only in America,” we are told, can someone rise from poverty to become the president, a billionaire, or perhaps a celebrity—respected, envied, or adored by millions.

As most Americans know, almost none of this is true. It is possible to rise from “rags to riches,” but it is more difficult in the U.S. than in many other countries. For those born into families in the bottom-fifth income bracket, only about one-in-twenty or five percent make it to the top one-fifth. Most don’t even make it into the middle class. Very few make it to the top one-tenth, and only very rarely does one make it to the top one percent. The top one percent make more money than the bottom half of Americans, and the income disparity is growing rather than improving. It is easier to rise out of poverty in Canada, Germany, Denmark, and several other European countries than in the U.S. Most people living “the American Dream” today live in countries other than the U.S.A.

So, what are we supposed to conclude from this lack of upward economic mobility? One possible conclusion is that most Americans, particularly the working class and lower, aren’t working hard enough, long enough, or smart enough to deserve increases in income and wealth. Everyone has had an opportunity; some have succeeded, some haven’t. Americans are getting what they deserve. This conclusion is probably more widely held among the upper classes than we would like to admit.

Another, more logical conclusion is that fewer Americans have had opportunities to work hard, long, and smart enough to succeed. Economic globalization led to the loss of good-paying manufacturing jobs in the U.S. at the same time when computers and digital technologies were replacing clerical workers. American workers lost their bargaining power at a time when lax enforcement of antitrust laws gave corporations more power to force workers to work harder and longer for less pay and fewer benefits. Rather than admit that economic globalization was a mistake, political leaders blamed workers for not preparing themselves to compete in the global economy.

Both Republicans and Democrats proclaimed that the American Dream was still in reach: Their mantra was, “If you work hard and play by the rules, you should be given a chance to go as far as your God-given abilities will take you.” The political solution to rising economic inequity was education: retraining of previous factory and clerical workers and access to higher education for everyone. Rather than lament the good jobs lost to globalization and digital technologies, American workers needed to prepare themselves for the jobs of the 21^st century.

The government would provide “equal opportunity.” The outcome, in terms of income and wealth, would then reflect their inherent abilities, talents, and efforts. Democrats focused on affirmative action programs, particularly in government employment and higher education, to address the legacy of centuries of discrimination against women and minority groups. Republican programs focused on tax cuts and educational assistance for low-income families, without regard for race, gender, or diversity of opportunity. With equal opportunities to succeed, everyone would get what they merit or deserve.

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So, why does America still have a wide and growing economic, political, and cultural divide? Did the government fail to provide equal opportunities for the less fortunate? Or are there fewer people willing to work hard enough, long enough, and smart enough to succeed? There is some truth to both. However, government efforts to improve the American meritocracy may have increased, rather than decreased, economic and societal disparities. With greater equality of opportunities, those who succeed are more likely to see their success as a reflection of their superior worth. Those who fail are more likely to accept their failure as a reflection of their inferiority or to blame others for their lack of success. Those who neither rise nor fall are more likely to accept economic success as an accurate measure of merit or worth.

For several reasons, these conclusions are unjustified. People are born with different physical and mental capacities and thus have different developmental potentials, regardless of their opportunities. Some are genetically destined to be physically weaker, regardless of how long or hard they work or train. Others will grow up strong, with little conscious effort or exertion. Some are born with brains hard-wired for either analytical or intuitive thinking, and no amount of education or dedication will prepare them to excel in occupations for which their brains are not equipped. Child prodigies in mathematics, music, and sports are extreme examples of how genetics affects everyone’s potential for success in specific occupations.

Potential is necessary, but not sufficient to ensure success. The potential must be developed. Being born into abject poverty, or with parents addicted to alcohol or drugs, or otherwise incapable of responsible parenting, has lasting impacts on their children’s future development. In addition, schools in low-income areas are typically underfunded and lack the parent support and involvement found in higher-income communities. For high-income families, preparing their offspring for success often begins with selecting the right preschool and continues through four years of college. Early-life experiences have lasting impacts on who we can and can’t become.

The emphasis on at least four years of higher education as a prerequisite for success has placed an additional burden on parents and children. Upper-class parents feel morally obligated to get their children accepted at an elite college to enhance their chances of success. Middle-class kids with four-year degrees from middle-class colleges start their careers with middle-class jobs. Those without a four-year degree take whatever they can get. Some improve their opportunities by attending community colleges or trade schools, but without a four-year degree, their employment options are limited. Those with only a high school degree, or worse yet, high school dropouts, are deemed destined to fail in the 21^st-century economy.

As more students strive for admission to colleges, the percentage of students accepted has declined, and the cost of education has risen, making it even more difficult to reach the first rung on the ladder of success. Regardless, a four-year degree has become an official certification of merit or worth in America. Those with a four-year or higher college degree tend to feel they had to work hard against strong competition to earn it, and thus, deserve the prestige that comes with being a college graduate. Those who weren’t accepted, dropped out, or didn’t apply tend to feel that either they weren’t good enough or that the system was rigged against them. Either way, they feel that society doesn’t value whatever they have to offer, so why try?

Those with exceptional talents may find a way around the sorting machine of higher education. If someone has exceptional talent as an entertainer, as a singer, actor, or athlete, they may become famous without going to college. If someone has charisma or an exceptional ability to influence people, they may gain power as a successful entrepreneur, labor leader, or politician without a college degree. Power and fame are generally rewarded with wealth, so even for the powerful and famous, success or merit is generally measured by the ability to make money.

The wealth associated with power and fame is more a function of societal preferences than of individual abilities. Top players in the NFL, MLB, NBA, and NHL make millions of dollars a year only because fans buy game tickets and the products of advertisers who pay to broadcast or live-stream their games. Actors and musicians make fortunes only because millions of people are willing to pay to experience their performances. In earlier times and in different countries, performers of equal talent would be lucky to make a living. The entrepreneurs who have made billions from digital technologies would have had few opportunities before the invention of mainframe computers. And, the politicians now in power in Washington, D.C., would have been lucky to avoid prison in the 1940s. There is little real reason to award any special merit to those who were lucky to be born at a time and place that values their specific talent.

Wealth, regardless of its source, is not a logical measure of merit. Even the most conservative of early neoclassical economists understood that a person’s contribution to the economy was not an accurate measure of their contribution to the good of society. Frederich Hayek, of the ultra-conservative Austrian School of Economics, wrote that there was “no necessary connection between merit and [economic] success” (see Sandel p. 134). In the 1920s, Frank Knight of the University of Chicago wrote that providing something people are willing to pay for is not the same thing as making a truly valuable contribution to society; that “productivity contributions have little or no ethical significance” (see Sandel 137). “It is hard to see how being different from other people is more meritorious than it is to be like them” (see Sandel p. 138).

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The bottom line is, there is no single measure of merit, and there is no way of knowing whether anyone is more meritorious or worthy than anyone else. As Hayek and Wright both pointed out, economic contributions are meritorious only to the extent that they are motivated by an intention to serve the greater good of society rather than by individual self-interest. There is nothing particularly meritorious about pursuing one’s self-interest. Opportunities to become wealthy also depend on enforceable contracts, the rule of law, and the overall civility of society. Paying taxes to help fund those opportunities is not a meritorious act but a moral responsibility.

Societies depend on families and communities, and their willingness to develop and sustain a shared ethic and common sense of morality. Those who contribute to the integrity of families and communities—parents, teachers, first responders, local officials—are as meritorious as the men and women who own and manage local businesses. The caregivers, artists, poets, philosophers, elders, and caretakers of community and societal culture also contribute to the common good. Whenever any society deems earning and spending more meritorious than sharing and caring, it loses its shared sense of purpose. It allows its social fabric to be ripped asunder and its moral foundation to crumble.

There is no way of knowing how much or how little good anyone is contributing—who is deserving, and who is not. So, merit is ultimately a collective moral judgment. Who is seizing their opportunities and overcoming the obstacles in reaching their highest potential, and who is not? We all have a God-given ability to make our unique contribution to the greater good of our society and humanity. Everything we do affects everyone and everything else. And everything others do affects us. Some effects are small, others large, but all are potentially important. No one’s potential contributions are necessarily more or less important than anyone else’s, regardless of their status within society. All are of equal “inherent” worth because all have an equal potential to contribute to the greater good.

In democracies, all are afforded an equal opportunity to participate in processes of governance that determine the political and legal structures for their societies and economies. In meritocracies, those who have achieved wealth, regardless of the means, determine the legal framework within which those deemed less meritorious must strive for success. Governments reflect what people think of themselves relative to others: are they superior, inferior, or equal? Meritocracies assume those who have succeeded economically are most capable of governing. Democracies assume that people are capable of governing themselves. Governments of the people, by the people, and for the people.

John Ikerd

Note: For an in-depth treatment of merit, read “The Tyranny of Merit,” by Michael Sandel

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I posted my responses to 24 economic questions in 2025. Links to these posts are provided at the end of this post and at johnikerd.substack.com. As promised, the posts included timely questions, such as why people feel the economy is bad and why prices didn’t come down after the COVID pandemic. However, most are general questions, such as why we never seem to have enough money, why the government needs a monopoly on money, why the economy doesn’t work like a democracy, and why we even need an economy.

I started with 100 subscribers from a list of friends and acquaintances that grew to more than 250 during the year. The number of viewers averaged around 300 per post, and ranged from 200 to 500. Around 50% of viewers, or 150 on average, opened the posts. I assume they read at least part of them. Most Substack bloggers would probably be embarrassed to reveal such modest statistics. Over the years, however, I have spent a lot more time writing things that far fewer than 150 people read or even started reading. I am always glad to gain another subscriber or follower and appreciate every “like” and comment.

I plan to continue “Why Economics?” in 2026, but will likely write fewer posts this year. I have pretty much exhausted my list of “whys?” I will wait for questions to arise from current events and subscribers’ requests for common-sense answers to their economic questions. I also plan to “restack” and “share” relevant sections from previous posts in response to current events, which I did not do during 2025.

I will try to stick to economics in my Substack posts, but will bring in the political context when necessary. Twenty-twenty-six will obviously be an important political year, and the economy will be an important part of it. However, my Why Economics? posts are meant to help people understand the issues rather than try to tell people what they should think or do. I still believe a vast majority of people share a common sense of what they ought to do and ought not do if they have a common understanding of the situation.

If you have an economics question you would like me to consider, please type it into the comment section of any of my Substack posts.

All the best for the new year,

John Ikerd

Why? Economics

Common sense answers to commonly asked economic questions.

By John Ikerd

Democratic societies attempt to mitigate this deficiency of capitalism by providing “economic safety nets” of social welfare programs that provide various types of government assistance in meeting basic needs, including food, clothing, housing, healthcare, and education. These programs rely on the economy, specifically, tax revenues, for funding. Progressive taxation is also essential to maintain the competitiveness of capitalist economies, to maintain economic meritocracies rather than oligopolies or monopolies. However, capitalists view taxes as constraints, rather than investments in the societies that provide the markets and the civil infrastructure necessary for their business endeavors. There is a constant tension between capitalists and the government.

Whenever governments fail to maintain the competitiveness of markets through progressive taxation and antitrust policies, those allowed to accumulate economic power use it to gain political power. They lobby legislators, finance political campaigns, reward politicians who support them, and penalize those who don’t. Governments then fail to tax those who have far more than enough to meet their needs or fund economic safety nets for those left without. Rather than the government using the economy to help meet the needs of people, the economy takes control of the government. The government then serves the capitalists rather than the people. That’s why capitalist economies today do not ensure that the basic needs of all are met.

The U.S. form of capitalism is “frontier capitalism.” It’s an economy in which those with access to capital not only dominate but also make the rules. “Might makes right.” Today’s economic environment is analogous to that of the early European settlers as they expanded beyond the frontiers of what they considered to be civilization. The Europeans claimed individual ownership of the lands that indigenous peoples had relied on to meet their common needs. Those who had the physical strength, weapons, or economic means to take and maintain control of the land prevailed. They hired gunmen to protect their claims and attracted like-minded cowboys, lumberjacks, and miners to do the work. Many of those who amassed fortunes showed no social or moral restraint in depriving others, neither indigenous peoples nor fellow pioneers, of their basic human rights to food, clothing, shelter, liberty, or even life.

