The Worst Form of National Economics

January 12, 2012

- See all 39 of my articles

The Worst Form of National Economics, Except All the Others That Have Been Tried

Like Winston Churchill Said …

Let me get this out of the way, I’m not against capitalism. Winston Churchill once said of Democracy that it’s the worst form of government, except all the others that have been tried. Capitalism is the financial equivalent to that form of governance – it’s the worst form of national finance, except all the others that have been tried. I have no problems with capitalism. People should be free to make the money they want, as long as that money making doesn’t harm others. Well, that harming others is where I have a problem with the twisted brand of capitalism that so many modern corporations practice – Vulture Capitalism.

Back in the late 1800’s there was a term used for the leaders of companies so powerful that they were indeed “too big to fail” – Robber Barons. These men were known for using unethical practices to obtain their obscene wealth. They acquired personal wealth at the cost of anything, including in many cases people’s lives. The recession of 2008 also had its roots in corporate entities that were “too big to fail” and the results where a handful of individuals gaining wealth and the vast majority of the country either being stagnant or losing ground. Again, I have zero problem with people becoming rich. I have many problems with people becoming rich because the money elects the politicians and then the politicians make the rules and then the rules favor those with money.

Trickle Down is Now Upside Down

An article just out last week showed that not only is the idea of “Trickle Down” wealth false, things have been the opposite in recent times. Even before taxes of any kind are taken into effect, the rich are still getting richer and everyone else – 99.9% of the country – are either stagnant or losing wealth.

Think of it this way; you’re in a group of 100 people, and you and 98 others all drive mid 1990’s SUVs and make $10 an hour. The last guy drives a Prius and makes $100 an hour. The price of gas for you and the 98 is $3.50 a gallon, but because of the fact he drives a non-guzzler, the guy who drives the Prius only has to pay $2.00 for a gallon of government-subsidized gas. Not only does he have a lot more money to cover his basic expenses, you and the other 98 are at a disadvantage because of government loopholes – loopholes put there by a combination of his money, and money from Toyota and the gas companies. Back before the Prius was invented, and before he was making so much more things were even, but as time goes on the playing field becomes less and less level.

It’s like a very small deviation in a course, over a mile being 1 degree off course will only put you off your final destination by a few dozen feet, but if you extend that trip to a few hundred miles you will be dozens of miles off by the time you get to where you’re going – magnitudes of order. Think that’s bad? What exists between the .4% and the rest of the 99.6% now is many magnitudes of order.

Cheer Up, It Can Only Get Worse!

It will only get worse, too. Every senator and representative makes over twice as much as the average person, easily putting them in the top 2% Unless they specifically vote to freeze their own pay on an annual basis, they get about a 3% “cost of living” raise.  I’m a state government employee and because of “budgetary” reasons I haven’t gotten a cost of living raise in more than a few years. Combine that with the fact that my medical benefits have decreased and gotten more expensive (higher out-of-pocket, higher salary deduction), I’ve actually lost money, comparatively.

For the vast majority of congresspeople, the bulk of donations to their political campaigns come from the ultra-rich or corporations. Why wouldn’t a senator not vote for changes that help the rich? Not only are they helping themselves, they’re most likely helping their kin since inherited wealth is taxed at a much lower rate, sometimes not at all with loopholes and trust funds. Finally, once voted into office a congressperson gets lifetime health care and a retirement check. It’s a revolving door – rich corporations and the top .4% help get people into office, those people in turn pass laws and write loopholes that help the rich corporations get richer and top .4% keep more of their money, who in turn help who they want to be in office get there.

One of the biggest pieces of evidence of this is the Wall Street bailouts. Wall Street started voting in people who would deregulate finance laws, in turn Wall Street was allowed to take bigger gambles with collections of money – money at least in part made up of millions of retirement and savings accounts. Those risks failed, and in failing the richest of the super-rich made money because they hedged their bets. The companies they left sinking were then bailed out by the government, while the vast majority of people got nothing. The rich gambled with our money, lost it, made money themselves on that gamble, and then got the government to bail out the companies they shattered with that gamble.

It’s not just Republicans, on this one, either. After promising to change Washington in his election campaign, Barrack Obama turned around and filled his most important cabinet positions with ex-bankers, and ex-Wall Street types. I’m not sure which is worse, Obama failing like that and still decrying the evils of “Trickle-Down” or the Republicans still trying to get you to believe it works.

