Remedy Unfairness In Our Economy
In Our Economy
It has been a very long time since we have seen protesters in the streets of the United States. Today the issue is growing inequality and the unfairness and dysfunctionality of the system. Government responses to these demonstrations actually demonstrate the unfairness.
The one percent made billions for themselves while gambling with the money the rest of us invested, destroying trillions of dollars of our wealth, and totally wrecking the economy worldwide. But only a couple of the outrageously blatant miscreants were arrested, prosecuted and jailed. Now, however, in city after city, hundreds of protesters are being arrested for demonstrating peacefully. The appearance that, in addition to “too big to fail,” there is such a thing as too big to jail is one of the things being protested.
Our political system is nearly paralyzed. It has become obvious that many of our political leaders have been bought and paid for by special interests within the wealthiest one percent. In addition, the behind-the-scenes politicos – that army of lobbyists, strategists, propagandists, etc. – have engaged the 99 percent in a hugely destructive game of “Let’s You And Him Fight.” They know what many of the 99 percent do not yet realize: Ordinary Americans are fighting among themselves in bitter culture wars over abortion, teaching evolution, the reality of climate change, gay marriaqe, limiting voting rights, stripping union rights, whether or not there are death panels, etc. And while we are doing that, the one percent is robbing us blind.
Thirty years ago, many Americans fell for an economic theory commonly called “supply side economics.” Basically, the theory is this: There will always be unlimited demand because everyone always wants more, better, bigger, newer. The central task of the economy is to produce enough to satisfy that demand at a price people can afford to pay for it.
Under that theory, the name of the game for producers is to lower costs – labor costs, materials costs, transportation costs, taxes, the cost of complying with regulations, all costs. A producer lowers costs partly by backing politicians who will cut corporate taxes, repeal regulation, pass “right-to-work” laws, and ban collecdtive bargaining.
Simultaneously, producers outsource work to the cheapest available labor in the world and/or replace human workers with industrial robots and computer software. They use the cheapest raw materials, either moving operations to where the raw materials are or getting tariffs repealed if they have to import them. They cut as many corners as possible in getting rid of their waste products and complying with those regulations they cannot get repealled and they lobby to get environmental regulations repealed.
Much of the cost cutting is undone by speculators. For example, at least 20 percent of the cost of a gallon of gasoline is attributable to nothing other than speculation in the commodities markets. Speculators do not produce oil, refine it, transport it, wholesale or retail it. They simply buy and sell – or sometimes sell then buy – bulk oil with the intention of manipulating prices in ways that make them money without their having to add value to the process or the product.
The theory is that we consumers will buy more and more if the prices are low enough. No one seems to have thought about the long-term effect on Americans as consumers of outsourcing their jobs or replacing them with machines and depressing their wages for nearly half a century. It should have been obvious that at some point average American people wouldn’t have enough money to keep on buying at the rate produces needed for them to consume. But that is where we are now.
When they sold us “supply side” economic theory, they also led us to believe that as those at the top made more, they would create more and better-paying jobs for those of us who were putting up with the negative consequences of all the de-regulating and wage depressing and converting us from American citizens to mere consumers. But not much trickled down. Prices did not drop nearly as much as they should have given all the cost savings. Indeed, pricing remains based on the principle of “all the traffic will bear.” Those at the top of corporations simply pocketed the increased profits for themselves instead of increasing wages to reflect growing worker productivity. Without strong unions, there was no way to force them to share profits with the workers who made those profits posssible.
Simultaneously, the stock markets and major financial institutions changed their core function. The purpose of stock markets is supposed be to find capital for those entrepeneurs, producers and distributors who need it.
For their efforts in bringing comapnies and investors together, the finance industry earns profits through commissions.
Then the big finance houses began to realize that they could make money just by moving money around – by convincing investor A to trade his stock in company 1 for stock in company 2, then convincing investor B to trade his stock in company 2 for stock in company 1. The companies, the investors, and the economy as a whole are relatively no better off as a result of this sort of deal. But the traders make four commissions – one for each of the sales and each of the purchases – by just moving the money without adding real value.
The theory underlying all capitalism is that buyers and sellers in the market behave dispassionately and rationally. The reality is that they are at least as susceptible to such irrational things as the gambler’s fallacy, to such emotions as fear and greed, and to such temptations to commit fraud and other crimes as everyone else. The truth is that the market is not rational, and it does not perfectly value things. Trusting it to behave in the idealized way we thought it should is just plain nuts.
More cutting of regulations and taxes on corporations and their owners is not going to fix anything. Nobody creates a job just because he/she got a tax break. And nobody ever failed to create a job or killed a job solely because some regulation was either passed or repealed.
One thing we need at this point is some good old-fashioned trust-busting: Too big to fail is too big.
Another thing we need is to jail the Wall Streeters who designed deals to fail but didn’t tell that to the investors they lined up to invest in them, the people that committed outright fraud on investors, etc. If this is to be a just society, nobody can be too big to jail.
Third, we need to repeal the Bush tax cuts for the rich, which, by themselves, account for about 20 percent of the deficit. It makes no sense to borrow money to pay the rich to create jobs, especially when they are not actually doing that and have not been for a very long time.