As the families of early European settlers moved West, however, there was a growing need and public demand for a more civilized society, one that included churches, schools, and some sense of law and order. With the increasing influence of religion and education, “might makes right” was no longer acceptable as the “law of the land.” The citizens of frontier towns appointed sheriffs, deputies, local militias, and constables, including former gunfighters and gamblers. The federal government provided U.S. marshals and circuit judges.

As new territories were claimed or acquired by the United States, they became subject to U.S. laws and responsibilities for securing the rights of all to life, liberty, and the pursuit of happiness. There were still instances of abuse of power, corruption, and cases of “frontier justice.” However, it was no longer legal to deprive someone of life, liberty, or property just because you could, nor was it socially acceptable to deprive someone of their basic human needs for food, clothing, or shelter.

However, the “economic frontier” in the U.S. has never been fully settled or civilized. There have been rare times in U.S. history when the government has made progress in managing the economy for the common good of the people. The Progressive Era of the early 1900s, the New Deal of the 1930s, the Civil Rights Movement of the 1960s, and even the environmental movement of the 1970s are examples. More recently, however, the U.S. economy has served the interests of private investors and speculators rather than the common good of the people. The wealthy have been allowed to become richer and more politically powerful, and have used their influence to extract, exploit, and erode the civility of society and the common wealth of the nation.

Politically powerful capitalists in the U.S. have opened new economic frontiers since the 1980s, as they have systematically destroyed the government’s ability to ensure that the economy served both public and private interests. They were guided by the words of noted economist, Milton Friedman, who wrote, “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

The basic problem was that corporate businesses, not civil society, were now writing “the rules of the game,” and the government had lost its ability to maintain competition and prevent deception and fraud. The government also lost its ability to tax the rich to ensure that the basic needs of the less fortunate are met. The only rules left are like those of the “Wild West”—frontier justice.

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I believe a fundamental flaw of capitalist nations is that their economies and governments are organized as separate entities. An adversarial relationship inevitably develops between the government and businesses as the government imposes restraints and regulations to maintain competitive markets and ensure equality of economic opportunity. If economies were organized as self-limiting, self-regulating entities, the role of government would be reduced to organization and oversight of the economy in general rather than regulation of individual businesses. As in democracies, self-governing economies would need to be grounded in “constitutions” that ensure economic justice while protecting economic liberties. There would be no inherent conflict between the economy and society.

In pure democracies, the majority rules, and minorities often suffer from the “tyranny of the majority.” In constitutional democracies, the rule of the majority is constrained to ensure the basic human rights of minorities. Individual liberties are constrained to ensure justice for all, and social equality is tempered to protect the freedom of individuals. In purely capitalist economies, those with the money rule, and the rest suffer the “tyranny of the wealthy.” In constitutional capitalism, the freedom to accumulate wealth would be constrained by ensuring that the basic needs of all are met, and the level of basic needs met would be tempered by the right of individuals to be rewarded for their economic contributions.

In other words, the wealthy would share a portion of their wealth with the needy, through taxes, but the level of needs provided would be limited to maintain an economic incentive for the wealthy to invest and earn money to be taxed. The needy would not have a right to the most expensive food, clothing, housing, health care, or education, but they would be afforded a right to enough and as good as needed to secure their rights to life, liberty, and the pursuit of happiness. Some nations might choose to tax more to secure greater equality, but economies cannot be sustained without incentives to invest, hire workers, and produce the goods and services that societies need. Regardless of individual national means and choices, the global community should ensure that no one is forced to live with less than is required for a decent and dignified standard of living.

Governments create their economies, and the people create their governments. So, societies could create economies that worked like a constitutional democracy if they collectively consent to do so. Whenever the people are unwilling to consent to an economy that ensures the basic needs of all, a few wealthy individuals and corporations will control the government and the economy, and the basic needs of many, if not most, of the people will be unmet. So, if we want an economy that works like a constitutional democracy, that meets the basic human needs of all, we can create one for that purpose. It may seem impossible to recreate our national economy, but we could start by creating local economies that can do many of the things we want our national economy to do. All that is lacking is the collective will.

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Cities, towns, villages, or counties could create their own local economies, as long as their economic constitutions and initiatives don’t violate state or federal laws. However, it would be easier to gain the necessary consensus if the boundaries of local economies were not restricted to those of existing local governments. Perhaps local economies could be established as “virtual precincts of townships” within existing municipalities or counties. In other words, those agreeing to be economically self-governed could be self-selected groups of individuals who live anywhere within a municipality or county. The local economy would be a “community of interest” within a “community of place.” The economically governed would include only those who consent to be governed.

An economic constitution might begin with a preamble similar to that of the U.S. Constitution: We the people of ______________, to secure for all who choose to be so governed, of this generation and generations to come, assurance of the economic necessities for life, liberty, and the pursuit of happiness, do establish and declare legally binding this Economic Constitution of the _______________.

Various articles of the Constitution would define the organizations, institutions, and functions necessary to accomplish the purpose expressed in the preamble. The primary governing body would logically consist of representatives for the various stakeholders, including local producers, processors, manufacturers, retailers, lenders, and consumers. The executive functions might be carried out by a Chief Executive Officer and a Board of Directors that represents the various stakeholders, elected by the members of the economy. The judicial and legal functions would be restricted to ensuring that actions of members of the “economic community” conform to the Economic Constitution and rules and regulations enacted through self-governance.

The Constitution might include a Bill of Economic Rights, spelling out specific rights of members of the economic community.

• Right to enough safe, appealing, and nutritious food

• Right to a safe and comfortable residence

• Right to clean air and water and a healthful environment

• Right to sufficient health care to restore and maintain health

• Right to sufficient education to participate fully in a democratic society

• Right to employment sufficient to provide a livable income

• Right to a minimum basic income for the elderly, disabled, and self-employed

• Right to protection from economic exploitation

• Right of future generations to equal or better economic opportunities.

Economic communities should be large enough to allow for some economies of scale in carrying out economic functions, but small enough to maintain the sense of interconnectedness and common interest essential for effective self-governance. Local economies could own their own banks or credit unions, where deposits by community members would provide reserves for loans made to member businesses to produce goods and services to meet the needs of community members. These local lenders would have an ability similar to large commercial banks to loan out far more money than they hold in reserves, essentially creating new money for the specific purpose of supporting community economic initiatives.

Local provisioners of goods and services would have ready-made, dependable markets formed by members of their economic communities. Local producers and distributor could adapt their businesses to accommodate the needs and preferences of community members, and members could modify their lifestyles and preferences to accommodate the capabilities of local producers and distributors. Economic activities of community members would not necessarily be limited to their economic community; however, community relationships and transactions would need to take priority over others. Economic communities could also own and operate their own production, processing, and retailing establishments that function specifically to meet the needs of members.

State, federal, and local government funds appropriated for purposes consistent with their mission (such as food assistance, housing, health care, energy, education, and transportation) could be used to carry out the purposes of the local economic community with maximum effectiveness and efficiency. Community members would need to agree to a system of progressive taxation of businesses and individuals to offset any funding deficiencies. As in constitutional democracies, the economic incentives for those who are willing and able to invest more and earn more should be protected as a constitutional right. They would only be asked to invest a portion of their earnings to enhance the quality of life in their communities and to sustain their own economy and society.

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Our current economy doesn’t work like a democracy because it was created to function as a meritocracy. Given an opportunity, it’s unlikely that a large portion of today’s businesses, wealthy individuals, or even most consumers would choose a democratic economy. However, those of us who understand that today’s economy is not sustainable realize that sooner or later it will fail and will need to be replaced by something fundamentally better. It seems logical that we should start prototyping potential alternatives to capitalism, or alternative versions of capitalism, before the current economy collapses and change becomes an urgency rather than just a necessity.

Civility wasn’t restored to the “Old West” by a social revolution or a single act of Congress. It was restored one community, one town, one territory at a time—by people who understood the necessity for fundamental change. Frontier justice was not sustainable. So, the Wild West was tamed by churches, schools, marshals, judges, and juries. This is how I believe today’s unsustainable economy could be replaced, and will be replaced: one local economic community at a time. “Constitutional capitalism” simply seems a logical model for prototyping economic democracy.

John Ikerd

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https://www.johnikerd.com/the-american-covenant/can-we-afford-a-new-bill-of-rights

https://www.johnikerd.com/family-farms-and-rural-communities/community-economic-utilities

The U.S. has the largest number of immigrants, with 53.3 million, but not the largest percentage of immigrant residents. Immigrants make up the same percentage of the population of countries in the European Union as the U.S., but more than 20% of residents in several European countries. More than 20% of Canadians are immigrants, and more than 30% of Australian residents were born elsewhere. Immigration has increased dramatically in nearly all so-called developed countries since the 1990s, causing increased economic and political concerns, particularly in the U.S. and Western Europe.

The focus of concern in the U.S. has been on illegal immigration. Unauthorized or undocumented immigrants make up about 27% of all U.S. immigrants and close to 4% of the total population. The undocumented include all who do not have a valid legal status, including people who have crossed borders without inspection, overstayed their visa, or violated some term of their admission. Approximately half of these unauthorized immigrants have some form of legal protection from deportation, including active asylum applications.

The Trump administration has made deportation of undocumented immigrants a top political priority, including those in the country legally who have committed crimes or allegedly violated some condition of their immigration status. The U.S. Immigration and Customs Enforcement (ICE) budget is now larger than the combined total of all other federal law enforcement agencies, including the FBI and Federal Bureau of Prisons. National Guard units have been deployed to several major cities to protect ICE agents as they raid workplaces and residences to round up and detain immigrants for potential deportation.

Why are so many people leaving their home countries at a time when they are increasingly unwelcome elsewhere? The reasons are predominantly economic. An estimated 90% of international migrants choose their destinations for economic reasons. Some economic refugees are pushed to leave their countries because of political conflicts, natural disasters, or religious or ethnic persecution. Military conflicts in Ukraine, Gaza, Yemen, and Sudan, for example, have displaced millions of people. However, most economic migrants are pulled to higher-income countries by hopes for better economic opportunities for themselves or their families. Whether to escape economic exploitation or inequities, seek better employment opportunities, or both, the most common motives for international migration are economic.

Approximately 66% of the world’s international migrant population is working age, and many others are families of immigrant workers. Migrant labor makes up 19% of the U.S. workforce, notably larger than the 15.4% immigrant population. Immigrants fill large percentages of manual labor jobs in agriculture, food processing, food service, construction, health care, home care, long-term care, and other personal services. In recent decades, the U.S. has welcomed increasing numbers of high-tech workers, particularly from India and China. However, immigrant workers are disproportionately employed in sectors of the economy that pay lower wages and thus are less attractive to native-born workers.

The supply and demand for global labor are also affected by shifting demographics. The ageing populations in the more affluent countries create a demand for younger workers who have fewer opportunities in less-affluent nations. Immigration has always been essential in nations, such as the U.S., where the need for workers has typically grown faster than the birthrate. During the 2000s, however, economic disruptions, including the 2008-2009 recession and COVID, and slower economic growth rates reduced the need for additional workers in the U.S. at a time when more people elsewhere were being pushed or forced to migrate.

There is no consensus regarding the impacts of immigration on wages and salaries, since most immigrants take jobs that others don’t want. In addition, immigration was a major political issue in the 1990s, when the nation experienced rapid economic growth. Ross Perot received nearly 20% of the popular vote in the 1992 presidential election by running on an anti-immigration platform. Regardless, destination nations, including the U.S., have failed to change their immigration laws and regulations to accommodate the surge in politically and economically forced immigration. As a result, immigration has become a divisive political issue.

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It’s no coincidence that growing public attention and concerns about economic immigration have coincided with trends toward economic globalization. International trade as a percentage of global GDP or total economic output has more than doubled since 1990. The increase is generally attributed to new technologies, such as low-cost transportation and the internet, which reduced the cost of moving goods, impersonal services, and investment capital across borders. The end of the Cold War also opened new trade opportunities among previously opposing countries. However, the removal of trade restraints through so-called free trade agreements, such as NAFTA in 1994 and the WTO in 1995, left the natural resources and people of less developed countries vulnerable to economic extraction and exploitation.