Plugging the River-sized Leak with Chewing Gum

Remember Citizens United vs. The Federal Election Commission? I’ve written about it before – it essentially removes limits to anonymous corporate spending in political campaigns. It’s just the latest in a long-line of laws that essentially give a corporation similar rights to that as a person. Even with the millions of people making political donations, corporations can still outspend us, even more so with the whole rich-getting-richer, poor-getting-poorer trend of the last few decades. We need to even the odds, we need to call in a few bulldozers to plug the leak that’s been growing larger since the 1980’s. If corporations have all the benefits of being a person, they need some of the drawbacks. When I see a corporation getting executed in Texas I’ll consider it a decent first step toward the playing field being level.

This is not about class warfare, this is about correcting a wrong that has been snowballing since the early part of last century and snowballing out of control since the 1980’s. That few degrees off course that accumulated under Reagan, Clinton, and the Bushes has us hundreds of miles from where we should be. Democrats are at least arguing that the problem exists, even if they are taking corporate money in one hand while placating you with the other. Republicans are arguing for less regulation, less restrictions on campaign finance, and calling the Democrats placation “class warfare.” It’s hard to have a class war when some 400 people have more resources than 40 million.

Capitalism is wonderful, but thanks to greed it needs oversight, especially when the people making the rules are put in place by the people with the money.

3 Comments (+add yours?)

  1. Martin Kelly
    Jan 12, 2012 @ 09:47:03

    Zarberg, this is where we agree completely. The only way that capitalism can work without hurting large numbers of people is for the consequenses of risks to fall on those to take the risks. With the “too big to fail” idea, risks are taken, but the risk takers are isolated from any negative effects. Bailouts by the federal government is a missuse of our tax dollars. I am not an anti-tax person, I know that we need a certain amount of taxes to support the functions of government, but bailout is not one of those functions.

    I do not blame the president. He is a cheer leader and an advocate, but it is congress who bares the blame for all of the activities that have driven us down this road. Even today, as we have salary freezed for the actual workers in the governement and shut down of factories that support government contracts, the congress has not passed a budget. Until we actually implement restrictions on legislation that benifits specific groups at the expense of others we will continue to see these problems.

    Remember that the big donors are the rich, corporations and the large unions. Unions are important in protecting workers in many instances, but the larger unions are using their power of size to the same extent as the rich and corporations.


  2. Someone Commenting
    Jan 12, 2012 @ 19:30:58

    Let’s face it. Capitalism is dead. Capitalism as a “pure” form of economics just isn’t in use in any “western” country and probably not any country at all. This is a good thing. There are elements of capitalism that are good and useful, but capitalism as an ideology works about as well as communism as an ideology-that is to say, not at all.

    This is what the government needs to do: Tax, tax, tax, spend, spend, spend. Actually, it could even be borrow, borrow, borrow, spend, spend, spend. But the economy won’t improve without some stimulus and private corporations just aren’t going to provide that. As it is, the wealth of the country is all horded up in the top 0.5% (yeah, I know “We’re the 99.5%” is a terrible slogan but there is a steep gap between even the 1% top earners and the 0.5% top earners). It doesn’t do anyone any good there. We need to get it out into circulation, into the hands of people who will actually use it, who will buy, produce, and create, if given a chance. In short, the non-millionaires.


  3. Martin Kelly
    Jan 12, 2012 @ 20:56:11

    I have to disagree with you Someone. If the government does Tax, tax. tax, spend, spend, spend or worse borrow, borrow, borrow, spend, spend, spend, the problems that Zarberg outlined will only get worse. If the government is owned by the to 0.5% and that same government is going to choose the winners and losers (bailouts and extra taxes) the problem is compounded not solved. We would push the 99.5 % lower with taxes or bury our children with spending.

    Pure capitalism can only work in small communities, just like communism. When the community is too big (I have ready that the tipping point is 1000 people), either system will result in abuses and individuals who are simply left out. We in the united states have a mix of capitalism, regulation and socialism (i.e. social security). In my opinion, the goal is to get the best balance of each. Capitalism to allow the accumulation of personal wealth, regulation to prevent or at least mitigate abuses, and socialism to provide a safety net to those who are unable to achieve or fail so irrevocably that they cannot recover on their own.

    I guess I have now labeled myself as a tea party 99%er 😉


Leave a Reply