Peter Schiff is one of Ron Paul's economic advisers, and I've been listening to his radio show lately. On his December 22 show he talked about an appearance he'd made on Cenk Uygur's show. He was ultimately cut off by Cenk. On his radio show he explains that he was having trouble with his ear piece, so he didn't realize Cenk was trying to break in. Cenk probably thought Peter was ignoring him so he cut him off. More of a misunderstanding than anything.
On the show Peter was essentially defending the 1%. They create the jobs, they write the checks, they pay the taxes. He read an email from someone that saw him on Cenk's show and the email called him a parasite. Peter laughs and says no, the writer has it backwards. He's the host. He's paying all the taxes. Do the poor want him to leave? If so who's going to pay for the welfare that all the poor people want? Who's going to employ everyone? You are sucking off his tit. He's not sucking off yours.
I was thinking about how I would react to Peter as I listened and I was a bit stymied. I had to think about it. This is the value of listening to those I disagree with. Something's not right about what he's saying, but formulating that into words takes effort. Putting myself through that effort is a good thing because I think it prepares me to explain it to those that might want to know.
In a capitalist system there are two ways to make money. You can work and get paid a salary. Or you can own a business. If you are paid a salary you aren't a parasite. You are compensated for what you are doing. And if you own a business you aren't necessarily a parasite. Suppose you work really hard to create a business that provides a product people value. Let's just use a janitorial service as an example. Someone is willing to pay you to clean their home or building. That's not parasitic.
Let's suppose your business expands and you can employee one person. You delegate this person to do 75% of the cleaning. You are the owner and you do 25% of the cleaning and also run the books, try to find new business, etc. Your employee is better off having the job opportunity. And you are providing a service to consumers. That's all fine. But there is just a tiny bit of a parasitical relationship here. Your employee is obviously doing something productive and your company gets a check for it. You take a portion of that check and pay him a salary. You keep the rest. That's fine. There's nothing wrong with it. You took a risk and started a business, made an employee better off, provided a service for your customers. I don't think anybody has a big problem with this arrangement. But the work he does provides more value then the amount of compensation he is given. If it didn't he wouldn't have been hired.
As this arrangement continues and the business expands that parasitical arrangement becomes more and more pronounced. Maybe a right winger would still not object if the owner had expanded to 1000 employees, including management that permits the owner to do nothing at all, including dealing with books, advertising, and marketing. The owner just stays home, pays salaries with revenue generated, and then retains the surplus revenue. You can call that good or bad. Maybe that's his just reward for taking that initial risk. But it is parasitical. Right now the productive efforts are entirely the work of others and he collects the money.
And let's take it a step further. Let's suppose we're not dealing with a person that worked hard in starting a business. Let's suppose a man has $1 million for whatever reason. Maybe he inherited it. Maybe he won a lottery. Maybe he stole it. He decides one day he's going to start a janitorial service, but he isn't going to do any work. He's going to pay someone a salary to initiate it. This person needs to hire workers, manage the books, and perhaps do some cleaning if necessary. Let's suppose this service succeeds. The owner doesn't do anything productive. He wrote an initial check, and that was it. Now he sits back. The service employs 350 people. It generates $1 million/month in revenue. With that revenue he pays his employees an average of $1500/month, or $18K/yr. The balance is $475K/mo. He spends $100K/mo on materials/tools, etc. He retains $375K/mo. He never breaks a sweat. He does pretty much nothing except writing checks (most check writing is delegated to someone else, but he writes the one check to the manager). He is in fact generating his revenue based on the sweat of others. He is a parasite.
This is really close to what Peter Schiff is. Peter Schiff runs an investment firm. He makes money from owning things. Suppose he just buys all the stock in this janitorial service. His income could be in the form of dividends. Payouts based on the profit of the company. If he owns all the stock he gets the $375K/mo.
If you think Schiff is contributing to the service, consider what would happen if the employees were to decide that they simply weren't going to respect the ownership title that he waves in their face. Suppose they said sure, you own the brand and you own the mops. But we don't care. We're going to use them to clean buildings, and we're going to take the revenue and distribute it amongst the workers as well as keep the business running. Would the work cease? Would it no longer be possible to clean the buildings? No. Work would go on as before. We don't need Peter Schiff to clean the buildings and make a good living. He's doing nothing but collecting the revenue that is generated due to the work we do.
Where I work the janitorial service has been outsourced, perhaps with a company like Peter would own. They drive up in their rickety cars. They try to hide their smiles so we don't see their crooked teeth. I've befriended one lady. Her name is Kathy. She goes to work at her first job at the shock absorber plant and works about 10 hours. Then she comes in to our office building and puts in another 3 or 4. She works in our office 5 days a week and at the plant 6 or 7. But that's not enough for her to afford a home, so she lives with her brother. Yeah, she drinks and smokes. Not wise. But it's a tough life and it's hard to cope. She really could use some health care coverage. She obviously can't afford it.
Peter Schiff says we should be grateful to him because he pays all the taxes. He takes his $350K/mo or whatever it is he makes which comes from the productive efforts of people like Kathy and he's outraged that he's expected to pay taxes. "Do you want all us rich people to leave?" he asks.
I say sure, let him go, but with a caveat. If he doesn't stay we aren't going to send him the surplus revenue generated by the janitorial service. We aren't going to respect the piece of paper that says he owns it. He doesn't do anything that is needed for productive output. He doesn't really contribute. He wouldn't even be paid in the first place if people didn't respect his property rights.
This is of course not how all the rich became rich. Many of the rich did it the way the hypothetical man that started the janitorial service in my example did. Everyone respects that. Everybody knows that in cases like this, where a person is taking a lot of risk and working really hard, harder then most others, that this guy should be rich. That is just and good for the economy. But that's just not what has been going on in the US over the last 30 years. Those that are getting rich these days are overwhelmingly hedge fund managers and CEO's. The belief that people like this are actually compensated due to their productive value is highly dubious, and certainly not necessarily true.
The janitors, factory workers, tomato pickers, and garbage men aren't parasites, leeching off the benevolent capitalist that owns Waste Management and gave the garbage man a job as a gift. The garbage man is keeping only a portion of his productive effort and giving the rest to the stock holder, who for all we know is sitting in a mansion doing absolutely nothing. Schiff says the worker is the parasite and the rich man sipping piña coladas by the pool is the host. That's twisted and wrong.