Economic globalization is credited with lifting billions of people out of poverty. However, increases in incomes from globalization were largely offset by higher living costs. This meant those who didn’t benefit from trade were left worse off economically than before. Perhaps more importantly, globalization left millions of previously employed workers without jobs. For example, good-paying manufacturing jobs in the U.S. were lost to lower-cost labor markets overseas. The livelihoods of Mexican farmers were destroyed by imports of cheaper, subsidized U.S. corn. Many of those left without economic opportunity, such as farmers in Mexico, were pushed to migrate elsewhere, and pulled to destinations where workers were also suffering from globalization, notably the U.S. This made it easy for U.S. politicians to blame job losses on immigration rather than economic globalization.

Economic globalization was not about realizing the potential benefits of “free trade,” but instead about removing the remaining restraints to “economic exploitation.” Authentic free trade is possible only among politically and economically sovereign nations. Sovereignty means that the trade representatives are committed to serving their nations’ common interests, are fully informed of the potential consequences of trade, and are free to trade, or not trade, without deception, coercion, or political pressure. Only under such conditions is there any assurance that trading will benefit both trading partners, which is the basic assumption of free trade and the political defense for so-called free trade agreements, such as NAFTA and the WTO.

In addition, classical economists assumed that investors would show a strong preference for investing at home, rather than in other countries, and that workers would be employed in their home countries, rather than migrate to other countries. The mutual benefits of trade were to be derived from the flow of products, allowing each nation to realize its comparative advantage or relative efficiency in producing goods and services. None of those essential conditions exists in the global economy today, has existed since the 1990s, and perhaps has never fully existed.

There certainly are benefits to be gained from international trade, but the benefits and costs depend on the specific conditions of each trade agreement or transaction. The WTO, NAFTA, and earlier GATT trade agreements removed trade barriers that nations had created to protect their economic sovereignty, their ability to decide freely, to trade or not trade. New technologies and the lack of regulation allowed capital to flow freely around the globe to finance investments by multinational corporations. The natural resources and people of less-developed nations were left vulnerable to economic extraction and exploitation disguised as free trade.

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Once the protections were removed, the basic strategy or playbook for economic exploitation was implemented. The “underdeveloped” nations were seduced by promises of future prosperity to take out large economic development loans from the World Bank. If seduction failed, political leaders were bribed, replaced, or assassinated by representatives of nations targeting them for economic exploitation. The World Bank loans were used to finance the construction of roads, storage facilities, and port facilities to facilitate exports to countries promoting the development projects. Multinational corporations were recruited to invest in the necessary production and processing projects and facilities. This put the corporations in a position to reap the profits from development projects, after paying any corrupt government officials. The developed nations benefited from cheap imports of raw materials and consumer products.

The developing nations were dependent on exports to make their loan payments, forcing them to reduce or abandon production for domestic consumption, and leaving them dependent on both imports and exports to survive economically. Once the infrastructure projects were completed, continuing production, processing, and export activities invariably employed fewer workers than those displaced by increasing reliance on imports to meet domestic needs. The unemployed domestic workers were then forced to migrate, seeking employment elsewhere, notably to nations that have benefited economically from their exploitation, including the U.S. and Western Europe.

This extractive and exploitative international development process is frequently referred to as “neocolonialism” or “economic colonialism.” The exploited nations often have former political colonies left without the political or economic means for self-development when political colonialism became indefensible in the global community. With global corporations and politically powerful nations realizing the benefits of globalization, exploited nations become subject to both political domination and economic exploitation. They were forced to essentially return to being political as well as economic colonies of their oppressors.

Rather than help former colonies recover from centuries of oppression, the so-called developed nations have found alternative means of continuing their exploitation. President Trump’s tariff policies are defended as a reversal of economic globalization, with promises to reduce U.S. imports and restore domestic manufacturing. However, the on-again, off-again tariffs with exclusions for specific nations and products are nothing more than an alternative means of coercing or bribing nations to allow the extraction and export of natural resources, especially “rare-earth minerals. Rare earth minerals are a group of 17 chemical elements that are used in many high-tech applications, such as electronics, magnets, and renewable energy technologies. They are not necessarily scarce, but extraction and processing are costly and difficult, and result in massive environmental pollution, similar to mountaintop mining.

These minerals are crucial in the production of electric vehicles, wind turbines, smartphones, and various high-tech military equipment. They are considered critical to future economic growth, and thus, access to rare earth minerals has become the new target for international economic exploitation. Trump’s selective tariff policies simply skip the pretext of economic development and force export-dependent nations created by economic globalization into deals that allow multinational corporations to extract and export their rare earth minerals. Multi-billion-dollar investment ventures, often including the president’s family, tend to coincide with the “trade deals.” There’s no reason to believe the winners and losers from Trump’s “deals” with other nations will be any different from those of economic globalization.

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So why has economic immigration become a problem? Contrary to claims by the Trump administration, immigrants living in the U.S. are not “from failed nations,” in any sense other than nations that the U.S. and other so-called developed nations have coerced or forced to fail. Immigrants are not people released “from prisons, mental institutions,” or members of “gangs, or drug cartels,” to any greater extent than native-born citizens with similar life experiences.

Immigrants are not supported extravagantly by taxes paid by U.S. citizens but instead contribute more to the U.S. workforce and economy than they receive in public benefits. Immigrants are not the cause of the nation’s “failed schools, high crime, urban decay, overcrowded hospitals, housing shortages, and large deficits.” They represent just over 15% of the population are no more likely to be a burden on society than the millions of native-born citizens who live under similar economic conditions. Most international immigrants are honest, hard-working people whose lives have been disrupted and their livelihoods destroyed by the nations, including the U.S., that now demean them, reject them, detain them, arrest them, and deport them.

Why is immigration a political problem? The nations whose leaders are now demeaning and deporting immigrants disrupted the global economy and destroyed their livelihoods and ability to support their families in their home countries. Some are political refugees, but most left their homelands because they could no longer make a living there. The nations that destroyed their jobs are now unable or unwilling to develop immigration policies to accommodate the immigration problems their nation’s economic policies have created. Instead, they are finding new ways to continue the exploitation while blaming immigrants for their own weak economies and societal ills they are unwilling to recognize or address.

John Ikerd

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Notes:

https://education.cfr.org/learn/reading/migration-today

https://www.facebook.com/Uyghursbookshelf/posts/foreign-born-population-in-western-europe-2024-in-2024-nearly-70-million-people-/1249720533624056/

https://yougov.co.uk/international/articles/51684-eurotrack-publics-across-western-europe-are-unhappy-with-immigration

https://www.pewresearch.org/race-and-ethnicity/2025/08/21/u-s-unauthorized-immigrant-population-reached-a-record-14-million-in-2023/

https://www.cnn.com/2023/04/15/us/where-immigrants-come-from-cec

https://www.americanimmigrationcouncil.org/blog/immigration-challenges-implementing-the-one-big-beautiful-bill/

https://www.bls.gov/opub/ted/2007/jan/wk2/art03.htm

https://www.migrationdataportal.org/themes/labour-migration-statistics

https://www.workrisenetwork.org/working-knowledge/immigrants-low-wage-workforce

https://www.un.org/development/desa/pd/sites/www.un.org.development.desa.pd/files/undesa_pd_2025_intlmigstock_2024_key_facts_and_figures_advance-unedited.pdf

https://mybeta.ca/positive-and-negative-impacts-of-globalization/

https://library.uniteddiversity.coop/Money_and_Economics/confessions_of_an_economic_hitman.pdf

https://lifestyle.sustainability-directory.com/term/economic-colonialism/

https://en.wikipedia.org/wiki/Neocolonialism

https://www.cnn.com/2025/10/30/business/rare-earth-minerals-deal

The trickle-down or “supply-side” theory of economic development is rooted in an economic belief that “supply creates its own demand,” an assertion called “Say’s Law” after French classical economist, Jean-Baptiste Say. The basic idea is that economic growth begins when investors decide to build factories or offices that will supply goods or services that people need or want. The increases in employment resulting from these investments created additional income to buy the goods and services produced. Thus, the increases in production or supply create corresponding increases in worker incomes or demand.

Say’s Law provides the rationale for the theory of “self-correcting markets.” Classical economists believed that whenever unexpected economic conditions caused the economy to slow down, producers would reduce prices and that workers could, and would, accept lower wages and salaries. Lower cost of labor would restore investor profits, which would then be invested to increase production. Workers’ incomes would rise, increasing demand, and the new supply would create its own demand. The economy would recover and resume economic growth—without government intervention.

If investors overbuilt, there would be a shortage of workers, wages and salaries would rise, profits would fall, and investors would reduce production, preventing inflation in prices, again, without government intervention. A reduction in supply would create a reduction in demand, thus reducing or avoiding inflation. The markets would correct themselves.

Trickle-down economists simply extend the idea of self-correcting markets to justify government intervention during economic recessions. If investments aren’t sufficient to support economic growth and full employment, they rationalize that self-correction is prevented by investors’ lack of capital to invest or by burdensome government regulations. If the government cuts taxes and deregulates industry, investors will have capital to invest, employment will rise, and the markets will be free to self-correct, as asserted by Say’s Law.

The whole idea of supply-side economics and self-correcting markets was thoroughly discredited during the Great Depression of the 1930s, which was triggered by a crash in the overvalued, speculation-driven stock markets of 1929. The loss of public confidence resulting from the stock market crash led to a run on the banks as depositors scrambled to withdraw their money for safekeeping elsewhere. Withdrawals of deposits forced banks to reduce lending and investing, and many banks called in existing loans to meet obligations to depositors. Other banks failed, leaving their depositors with no money.

The Federal Reserve System (FED) responded by reducing the money supply to prevent inflation, rather than increasing the amount of money available for lending, investing, and spending. Tariffs also hindered the recovery, as high tariffs on U.S. imports in the early 1900s were countered with high tariffs on U.S. exports. With bank failures and business failures, there were fewer things to buy (less supply), but even less money to spend (less demand). Prices fell, wages and salaries fell even further, but the market didn’t self-correct. Investors were reluctant to invest, and consumers were hesitant to spend. Even those who had money had lost confidence in the economy.

The Franklin Roosevelt presidency brought a sharp reversal in U.S. economic policy. The abandonment of the gold standard removed restraints on the U.S. money supply. The Glass-Steagall Act of 1933 provided federal bank deposit insurance and allowed the FED to manage the money supply more effectively. Tariffs were reduced to free up international trade. The changes in economic policy stopped the declines in production, employment, and prices, but there was still no self-correction or recovery of the economy. The problem was not a lack of money to invest or even money to spend, but a lack of investor and consumer confidence in the U.S. economy.

The economy only began to recover when the government started spending money on the New Deal programs of the 1930s. Government spending put new money in circulation, money that was available for private sector spending, lending, and investing. The U.S. economy began to recover only because the government expressed confidence in the economy. The economy recovered and grew, even after higher income taxes were placed on the wealthy to fund the New Deal programs. However, the U.S. economy did not fully recover from the Great Depression until the government increased spending for World War II, and did so even though the spending was accompanied by further tax increases. The voters expressed their restored confidence in the government by re-electing Roosevelt to a fourth term as president.

World War II also kick-started private-sector investments and employment, educated the private workforce, and did the research for new post-war production technologies. Government spending on veterans’ benefits, the Interstate Highway System, and space exploration also helped fuel the private economy, with consumer spending on automobiles, television sets, electronics, and other consumer goods. The economy remained strong during the 1950s and 1960s under Democratic and Republican administrations. The real GDP, adjusted for inflation, grew at a rate of 4% during the 1950s and 5% during the 1960s. The middle class prospered as the purchasing power of the average American family increased by nearly 70%.

The economic policies of administrations from Roosevelt to Ronald Reagan are known as Keynesian economics, named after the British Economist, John Maynard Keynes. Whenever private investors fail to invest funds available to them to increase production and employment, the government spends and invests sufficient funds to support economic growth adequate to ensure full employment and livable incomes. Keynesian economics is a “demand-side” theory of economics. When necessary, public-sector demand creates private-sector supply.

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President Reagan revived supply-side economics to rationalize reducing corporate and individual income taxes and deregulating industry. Social and environmental programs from the 1930s through the 1970s had been funded by taxing corporations and wealthy individuals. Regardless, the U.S. economy had continued to grow, along with employment and incomes, until the 1973 OPEC oil embargo triggered a domestic and global recession. There was no way to bring inflation under control without reducing the money supply and increasing interest rates, which reduced investments and exacerbated unemployment.

Reagan seized the opportunity to blame failed government policies for the recession. Supply-side economic policies, called “Reaganomics,” abandoned the federal commitment to social and environmental programs, deregulated polluting industries, and reduced taxes on corporations and wealthy individuals. Reagan argued that increases in tax collections associated with economic growth would more than offset the impact of tax cuts.

Once inflation was brought under control, the FED increased the money supply to incentivize investments. Once again, however, investors did not respond to the tax cuts or deregulation until Reagan dramatically increased military spending in his attempt to weaken the Russian economy and force them into negotiations. Once workers had more money to spend, investors began to borrow and invest, and the economy eventually recovered. However, it was the demand triggered by military spending that restored investors’ confidence in the economy, not the tax cuts or deregulation. The Reagan tax cuts of the 1980s were the first step in widening the gap between the incomes and wealth of the top 10% and 1% and the American middle class.

Supply-side thinking has continued to dominate economic policies in the U.S. since the 1980s, despite the absence of credible evidence of effectiveness and compelling evidence of increased economic inequity and disparity in incomes and wealth. George H. W. Bush increased taxes to reduce federal budget deficits. He failed to be reelected, and no Republican has since dared to support tax increases. The economy continued to grow during the 1990s, despite modest tax increases on high incomes during the Clinton administration. Another round of large tax cuts during the George W. Bush administration was rationalized by the “dot.com” recession of 2001. Again, however, investors failed to respond to the tax cut incentives. Military spending for the Middle East wars put more money in the hands of consumers and supported an economic recovery.

Supply-side economics again failed after the Great Recession of 2007-2009. Government stimulus programs, including the extension of unemployment benefits and subsidized private-sector job creation, helped avert an economic meltdown. The tax cuts of the early 2000s were made permanent, and the FED kept interest rates at near-zero until 2015 and less than 2.25% until 2020, trying to incentivize private investing. The economy recovered slowly, despite the extension of tax cuts and low interest rates. Inflation held at around 2% despite ballooning federal budget deficits. Another round of tax cuts during the first Trump administration failed to mitigate the COVID recession of 2021 or ensure an economic recovery afterwards. Again, the economy recovered only when the Biden administration’s stimulus programs put money in the hands of workers who had lost their jobs during the pandemic.

Regardless, supply-side economics has dominated economic thinking in the U.S. since the 1980s, despite the absence of credible evidence of its effectiveness and the abundant statistical evidence of increasing economic inequity and disparity in incomes and wealth. Clearly, tax cuts and deregulation have neither avoided economic recessions nor ensured economic recoveries, yet they continue to dominate economic policies. But why?

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Over time, a clear pattern has emerged that explains both the failure and persistence of supply-side or trickle-down economics. Corporate managers only make investments that contribute to the GDP and create employment when they are confident that consumers will buy the things they produce at profitable prices. Perhaps some industrialists of the past, such as Henry Ford, felt a civic responsibility to build factories and pay their workers enough money to buy the things they produced. Or they trusted that if they paid their workers a living wage, other investors would do likewise, and there would be sufficient demand to justify the increase in supply.

Regardless of the past, today’s large, publicly traded corporations are purely economic entities. With few exceptions, today’s billionaires and multimillionaires are not philanthropists. They invest to maximize their economic returns. They only invest in ventures that produce things for people who already have money, not ventures that create jobs for people to make money. Over the past 50-plus years, investors have not responded to tax cuts, deregulation, or increases in the money supply with increases in the GDP and employment because they had more promising economic opportunities in stock markets, real estate, and cryptocurrencies. If consumers had more money, investors would produce things that entice them to spend it, but investors apparently haven’t felt any responsibility to create opportunities for people to make money.

After tax cuts have failed to stimulate the economy, the government has been forced to resort to deficit spending to support economic recovery. As I have explained in my previous posts, deficit spending has not exacerbated inflation in consumer prices because most of the increase in the money supply has been used by speculative investors to inflate the prices of corporate stocks and real estate rather than by the middle class to increase consumer prices. A notable exception was during the COVID pandemic, when money was given directly to consumers and market disruptions prevented increases in available supplies.

Corporations have taken advantage of tax cuts and low interest rates to “buy back” corporate stock, increasing their stock prices. Multimillionaires and billionaires have taken advantage of tax breaks, particularly in capital gains taxes, to speculate in stock markets, real estate, futures markets, financial derivatives, cryptocurrencies, and, more recently, artificial intelligence, or AI. As long as the government keeps interest rates low, refuses to tax the rich, and promises to rescue the economy from recessions, there will always be money to inflate prices of stocks, real estate, and other speculative ventures. Today’s suppliers don’t create demand; they only respond to demand created by others.

Trickle-down economics continues to dominate U.S. economic policies only because economic power has been translated into political power. The removal of limits on corporate and individual contributions to political campaigns, relentless corporate lobbying, and pay-to-play government “deals” have created a codependency between government and the wealthy. Tax cuts, deregulation, low interest rates, and deficit spending virtually guarantee that the rich will become richer, and the rest will become increasingly irrelevant. Investments in machines have replaced manual laborers, computers replaced clerical workers, robots are replacing skilled workers, and artificial intelligence will replace mid-level management. These trends seem destined to continue until there is another fundamental change in U.S. economic policy.

The lessons to be learned from past economies are clear. The economic situation of 90% of Americans could be dramatically improved with a fundamental change in economic policy. We know what kinds of policies have worked, and will work, for the people and what kinds only work for the wealthy. All that is lacking is the political courage to confront power with truth.

John Ikerd

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Endnotes:

https://www.forex.com/en-us/trading-guides/trickle-down-economics-explained/#:~:text

https://flexbooks.ck12.org/user:zxbpc2rzcziwmthaz21hawwuy29t/cbook/episd-2019-2020-us-history/section/8.3/primary/lesson/american-advancement-and-shifting-priorities-1950-1960/

The only significant drop in stock prices since Trump took office was a major selloff in April of 2025. On April 2, Trump declared the U.S. trade deficit was a “national emergency,” and announced “reciprocal tariffs” on all countries, long-term trading partners and competitors alike. He called it “liberation day.” He imposed a 10% minimum tariff on virtually all nations and larger tariffs on some, including Canada, Mexico, the EU, and China. The tariffs were to take effect on April 5. When Trump delayed the implementation date and began to negotiate lower tariffs with major trading partners, the stock market recovered. The market has continued to trend upward since, with only minor blips usually associated with some economically disruptive statement by President Trump.

So why has the stock market continued to rise since Trump’s election? Because stock traders are confident that Trump’s policies will ensure profits and growth for the large corporations represented in the Dow, S&P 500, Nasdaq, and other stock indexes. They trust he will back off whenever he does something that triggers a negative response in the markets.

Ultimately, however, the stock market is inseparable from the economy. When someone buys a corporate stock, they buy a share of the ownership of a corporation, and a corporation is ultimately worth only as much as it contributes to the economy. Corporate contributions to the economy are reflected in the performance of the economy: the total economic production or GDP, employment, inflation, interest rates, consumer spending, and other aggregate economic indicators. There is a limit to how high stock market prices can rise without corresponding increases in the overall performance and health of the economy.

Estimates vary, but the U.S. economy is expected to grow at a rate of less than 2% in 2025, down from nearly 3% growth in 2024. Manufacturing jobs have declined by 38,000 since the first of the year. Gains in overall private sector employment have consistently been lower than market expectations. More than 500,000 federal employees have been fired, laid off, or have quit during 2025, and the Trump administration has promised further cuts if the current government shutdown continues. The latest Bureau of Labor Statistics report showed unemployment holding steady at 4.3% in August, as the labor force is shrinking with reductions in immigration and an aging workforce.

Inflation rates have persisted at close to 3% during 2025, with continuing concerns about the ultimate inflationary effects of tariffs. Prices of big-ticket items, such as automobiles, are already reflecting the costs of tariffs. Consumer spending and consumer confidence are both lower than in 2024, reflecting uncertainty about future income and employment. The federal government is facing large budget deficits for the foreseeable future, and short-term interest rates are higher than long-term interest rates, keeping credit card and consumer interest costs high while reflecting expectations of a weaker future economy. The FED recently dropped interest rates by one-quarter percent, despite concerns about inflation, in response to even greater concerns about the weakening of the overall economy. So, an obvious disconnect exists between persistently rising stock market prices and the lackluster performance and questionable health of the general economy.

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Several factors account for the current disconnect between the stock market and the economy. First, most U.S. businesses are privately owned, but the stock market is made up of publicly traded corporations. Publicly-traded corporations are disproportionately large, and many are multinational in scope. In addition, small, independently-owned and operated businesses are a major driver of the US economy, both up and down. For example, publicly-traded corporations employ less than one-third of the U.S. workforce. Also, those who buy and own corporate stock are not representative of U.S. consumers. The wealthiest 1% of U.S. households own more than 50% of the corporate stock traded in markets, the top 10% own more than 90%, the bottom half own less than 1%, and around 40% of U.S. households own no corporate stock at all. So, stock prices going up or down do not reflect the economic situation or outlook of most U.S. businesses or consumers.

Second, the various stock indexes, such as the Dow and S&P 500, do not accurately represent all of the corporations that are publicly traded. For example, the 10 largest corporations included in the S&P 500 index account for an estimated 40% of the total value of the roughly 500 corporations included in the index. So, price changes of the dominant stocks have far greater effects on the indexes than do price changes for the smaller corporations. “Passive investments” are purchases or sales of bundles of stocks that reflect the makeup of stock indexes, sometimes called index funds. Passive transactions have equal “percentage” effects on all index stocks, which results in a greater “absolute” change in stock value of the largest corporations. Pension funds and mutual funds are major users of passive investments, which make up an estimated 20% of the value of the S&P 500.

Third, the large corporations that dominate the stock indexes often represent specific types of corporations or corporate investments. For example, corporate investments in artificial intelligence, or AI, have been a major driving force of the persistent upward trend in stock markets during 2025. AI data centers account for an estimated 80% of recent growth in corporate earnings and 90% of the increase in corporate capital expenditures. A recent MIT report indicated that 95% of the corporations that are investing in AI aren’t making any money from it, but they continue to dominate the stock markets. This raises the specter of another “bubble,” like the “tech or dot.com bubble” of the 1990s that eventually burst in 2000, causing stock prices to plummet by more than 75%.

This leads to the final cause of the disconnect between stock prices and the general economy that I will attempt to explain in this post. The stock markets reflect economic expectations rather than economic reality. Traders’ expectations of changes or future trends in stock prices typically have far more influence on stock prices than do the current economic performance of individual corporations or the overall economy. Changes in current economic conditions, such as changes in interest rates or employment, may trigger changes in market prices. However, the price changes in response to economic reports are more a reflection of changes in expectations than changes in current economic conditions. Sometimes the expectations become reality; often they do not.

Most people probably think of investments in corporate stocks as long-term investments, and those investing for retirement are often warned to avoid panic selling during downturns. However, most stock market transactions are not made for the long term. “Day traders” are estimated to make up about 1% of all traders, but typically account for more than 10% of stock transactions on any given day. They base decisions on whether they expect a stock price to rise or fall within the next hour, or next minute, not whether the corporation is a good long-term investment. Many stock transactions are executed by computers programmed to detect market trends and turning points, regardless of economic conditions. Warren Buffett and his followers are exceptions rather than the rule. On average, corporate stocks are held or owned for less than 6 months, not for years.

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So, why does the stock market keep going up? It may well be that the dominant traders in the markets believe that corporations that dominate the stock indexes are going to continue to be profitable for at least the next day, week, or six months. If their expectations are wrong, they trust that the government will do something to bail the big corporations out, as it has in the past. There seems to be a consensus among the pundits that the stock markets are “overvalued” relative to the economy. Eventually, either the performance and health of the economy must improve to reflect the strong market or stock market prices must fall to reflect the weaker economy. The disconnect cannot continue indefinitely.

In closing, I want to make it crystal clear that I am not suggesting that anyone should either sell or buy stocks. I am an economist, but I am not an expert on the stock market. I haven’t owned any corporate stock since the 1990s. I was a livestock marketing specialist during the first half of my academic career. I taught futures markets and options and forecasted prices for livestock. I learned during that time that while we so-called experts might agree that prices couldn’t remain as high as they were indefinitely, there is no way of knowing with any degree of certainty when prices would fall and how far they would fall when they fell. Is that the situation with stock markets today? I don’t know. But the recent strength in the stock markets does not reflect the performance or health of today’s economy.

John Ikerd

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Endnotes:

https://www.cnn.com/2025/10/01/investing/us-stock-market-government-shutdown

https://www.cnn.com/2025/10/12/markets/us-china-tariff-global-markets-intl-hnk

https://defiantcap.com/2025-mid-year-market-outlook/#:~:text https://www.morningstar.com/economy/how-healthy-is-us-economy-heres-what-top-economic-indicators-say

https://www.deloitte.com/us/en/insights/topics/economy/us-economic-forecast/united-states-outlook-analysis.html

https://fortune.com/2025/10/06/ai-boom-productivity-us-debt-immigration-inflation-stock-market-bubble/?utm_source=substack&utm_medium=email

https://data.bls.gov/timeseries/CES3000000001?utm_source=substack&utm_medium=email

https://fortune.com/2025/10/06/ai-boom-productivity-us-debt-immigration-inflation-stock-market-bubble/

https://www.sciencedirect.com/science/article/abs/pii/S1057521924005647#:~:text

https://www.reuters.com/article/markets/stocks/buy-sell-repeat-no-room-for-hold-in-whipsawing-markets-idUSKBN24Z101/

So why shouldn’t corporations have the same legal rights as their real human owners? The short answer: Because corporations are created for specific purposes—economic, social, or religious/ethical. Real people are multidimensional with a variety of different needs and values. The people who own or support a corporation may share its specific purpose, but may otherwise have very different priorities and preferences. Real people are not “single-minded.”

For example, the shareholders in a large for-profit corporation may agree on its economic priorities but may have very different social and ethical preferences and priorities. In addition, those owning stock through pension funds and mutual funds may not even be aware of the numerous companies in which they own shares. Speculators may own stocks for only a few days or minutes. Large corporations obviously don’t know the personal preferences of all their shareholders. Corporations are legally obligated to serve the “common interest’ of their shareholders. The only interest shareholders in for-profit corporations have “in common” is economic, to benefit economically from their investments. Thus, a large, publicly traded corporation is a purely economic entity.

Governments are means by which we collectively make decisions about the kind of society we want to live in, including the type of economy we want. The basic responsibilities of the U.S. government are spelled out in the preamble to the U.S. Constitution: to “establish justice” or secure our basic human rights, to “insure domestic tranquility” or promote harmonious relations among the states, to “provide for the common defense” or maintain a military force adequate to defend the country, to “promote the general welfare” or further the collective interests and common good of the people in general, and to “secure the blessings of liberty for ourselves and our posterity” or maintain the conditions essential for people to continue to live free from oppression and exploitation. Effective governance reflects the shared social and ethical values of the people governed.

One of the primary economic functions of government is to ensure that the economy functions for the common good of the people. Virtually all political decisions have economic consequences or implications. Thus, for-profit corporations have an inherent conflict of interest in political decisions and should not be allowed to participate in politics or governance. The same is true for most other types of corporations, excepting corporations specifically organized for political purposes. Thus, processes of governance should be limited to real people, who can express their full humanness in matters of politics and governance.

The Supreme Court obviously has not agreed with this conclusion. Most Americans probably link the idea of “corporate personhood” to the 2010 Supreme Court case, Citizens United v. Federal Election Commission, in which the Court held that free speech is “indispensable to decision making in a democracy, and this is no less true because the speech comes from a corporation.” Earlier rulings, going back to 1976, had ruled that spending money to influence voters is a form of political speech protected by the Constitution but had allowed some restrictions on campaign spending by individuals and corporations. The Citizens United ruling essentially removed all limits on individual and corporate political spending. The more money a person is willing and able to spend, including corporate persons, the louder and longer they can speak politically.

The basic idea of corporate personhood dates back at least to the late Roman Republic, which granted legal personhood to municipalities or local governments organized to manage public services. Later, corporate charters were granted to privately owned corporations, allowing collective ownership of public services that could be passed from one generation to the next without disruption. Commercial, for-profit enterprises were not granted corporate charters until the 1600s, when the East India Company set the precedent. The rationale was that English society would benefit by allowing investors to pool their capital to undertake high-risk, high-profit ventures in India, a British colony at the time. The East India Company, a British corporation, eventually gained economic and political control of much of India.

In the United States, the constitutional rights of corporations date back to a 1886 Supreme Court Case, Santa Clara County v. Southern Pacific Railroad Co. The corporate personhood question was never debated before the Court in that case. But the Court’s conclusion was included in a headnote or summary by the court reporter: “Before argument [began], Mr. Chief Justice Waite said: ‘The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.’”

The 14th Amendment was ratified in 1868, after the Civil War, to guarantee emancipated slaves the full rights of citizenship. It states, “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” The amendment was clearly meant to ensure the rights of previous slaves who had been freed by the Civil War but had been denied their constitutional rights as citizens.

A corporation, not being a real person, has no life or need for liberty, even though it can own property. Contrary to claims at the time, there is no documented evidence that corporate rights were ever discussed or considered during the drafting of the 14^th Amendment. The court reporter’s headnote has nonetheless been accepted in later Supreme Court Rulings. These earlier rulings led to the 2010 Citizens United case and the 2014 Burwell v. Hobby Lobby Stores case, which extended the constitutional rights of religious freedom to for-profit corporations.

Corporate personhood has been periodically challenged by dissenting Supreme Court justices, but has nonetheless prevailed. In a dissenting opinion in a 1949 case, Supreme Court Justices Douglas and Black pointed out that the Fourteenth Amendment was clearly meant to protect the civil rights of real people, specifically recently freed enslaved people, not to protect the economic rights of corporations.

In another dissenting opinion in 1978, Justice Rehnquist contended that the Fourteenth Amendment was intended to apply to real people, not legally created entities, and that there were dangers in extending the political rights of people to corporations. He wrote, “Those properties [of corporations], so beneficial in the economic sphere, pose special dangers in the political sphere.”

In a dissenting opinion to the Court’s ruling in the 2010 Citizens United case, Justice Stevens wrote, “It might also be added that corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction. But they are not themselves members of ‘We the People’ by whom and for whom our Constitution was established.”

Our current politically divided society and dysfunctional government are examples of the “special dangers” of allowing for-profit corporations with “no consciences, no beliefs, no feelings, no thoughts, and no desires” to participate in the political and governmental affairs.

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In earlier times, corporations were only chartered if they served some “public purpose.” In the mid-1800s, however, the wording of corporate charters was changed, and corporate charters were granted for “any lawful purpose.” Since at least the 1970s, for-profit corporations in the U.S. have been purely economic entities, organized and managed for the purpose of maximizing economic returns for their investors or shareholders. Their only constraints are laws and regulations imposed by the government, not their social or ethical values. Corporations may claim to serve all “stakeholders,” including the public, but those that do so are soon driven out of business or taken over by more aggressive corporate competitors.

Whenever corporations are allowed to participate in political activities, whether by influencing elections or public policies and government regulations, their logical motivation is to remove any legal restraints to maximizing profits or stockholder equity—the only common interest of their investor owners—regardless of the social or ecological consequences.

Some real people hold the same myopic political views as for-profit corporations. The difference is that a for-profit corporation lacks the capacity to develop or express a social conscience or ethical values. Real people also suffer the social and moral consequences of their myopic actions; corporations do not and cannot. The only penalties a corporation can be assessed or suffer are purely economic, and corporate laws limit the economic liability of investors.

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The 1^st Amendment to the Constitution gives real people a constitutional right “peaceably to assemble, and to petition the Government for a redress of grievances.” This was the legal justification for Political Action Committees (PACs), which allow people to pool their political contributions.

Before the 2010 Citizens United ruling, corporations and labor unions had been prohibited from making direct contributions to PACs, and individual contributions were limited. The Citizens United ruling allowed corporations and unions to make direct political contributions and form Super PACs, essentially removing all limits to for-profit corporate and union funding of political campaigns. Ironically, the political activities of non-profit organizations, which serve “public interests,” remain legally limited.

A national movement is currently underway to amend the U.S. Constitution to eliminate the concepts of “corporate personhood” and “money is speech” and to clarify the exclusion of corporations from the political process. The Move to Amend coalition, formed in 2009, includes “hundreds of organizations and hundreds of thousands of individuals committed to social, environmental and economic justice, ending corporate rule, and building a vibrant democracy that is genuinely accountable to the people, not corporate interests.” More than 500,000 people have signed a petition stating:

“We, the People of the United States of America, reject the U.S. Supreme Court's Citizens United ruling and other related cases, and move to amend our Constitution to firmly establish that money is not speech, and that human beings, not corporations, are persons entitled to constitutional rights.”

Their draft constitutional amendment includes three sections (abbreviated below):

Section 1. Artificial Entities Such as Corporations Do Not Have Constitutional Rights: The rights and privileges protected and extended by the Constitution of the United States are the rights and privileges of natural persons only…

Section 2. Money is Not Free Speech: Federal, State, and local government shall regulate, limit, or prohibit contributions and expenditures… to ensure that all citizens, regardless of their economic status, have [equitable] access to the political process…

Section 3. This amendment shall not be construed to abridge the right secured by the Constitution of the United States of the freedom of the press.

While the adoption of such an amendment may seem a remote possibility at present, once the current political crisis has passed, the Constitution will need to be amended extensively to prevent its reoccurrence, as was attempted following the Civil War.

A fundamental purpose of government is to ensure that the economy serves the public interest of society, not simply the economic interests of individuals. This purpose is explicit in the preamble to the U.S. Constitution. While the economy overall benefits from effective governance, individual corporations have no economic incentive to contribute to or support the effectiveness of government. Only real people, acting together through government, can ensure that for-profit corporations serve not only the economic interests of their shareholders but also the public interest of society, including those of future generations.

John Ikerd

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https://en.wikipedia.org/wiki/Corporate_personhood

https://en.wikipedia.org/wiki/Santa_Clara_County_v._Southern_Pacific_Railroad_Co.

https://www.brennancenter.org/our-work/analysis-opinion/history-corporate-personhood#:~:text

https://www.foodsystemsjournal.org/index.php/fsj/article/view/1172/1144

https://www.law.cornell.edu/constitution-conan/amendment-1/doctrine-on-freedoms-of-assembly-and-petition#:~:text

https://en.wikipedia.org/wiki/Political_action_committee

https://www.movetoamend.org/

Money is one of the most thought-about, talked-about, worried-about, and misunderstood concepts in economics. Most people probably don’t want to know any more about money than how to get more of it or spend less of it to get things they need or want. However, the value of money, specifically the U.S. dollar, is increasingly at risk. The value of the dollar is guaranteed only by the “full faith and credit” of the U.S. government. If the government loses its ability to control the amount of money in circulation, there will be no way to ensure its value.

Until recently, the U.S. government’s monopoly on money hadn’t been seriously questioned since the late 1800s. The authority of the government to issue Greenbacks to pay off Civil War debts was challenged in the courts. Greenbacks were not backed with gold or silver, only the “full faith and credit of the U.S. government.” In a series of late-nineteenth-century rulings, known as the Legal Tender Cases,[i] the Supreme upheld Congress’s power to issue paper money and make it “legal tender for all debts, public and private.”^[ii] The Supreme Court has since consistently ruled that Congress’s constitutional authority to “coin money and regulate the value thereof” gives Congress control over every phase of currency, including creating and regulating the supply of money.

Cryptocurrency is a new digital form of money that is not overseen or managed by the U.S. government or any central authority.[iii] The first cryptocurrency was Bitcoin. It was created in 2009 by an anonymous group of computer programmers. The group was concerned that traditional currencies, including the U.S. dollar, were too reliant on the trustworthiness of banks and the integrity of governments. Other cryptocurrencies have emerged since and have a volatile history of wide fluctuations in value and bankruptcies, but have persisted. As of 2025, the market value of cryptocurrencies was estimated at $3 trillion. Bitcoin and Ethereum are the leading currencies with values of about $1.9 trillion and $321 billion, respectively. Although there are hundreds of different cryptocurrencies, the top 20 dominate the market.

Until recently, cryptocurrencies were used almost exclusively for speculation and “laundering” illegally obtained money. Scammers have always created ways for people who have more money than they need, are addicted, or desperate for a “big win” to gamble or speculate with money. Cryptocurrencies seemed to serve the same basic purpose as tulip bulbs or pork bellies in times past, or hedge funds today. During Donald Trump’s first term as president, he called cryptocurrency “not money” but “based on thin air.” He said Bitcoin “seems like a scam.” So why worry about cryptocurrencies if they are just another scam?

By the time of Trump’s 2024 presidential campaign, he had reversed his rhetoric and become an advocate of cryptocurrencies. Once elected, he issued a statement vowing to make the United States “the crypto capital of the world.”[iv] He has appointed crypto-friendly regulators, weakened crypto regulations, and dropped ongoing investigations into crypto crime. He has used the presidency to promote his own cryptocurrency, $Trump. His family company, World Liberty Financial, makes millions facilitating crypto transactions. Its most recent venture allows investors to speculate on the price of its self-branded coin, WLFI, through the stock market. Trump has received millions of dollars in donations from the crypto industry and has called himself the "crypto president.”

Trump’s conflicts of interest related to cryptocurrencies have met with little legal or political scrutiny. However, a far greater risk than his personal enrichment is that Trump will, at some point, use his unparalleled and unchallenged presidential powers to back cryptocurrencies with the “full faith and credit of the U.S. government.” Cryptocurrencies would then be “legal tender for all debts, public and private,” leaving the government with no means of controlling the money supply or ensuring the value of U.S. dollars. The risks would be the same regardless of the administration in power, but in this case, the risks are real rather than hypothetical.

Thus far, the value of cryptocurrencies is ensured only by the shared confidence of the people who invest and trade in them. They are worth only what someone is willing to pay for them. The values of crypto “Stablecoins” are pegged or tied to U.S. dollars, but the Stablecoin issuers, not the U.S. government, are responsible for ensuring their value. If cryptocurrencies were granted “legal tender” status today, there would be an immediate $3 trillion increase in the amount of money in circulation, with no increase in goods or services to buy with the new money. The result would be runaway inflation, likely followed by a recession or depression, as the government would have lost control over the amount of money in circulation.

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An understanding of why the government needs a monopoly on money begins with understanding the basic nature of money. Money is a promise to repay. Economists refer to money as loans, in that banks make loans that are deposited in borrowers’ accounts and used as legal tender. These loans create a promise to repay, which is the essence of money. When people are paid for working, they are essentially loaning their labor to their employers and accepting money as a promise to be repaid for their work. The money can be used to buy anything they choose as repayment. Employers sell, or loan, the things workers produce to other people and accept money as promises of repayment. These impersonal transactions, made possible by money, significantly expand the potential benefits of trade by enabling people to provide things of value to those they don’t know and to acquire things of value from those they don’t know.

For money to fulfill its purpose, it must have three basic characteristics. First, money must be widely accepted as a means of payment—or repayment. Economists call this “accepted as a medium of exchange.” It must be easy to buy and sell things for money. Second, money must be accepted as a standard of measure of value for goods and services, which economists call a “unit of account.” The value of different things bought and sold must be expressed in common terms, such as dollars and cents. Third, money must maintain its value over time, which economists refer to as a dependable “store of value.” The value of money saved for later use must not depreciate, or at least not depreciate more than anticipated by the saver or investor.

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Cryptocurrencies have none of these essential characteristics. There are countless online descriptions of how cryptocurrencies work.[v] In the most basic terms, a cryptocurrency transaction is a digital transfer of currency from one person to another without the use of a bank. Instead of a bank, a public online record or ledger called a "blockchain" is updated to show that one person has sent a specific amount of currency to another person, and the other person has received it.

In reality, a crypto transaction is very much like a typical bank transaction. Banks don’t actually send cash from one bank account to another. They verify that a person writing a check or requesting a transfer has sufficient funds in their account to cover the transfer or debit and that the recipient has a valid bank account to receive the deposit or credit. The bank then digitally transfers the requested amount of money from one account to the other. Crypto transfers or payments are simply exchanges of cryptocurrencies rather than dollars. Crypto transactions are recorded in “blockchains” or online ledgers, rather than in bank accounts.

A major difference is that cryptocurrencies must be converted into dollars to buy or sell anything not priced in units of the cryptocurrency. To buy and sell cryptocurrency, a person must set up a “digital wallet” to store their crypto units. Cryptocurrencies can then be bought and sold using dollars and other official currencies through online crypto exchanges. The dollar value of cryptocurrencies can vary significantly during the time it takes to verify crypto transactions. The potential changes in dollar values are even greater between when dollars are exchanged for crypto and when crypto is exchanged back for dollars. With banks, once a person opens a bank account, transactions can be made with no risk of differences in amounts paid and received. Money on deposit in a bank account can be withdrawn at any time at full face dollar value.

Another key difference between cryptocurrencies and U.S. dollars is in how transactions are verified or validated. Banking transactions are confirmed by the bank, or banks, involved. Banks verify the identities of depositors involved in the transaction and ensure there are enough dollars on deposit to cover their requests before transferring funds or allowing withdrawals. In contrast, crypto transactions are verified by a consensus of a specified number of members of a decentralized network of “miners” or “validators.”

The validators scan the blockchain records, which include all previous crypto transactions, to ensure that sufficient currency to cover the transaction has been deposited in the appropriate digital wallets and has not been used for prior transactions. The crypto validators must agree that the digital identities of participants in transactions are valid and that sufficient units are on deposit to cover the requested transactions. Once verified, transactions are added to unalterable blockchains or digital ledgers. The blockchain provides a secure, transparent, and unchangeable record of transactions that have been verified by a decentralized network of participants, without the need for a central authority. The primary motivation for creating cryptocurrencies was to avoid dealing with banks or any central authority.

The most important difference between cryptocurrencies and U.S. dollars or other government-issued currencies is in how they are created and regulated. Cryptocurrencies are “created out of thin air,” a common phrase for money created when banks make loans and create bank deposits. However, U.S. banks are chartered by the government to make loans and accept deposits. A bank’s charter is a contract between the bank and the government, outlining the rules and regulations the institution must follow to operate safely and legally. U.S. dollars are also put in circulation through government spending, as explained in previous posts. Cryptocurrencies, on the other hand, are created by the project developers or organizations that establish them. Their primary purpose is to avoid government oversight or regulation. In the case of Bitcoin, the creators were a group of anonymous computer programmers.

Congress has empowered the Federal Reserve System, or FED, to create and maintain sufficient money in circulation to accommodate full employment and maintain the value of the U.S. dollar. The FED accomplishes this mandate by setting interest rates charged to member banks, which affect the amount of money commercial banks can create and keep in circulation by lending. For cryptocurrencies, the amounts placed in circulation and processes for adding currency are determined by the project's developers, according to their specific rules, or "tokenomics.” Bitcoins, for example, are awarded to “miners” for their work in validating transactions, and the maximum number added is halved each year—ensuring a maximum quantity of Bitcoins. These rules are publicly available and supposedly cannot be altered.

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Cryptocurrencies claim to be a viable alternative to fiat currencies, meaning currencies created and exchanged by government-regulated banking systems. However, cryptocurrencies have none of the essential characteristics of a legitimate currency. They are not widely accepted as a medium of exchange and are not a common measure of value or unit of account. Even if they could eventually acquire acceptance as a transaction currency, they will never be a dependable or credible “store of value,” or means of ensuring the value of savings or investments. I have addressed the risks of allowing money to be created through loans by non-regulated lenders in previous posts. Cryptocurrencies present far greater risks than current non-regulated lenders.

If a cryptocurrency, such as Bitcoin, were accepted as legal tender in the U.S., the FED would lose its ability to keep the total amount of money in circulation in balance with the amount of goods and services available to buy because it would not be able to regulate crypto interest rates or the quantity of cryptocurrency in circulation. The amount of crypto in circulation would be determined by its “tokenomics,” or more realistically, by the whims of its developers—not the FED. As a result, domestic prices for goods and services could become volatile and unpredictable. The prices of goods and services imported from other nations would also fluctuate widely with changes in the value of the U.S. dollar relative to other currencies.[vi]

Without government regulations, cryptocurrencies can be used to launder illegally acquired money, fund terrorism, and evade taxes. This would pose risks to the financial system and compromise U.S. relationships with foreign countries and their banks. Moreover, widespread crypto use would undermine consumer protection. Households and businesses could suffer from fraud and cyberattacks by hackers. In the case of Bitcoin, for example, there is no way to reverse an illegal transaction and no “legal issuer” of the currency to hold responsible.

Most importantly, the official money or legal tender of a nation must be sufficiently stable and predictable in value to serve as a reliable “store of value,” facilitating long-term monetary obligations, such as home loans, and saving for future purchases and retirement. With no assurance of the future value of money, homebuyers could end up paying twice as much, or half as much, as the initial contract prices of their homes. People saving for retirement could retire rich or broke, depending on fluctuations in currency values. If cryptocurrencies were legal tender, there would be no way to plan for the future—neither next week, next year, nor a decade from now.

The FED may not be perfect in anticipating when and by how much to increase or decrease the money supply by lowering or raising interest rates. However, it has managed to maintain a relatively stable and growing economy during times of global wars, terrorist attacks, financial meltdowns, and a global pandemic. This degree of economic stability and security would be impossible if cryptocurrencies were accepted as legal tender for all debts, private and public. If the U.S. becomes the “crypto capital of the world,” a few rich people will become far richer, but the economy will be thrown into chaos. That’s why the government needs a monopoly on money.

John Ikerd

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Notes:

[i] https://constitution.congress.gov/browse/essay/artI-S8-C5-1/ALDE_00001066/

[ii] https://constitution.congress.gov/browse/essay/artI-S8-C18-4/ALDE_00001239/

[iii] https://www.britannica.com/money/cryptocurrency

[iv] https://www.whitehouse.gov/fact-sheets/2025/03/fact-sheet-president-donald-j-trump-establishes-the-strategic-bitcoin-reserve-and-u-s-digital-asset-stockpile/

[v] https://www.schwab.com/learn/story/cryptocurrencies-what-are-they

[vi] https://www.imf.org/en/Blogs/Articles/2021/07/26/blog-cryptoassets-as-national-currency-a-step-too-far

Also See:

The national debt is simply the total amount of money the federal government has borrowed over the years to cover the difference between government expenditures on public goods and services and revenues collected primarily through taxes. The government borrows money by selling government securities, including U.S. Treasury bills, Treasury bonds, and U.S. Savings Bonds. The government uses the money from these sales to cover spending not covered by tax revenues. The government pays interest on the securities, much as commercial banks pay interest on savings accounts and certificates of deposit.

We should probably be concerned about the rising cost of interest on the national debt, but not worried about whether the government can afford to pay it. The “net interest cost” on the national debt was $880 billion in 2024, accounting for 13% of total government spending. This was 34% higher than the $658 billion cost in 2023. Government spending on interest accounted for 3.1% of the gross domestic product (GDP) in 2024. The only higher interest cost relative to the GDP was 3.2% in 1991, when interest rates on government securities were close to 8%. Interest costs are projected to rise to over $950 billion in 2025, accounting for about 18% of government spending. Interest costs are on track to become the second-largest category of spending in the federal budget, only exceeded by Social Security and slightly higher Medicare and National Defense.

However, the reason for concern is not about whether government borrowing will crowd out private borrowing. The government could create as much new money as needed to pay interest on the national debt, or even pay down the debt, as I have explained in previous posts. The U.S. Treasury only needs congressional approval to do so. The main concern would be avoiding inflation in prices caused by the new money put in circulation by government spending.

Borrowing to finance interest payments removes as much money from circulation as the government pays in interest, but it raises the national debt and total interest costs. However, creating enough new money to offset the $950 interest cost for 2025 would add about 4% to the total money supply. Annual increases in the money supply have averaged 6.3% since 2000. Paying interest on the national debt by creating new money would put more money in circulation through government spending, requiring less through private lending and spending. However, after the first round of spending, money created by government spending continues to circulate in the private economy and is indistinguishable from money created by commercial bank lending. The government could also mitigate inflation by spending the new money on public projects such as infrastructure and housing that create jobs and increase the production of marketable goods and services—new things to buy with the new money. The primary risk of inflation is the limited production capacity of the economy.

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The best long-run strategy for reducing interest costs would be to pay down the $37 trillion national debt. The debt obviously could be reduced by raising taxes or cutting spending, but could also be paid down by creating new money. The process would need to be strategic, flexible, and long-term to avoid creating inflation. Additionally, there is no logical reason to completely eliminate the national debt. As I have explained in previous posts, the national debt is not like a household or business debt. It doesn’t have to be “paid off.” It is more like money deposited in commercial banks. Those who have loaned money to the U.S. government have deposited money with the U.S. government for the same basic reasons people deposit money in banks. They want a safe place to keep their money, where it will retain its value and earn interest until they decide to withdraw it.

Based on December 2024 data, roughly 20% of the national debt is intragovernmental debt, money the government owes to itself. This includes the Social Security Trust Fund, the Federal Hospital Insurance or Medicare Trust Fund. “Net interest costs” exclude intragovernmental interest payments. In 2024, foreign investors, including foreign governments and individuals, accounted for roughly 30% of the non-governmental national debt, and a comparable portion of interest is paid to foreign entities. Domestic investors accounted for the remaining 70% of debt, and the interest payments go to domestic investors. Private investments, including savings bonds, mutual funds, insurance companies, and pension funds, accounted for about 42%. Money deposited by the Federal Reserve accounted for about 13% of the national debt, and state and local governments held another 13%.

The national debt serves important public purposes. The U.S. could not realize the advantages of having the world’s reserve currency if the government were unwilling to hold large deposits of money borrowed from foreign investors. Foreign investors use these dollars for U.S. investments as well as international transactions. Private pension funds, mutual funds, and insurance companies would lose an alternative to risky corporate stocks or bonds. State and local governments would be deprived of a secure place for large deposits or public revenues. There are good reasons for the government to continue holding and paying interest on deposits of borrowed money. However, there are also logical reasons for concern that the national debt is too large and interest costs are too high.

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The primary concern is that rising interest costs are being used as political leverage to reduce government spending on other essential programs, including Social Security, Medicare, Medicaid, and the Supplemental Nutrition Assistance Program (SNAP). The fiscal conservatives who stoke public concerns about rising interest costs know, or should know, that their children and grandchildren will not have to pay off the national debt. This is simply a ruse to make people feel guilty about supporting government spending on essential programs. Everything I have explained in this post is widely known among economists and is readily accessible by lawmakers and their staff.

Politicians and their wealthy supporters attempt to create the illusion that the rising national debt and the associated increasing interest costs are unavoidable. They argue that raising taxes on corporations and wealthy individuals to cover deficits will stifle economic growth and reduce tax revenues, increasing rather than reducing the debt. They ignore the fact that every major tax cut in the past 45 years has been followed by larger budget deficits, and significant tax increases have been followed by less deficit spending. They tell their constituents there is no alternative to cutting essential government programs to offset the rising cost of interest on the national debt. The persistent rhetoric that we are creating a burdensome debt to be paid by our children and grandchildren is pure political propaganda.

Those in the highest tax brackets and receiving more than half of all income aren’t going to quit investing their money if their taxes are raised. They may get richer a little slower, but they will still invest their money to get still richer rather than stuffing their mattresses or mansions with money. The private sector of the economy might grow a little slower if the FED needed to raise interest rates to prevent inflation caused by the government creating new money to pay interest and pay down the national debt. However, the benefits of essential government programs, including Social Security and Medicare, would be preserved. Opportunities would be opened to address persistent societal challenges, such as universal basic healthcare, affordable housing, affordable childcare, paid family leave, and to deal with environmental challenges, including climate change.

Society would also benefit from a more rational approach to controlling inflation by recognizing government spending as a means of managing the money supply and controlling inflation, moving away from economic growth as the sole measure of societal well-being, and increasing equity of economic opportunity through tax policies that moderate rather than exacerbate the growing economic gap between the wealthy and the rest of us. There is reason for concern about the size of the national debt and the associated costs of interest. However, there is also an opportunity to improve our overall quality of life by taking steps that can and should be taken to address the challenges that confront us.

John Ikerd

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https://www.pgpf.org/programs-and-projects/fiscal-policy/monthly-interest-tracker-national-debt/

https://www.crfb.org/blogs/interest-costs-could-explode-high-rates-and-more-debt#:~:text

https://www.pgpf.org/article/what-are-interest-costs-on-the-national-debt/

https://scheerpost.com/2025/07/30/ellen-brown-the-genius-act-and-the-national-bank-acts-of-1863-64-taking-a-cue-from-lincoln/?

The GDP, or total value of goods and services, has more than doubled since the 1970s, even after adjusting for inflation.[i] However, the percentage of people living in poverty in the U.S. has remained stagnant in the range of 11% to 15%.[ii] Increases in the GDP have increased the cost of living as much or more than they have increased incomes for most people. Some have become richer, others have been made poorer, but most people have worked harder and longer trying to stay about the same. Economic growth has increased the disparity between the top 1%, even 10%, and the rest of us, leaving even the stagnating middle class feeling poorer than before.

There are many countries where people live in abject poverty. They need economic growth. The current World Bank benchmark for severe poverty is $3.00 per day, and nearly a billion people in the world live in poverty, on less than $25.00 per week.[iii] People in these countries survive by doing things for themselves, doing things for each other, doing without some things they need, and in some cases, relying on government welfare programs. The GDP only counts what people get through economic transactions, earning, buying, and selling, not what they get through personal relationships.

Economic transactions enable us to get paid for providing goods and services to people we don’t know, and then use the money to purchase things produced by people we don’t know. Economic transactions greatly expand our opportunities to benefit by doing things for other people that they can’t do as well as we can and having other people do things for us that we can’t do as well as they can—in economic jargon, to benefit from specialization and trade. People in many countries of the world could benefit from greater opportunities to participate in economic transactions, which would contribute to a growing GDP.

However, an increasing GDP also means greater reliance on the economy to meet basic needs, which increases the cost of living as well as incomes. People benefit from economic growth only if their incomes rise faster than their costs of living. As nations globally have become increasingly reliant on economic transactions, the World Bank has raised its poverty level from $1.00 per day in 1990 to $3.00 per day in 2025—reflecting a tripling in the economic cost of living. People in the so-called economically developed nations of the world, including the U.S., couldn’t survive on $3.00 per day. The current poverty line in the U.S. is more than $40 per day. Since the 1970s, increases in the essential cost of living have wiped out most, if not all, of increased incomes, particularly for the bottom 50% of U.S. wage earners.

In addition, as people rely more on impersonal economic transactions, social relationships tend to weaken, families and communities become less interdependent, the social and cultural fabric of communities and nations becomes more fragile, and people suffer from isolation and loneliness. At some point, the sacrifices of social relationships and cultural identity tend to offset any further contributions of economic growth to the overall quality of life. The United States is a prime example of a nation that has been systematically weakened and ripped apart—socially, culturally, economically, and politically—by a relentless pursuit of economic growth.

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Regardless, the economic, social, and political mantra that “economic growth is good” continues to dominate public perceptions and economic policies in the United States. The success or failure of presidential administrations is reassessed after each quarterly GDP report. If the GDP declines for two consecutive quarters, the economy is widely considered to be in “recession,” and the administration is in trouble. If the economy is growing, everything is okay. Regardless of social or environmental consequences, the government is expected to keep the economy growing, and the faster the better.

Even prominent economists who are concerned about the negative environmental and social impacts of economic growth seem to believe that continued growth is essential. It just needs to be a less extractive and exploitative form of growth.[iv] The concept of “sustainable development” is reinterpreted as “sustainable economic growth,” which is impossible, unwittingly equating growth with development. It is often argued that economic growth is essential to provide funding for environmental protection and social equity. This is true, but only up to the point where the economy begins to extract more than it conserves or renews, and exploit more than it equates and protects.

The U.S. has had one of the strongest, fastest-growing economies in the world, but it has arguably contributed more to environmental degradation and economic inequity than any other nation. Continued growth in the U.S. economy has been sustained not only by domestic extraction of resources and exploitation of workers but also by extracting and exploiting the resources and people of economically depressed nations around the world. The wealthy have benefited at the expense of the poor.

Others have argued that economic growth is necessary to cover the cost of interest charged on borrowed money. If the economy doesn’t grow, borrowers will not be able to make interest payments in addition to paying off their loans. Again, this is not true. If someone owes 5% interest on borrowed money, they need to earn at least 5% on their investment to cover the interest costs. However, some borrowers routinely earn far more from their investments than they pay in interest, and others earn less, and some go broke—every day of every year.

Lower interest rates make it easier to make money by borrowing, but the government has no obligation to ensure that borrowers can cover their interest costs. Neither does the economy need to grow to cover speculative investments in the corporate stock and financial derivatives markets. Current stock and derivative prices reflect expectations of continued economic growth, but the government is under no obligation to grow the economy to ensure that investors and speculators don’t lose money.

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“Anything that isn’t growing is dying.” This remains an article of faith in our culture. It simply is not true! Healthy living organisms, including humans, are conceived, born, and grow until they reach maturity and become adults. They then stop growing, but they continue to be productive members of their communities as they conceive, birth, and nurture new generations. They continue to contribute to the well-being of their natural environments or communities as they age and eventually die. Living things are no more in the process of dying after they reach maturity than when they were growing. Some organisms and organizations don’t stop growing until they destroy the things that enable, feed, and support their growth. They include parasites, cancers, and unrestrained capitalist economies.

The U.S. government continues to promote cancerous economic growth by refusing to tax the rich, dismantling regulations that protect the environment, and cutting government programs that ensure political and economic equality of opportunity. These actions are defended by the basic political and economic arguments that they are essential for economic growth and that economic growth ultimately benefits everyone. This is not true.

For example, those with incomes in the top 10% currently receive about 60% of all income in the U.S. The remaining 90% receive only 40% of the total. This currently amounts to about $13.8 trillion for the 10% and $9.2 trillion for the rest of us. If economic growth results in income increases of 4% per year for both the 10% and the 90% over the next ten years, the growth will be about $4.4 trillion for the 90% and $6.6 trillion for the 10%. The increases in incomes “per person” over the next ten years would be only $14,026 per person for 90% of the people in the U.S., but $189,353 per person for the top 10%.

The rich get richer while the rest of us struggle to cover the increasing costs of living. This would be the case if the top 10% were taxed at the same percentage rate as the remaining 90%, which is currently not true. The lower tax rate on capital gains, which is defended as necessary to promote economic growth, gives those who already have money to invest a tax advantage over those who don’t. In the previous example, more than 80% of the growth, or year-to-year increases, in income of the top 10% would need to be taxed away to fund benefits for the rest of society to equitably share the gains from the economic growth made possible by investors, workers, consumers, and society as a whole.

Unrestrained economic growth ultimately leads to extraction, exploitation, and a growing disparity between the rich and the rest of society. This is the way capitalist economies function, if they are not restrained and regulated by government to ensure they function for the benefit of the societies that create them, rather than those who manipulate them to accumulate individual wealth. The recognition of this inconvenient truth is growing globally, while policymakers in the U.S. seem oblivious to the root cause of the growing environmental, political, and economic problems that threaten the survival of the nation. The nation is killing itself by trying to keep its economy growing.

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“Degrowth” is a growing global movement that advocates for a voluntary, planned reduction in economic production and consumption and the reestablishment of a balance of economic, social, and ecological well-being.[v] It challenges the concept that economic growth, or the GDP, is an accurate indicator of human progress and well-being. Instead, degrowth prioritizes environmental sustainability, social justice, and the equitable distribution of access to natural resources and economic opportunities.

Degrowth's main argument is that infinite economic growth on a planet with finite economic resources is impossible. It argues that the GDP should be replaced by multiple economic and social measures, such as life expectancy, health, education, housing, meaningful employment, and “sustainable economic development” as indicators of both ecosystems and human well-being. The degrowth movement recognizes that people in many countries still need economic growth, but not at the expense of their overall quality of life. Degrowth policies would be administered by governments but freely chosen by the people, as they begin to understand the high cost of unbridled economic growth and the social and environmental benefits of a sustainable quality of life.

We don’t need economic growth in the United States. We need to grow in our commitment to care for the less fortunate and to take care of our common home, the Earth. The economic, social, and ecological are inseparable dimensions of the growing problems that confront us and are inseparable dimensions of the opportunities for a better quality of life before us. No one grows or lives forever, but everyone has an opportunity to leave their communities, societies, and the world a bit better than when they were born into it. We will continue to create more problems and miss more opportunities as long as we equate success with continuing economic growth.

John Ikerd

[i] https://www.multpl.com/us-gdp-inflation-adjusted/table/by-year#:~:text

[ii] https://aspe.hhs.gov/sites/default/files/private/pdf/154286/50YearTrends.pdf

[iii] https://www.worldbank.org/en/news/factsheet/2025/06/05/june-2025-update-to-global-poverty-lines

[iv] https://www.abacademies.org/articles/sustainable-development-balancing-economic-prosperity-and-environmental-concerns-16224.html#:~:text

[v] https://en.wikipedia.org/w/index.php?title=Degrowth&oldid=1300087754

Why should we be concerned about how few corporations control how much of specific markets? We can find what we are searching for with Google. There are dozens of different cereals in supermarkets. Airfares have risen far less than overall inflation. We don’t have to drink high-priced coffee unless we choose to. And, we can still buy our favorite soft drinks or candy, so who cares what corporation owns the brands?

Why should we care if one corporation controls an entire sector of the economy, or has a monopoly, or, more commonly, if three or four corporations share control of a market, which is called an oligopoly? If corporate consolidation doesn’t cause prices to rise or the quantity and quality of products to go down, or stifle innovation, does it really matter how many firms control a particular sector of the economy?

It matters because in capitalist economies, markets need to provide incentives to produce “the right stuff,” not just more “cheap stuff.” The only way to ensure that market economies produce things that meet the real needs and preferences of consumers is to maintain economically competitive markets. In economics, “competitive markets” means there is a large enough number of small enough sellers to ensure that no seller, or a small number of sellers acting together, can significantly influence the overall availability of products or market prices.

A larger number of smaller firms is necessary to ensure that retail prices reflect consumers’ preferences and that higher or lower prices are passed on to producers as incentives to produce what consumers need and want, rather than retained as excess corporate profits. The excess profits of too few and too large corporations result in less production of things that benefit consumers, and more production of things that generate profits for corporate executives and shareholders.

In industries dominated by a few large firms, it’s difficult, if not impossible, for someone with a better idea, product, or service to start a new business. New businesses that threaten the status quo are denied access to markets, or are bought out or forced out of business by their deep-pocketed corporate competitors. Large corporations have the power to convince consumers they have access to the widest possible assortment of the best products at the lowest possible prices, and that claims otherwise are false or misleading. Too few and too large corporations stifle innovation and limit consumers’ choices.

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Successful start-up businesses are limited primarily to markets that did not previously exist and thus are not yet dominated by a few large firms. Apple, Microsoft, and Google had no established competitors to beat in gaining control of markets for microcomputers, cell phones, and search engines. Once these dominant corporations were established, new entrants found it virtually impossible to succeed in their respective markets. There is no incentive to reduce prices or innovate, at least not more than necessary to maintain their dominant market share. Consumers never have an opportunity to choose products or services that would have been offered by those unable to gain access to markets.

The only means of ensuring that we are getting the “right stuff” to meet our needs and preferences is to maintain a sufficiently large number of sufficiently small providers. If individual or small groups of corporations can influence market prices or other conditions of trade, they have “market power.” If corporations have market power, sooner or later, they will use it to maximize profits by exploiting consumers.

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Corporate consolidation has long been considered a threat to the U.S. economy. The Sherman Antitrust Act of 1890 was enacted to prohibit monopolies and other combinations that restrain trade. Standard Oil and American Tobacco controlled more than 90% of their respective markets at the time. The Sherman Act allowed the government to break up large corporations, such as Standard Oil, but the act proved difficult to enforce. John D. Rockefeller (oil), Andrew Carnegie (steel), Cornelius Vanderbilt (railroads), and J.P. Morgan (financier), known as the “robber barons,” continued to consolidate corporate power and dominate their respective industries. The Clayton Antitrust Act was passed in 1914 to strengthen the Sherman Act and prohibit anticompetitive practices, such as collusion, price fixing, and discriminatory pricing.

These antitrust laws have continued to be enforced, with varying degrees of commitment, by the Department of Justice, the Federal Trade Commission, and, in cases involving livestock and poultry marketing, by the Department of Agriculture. Obviously, the enforcement has been ineffective, as verified by the continued consolidation of market power and the current lack of economically competitive markets. Since the early 1930s, corporate shares or stock in the top 1% corporations have increased by 27 percentage points (from 70% to 97%) and the top 0.1% by 40 percentage points (from 47% to 88%).^[i]

The trends toward greater corporate concentration of economic and political power have not been significantly affected by changes in antitrust policies or changes in political parties. The only signs of decline in the corporate consolidation were associated with the transition from a manufacturing to a service economy during the 1970s and 1980s. New corporations emerged to replace those displaced by the transition, and the upward trend in corporate consolidation of power continued.

Enforcement of antitrust law was essentially abandoned after 1979, when the Supreme Court adopted the “consumer welfare” standard for assessing proposed mergers. Approvals are based on whether a business practice or merger is expected to harm consumers by leading to higher prices, reduced output, or diminished quality of products or services. It no longer matters how few corporations control a market, as long as prices are not expected to rise, production is not expected to fall, and quality, which is difficult to measure, is not expected to deteriorate.

The typical argument in support of corporate mergers is that the larger resulting organization will be able to provide products or services at a lower cost to consumers by realizing economies of scale. Economies of scale result from being able to reduce production costs by operating a larger business or producing at a larger scale. The cost savings may come from spreading the high fixed cost of a production facility, such as an automobile plant, across more units of production, as with more automobiles produced per million dollars spent for the plant. Economies of scale may also result from spreading the high cost of a top management team across more production units or plants, as in banking and digital technologies. Such efficiencies exist, to one extent or another, in many sectors of the economy. However, if corporate consolidation significantly reduces competitiveness, the lower costs of production will not be passed on to consumers over time but instead retained as corporate profits.

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The consumer welfare standard is based on an outdated concept of monopoly control of markets. Theoretically, monopolies increase profits by reducing production, which allows them to raise prices. Monopolies may also cut costs by reducing the quality or durability of products. The consumer welfare standard overlooks the fact that once corporations are allowed to gain a significant market share through consolidation, they can drive their weaker competitors out of business by lowering prices, increasing production, and promoting superficial improvements and innovations. Lower prices and increased production are then hailed as verification of competitiveness.

However, once a small number of large corporations gain control of a market, they tend to function as a “shared monopoly.” They increase their collective profits by raising prices, limiting production of less profitable products or services, and stifling innovation by competitors, all to the detriment of consumer welfare. Research has shown that once three or four large corporations share more than 40% of a market, they can coordinate their production and pricing decisions without necessarily violating antitrust regulations. They can function collectively much like a monopoly.”^[ii] The four-firm market share for selected sectors of the agri-food industry is shown in the chart at the end of this post.

The consumer welfare standard also fails to recognize that when corporations gain market power, they gain political power. They gain the power to influence, or dictate in some cases, public policies. They not only stifle the enforcement of antitrust laws but also prevent or nullify regulations meant to protect the environment, ensure workers’ rights, or serve other legitimate public interests. Once corporations become “too big to fail” without disrupting the economy, they can be assured that the government will bail them out if their high-risk, high-profit ventures fail, as was the case with savings and loan banks in the 1980s and financial institutions in general during the Great Recession of 2008-2009. With virtually unlimited corporate financing of political campaigns, corporations have gained more political power than the real people.

The primary problem with the consumer welfare standard of antitrust enforcement is that it diverts attention from the existential threat to the sustainability of capitalist economies and democratic governments, including those in the U.S. Large multinational corporations have been allowed to gain the political power to prevent the implementation of government policies necessary to restore economic competitiveness to capitalist markets. Wealthy individuals, such as Musk, Zuckerberg, Bezos, and Ellison, have accumulated their wealth and political influence by creating and managing growing corporations. They are the “robber barons” of the 21^st century. (Check out Austin Frerick’s book, Barons: Money, Power, and the Corruption in America’s Food Industry.[iii])

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The only solution to the problem of too few, too large corporations is to break them up into more, smaller corporations, and continue breaking them up until economic competitiveness is restored. There may be some tradeoffs between producing things most efficiently and producing the things consumers need and want—between “cheap stuff” and the “right stuff.” In cases where significant economies of scale exist, large corporations should be operated as investor-owned “public utilities.” Ownership could be private, but production, pricing, and other management decisions would be subject to government oversight and regulation to protect consumer and public interests. “Natural monopolies,” such as water, sewer, and electricity, are already managed as public utilities, and the concept could be extended to other sectors of the economy where significant economies of scale exist.

It may take an economic collapse to break the corporate grip on government. Once people regain control of their governments, however, they should never again allow corporations to grow large enough or few enough to destroy the competitiveness of markets or the integrity of politics. Under corporate control, the internet has become an information jungle, more than nine cents of each dime spent on dry cereal pay for processing, packaging, and advertising, air travel has become a test of patience and endurance, coffee that used to cost a nickel now costs two to five bucks, and candy bars are half the size and five times the price.

Electricity might have replaced gasoline in transportation decades ago if large petroleum producers had not been able to stifle competition. Sustainably produced foods might have replaced the industrial food system by the early 2000s if large agribusiness corporations had not been allowed to stifle innovation. High-speed rail might have replaced a million miles of crowded highways, in the absence of the objections by politically powerful corporations. We might not be facing the crisis of misinformation and disinformation if the internet were managed as a public utility with a clearly defined public purpose. We will never know what kind of world an economically competitive economy would have brought, because we allowed corporations to become too big and too few.

Adam Smith wrote of the butcher, baker, and brewer, “[H]e intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” The pursuit of economic self-interests, including corporate interests, is led by an invisible hand to promote the common good, only if there is a sufficiently large number of sufficiently small providers of goods and services. This was the situation in the time of Adam Smith. It is not the situation today. Adam Smith’s invisible hand has been mangled and disabled by unrestrained corporate consolidation. That’s why we should worry about the lack of competition. That’s why the government should, and ultimately must, break up monopolies and oligopolies.

John Ikerd

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Endnotes:

[i] 100 Years of Rising Corporate Consolidation; https://bfi.uchicago.edu/insight/research-summary/100-years-of-rising-corporate-concentration/

[ii] A Special Report to the Family Farm Action Alliance by Mary K. Hendrickson, Philip H. Howard, Emily M. Miller, and Douglas H. Constance. https://farmaction.us/wp-content/uploads/2021/05/Hendrickson-et-al.-2020.-Concentration-and-Its-Impacts_FINAL_Addended.pdf

[iii] Austin Frerick, Barons: Money, Power, and the Corruption of America’s Food Industry, Island Press, 2024.