The Wrong Capitalism
By Bob Wood, TMO
Bob Wood is a TMO columnist and longtime financial advisor. His opinions are his own.
I want to start this article by updating a couple of previous ones with information that I came across later. First, as to the independence and objectivity of the big media outlets and what they choose to inform us about, take the time to check this post from libertyblitzkrieg.com, where we get an admission from a German journalist.
The money quote reads thusly, and you can read the entire piece online at ;
“I was bribed by billionaires, I was bribed by the Americans to report…not exactly the truth.”
– Udo Ulfkotte, a former editor of one of Germany’s main daily publications, Frankfurter Allgemeine Zeitung
That inspires the sharing of this quote;
“I have come to realize that the vast majority of decent, wonderful people have no idea how they are being hoodwinked, day in and day out, by the scum of this world. We are lied to, misled, bamboozled, suckered, cheated, misrepresented, conned, manipulated and royally screwed!
They take us to the cleaner’s day in and day out in every way possible. We, the people, pay the price of their cheating, their folly, their lying and their sheer stupidity.”
Pierre Rinfret
Now as to a prior piece on fairness in our economic policies and why Capitalism seems to be failing the majority of us. Readers of recent posts in this space might be wondering why I keep espousing Socialism over Capitalism. I’m not. What I’m advocating is more balance and fairness. I assure you I am a Capitalist at heart. It’s just that what passes for Capitalism in America now is far removed from what it could, and should be.
Capitalism is still the best way to run an economy. Incentives matter, and generate better outcomes when offered as inducements to greater effort. Why would anyone work long hours, or risk their savings in the effort to become self-sufficient if their risk didn’t offer greater reward?
The fatal flaw in Communism was very likely the absence of greater gain in exchange for greater effort. Those most willing to strive harder for longer would easily be discouraged when seeing their deserved share denied, evenly distributed to those who made much less effort.
More discouraging would be seeing those earnings taken by government in the name of serving the greater good. Seeing others ride along for free while sacrificing nothing dimmed the hopes of the best and brightest, discouraging accomplishment.
Under a Socialist system, high achievers can still enjoy rewards commensurate with their efforts. They will feel more like ‘’their brother’s keeper’’ than if working under a purely Capitalist system, but their standard of living will still exceed that of someone making little effort.
If nothing else, a purely Capitalist system can strengthen an economy if only by showing the least motivated among us that contributing more effort is in their own selfish best interests. Work harder, contribute more, and reap a bigger share of the pie.
This all makes sense on paper. In practice, however, what our economic system in America has devolved into is something altogether different
The gaping chasm between the rich and poor beg the asking for how our system benefits those making their fair share of contributions. Is the corporate CEO really making an effort that is 400 times that of his hardest front line worker?
This is no hypothetical question.
The following was posted on www.shtfplan.com recently;
‘’From a micro perspective, the personal economic health of America is abysmal. According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”. Stunningly, more than 100 million Americans are enrolled in at least one welfare program run by the federal government, not including the massive entitlement programs of Social Security or Medicare.
‘’The number of people on food stamps has grown to 47.79 million Americans. In 2008, when Obama first took office, only 32 million Americans were on food stamps. Approximately, 20.2 million Americans spend more than half of their incomes on housing, which represents a 46% increase from 2001.
‘’Parents under the age of 30 experience poverty rates consisting of 37 percent. The number of Americans living in poverty has grown to one out of every six US citizens.’’
Adding to this evidence that something is wrong with our economic system and how rewards are distributed, this comes from a post on www.washingtonsblog.com;
‘’To see how corrupt the United States government has become, just follow the money. According to the most recent Federal Reserve Flow of Funds report, US households currently have an all-time high $82 trillion in overall wealth.
‘’If that wealth were spread out evenly, every US household would now have $712k. However, as of the end of 2013, the median household only had $56k in wealth. From 2007 – 2013, overall wealth increased 26%, while the median household lost a shocking 43% of their wealth. If median wealth continues to decline at this rate, over 50% of US households will be bankrupt within the next decade.
‘’The fact that the majority of households are losing so much wealth in a time of record-breaking overall wealth demonstrates how systemically corrupt the economy has become. To begin to grasp the scale of corruption, let’s analyze how much wealth has been consolidated within the economic top 1% of the population.
‘’The latest comprehensive look at wealth distribution data reveals that the “ultra-rich” economic top 0.01% of US households now has an all-time high 11.1% of overall wealth. The next tier, the 99.9% – 99.99% has 10.4%, and the top 99% – 99.9% has 18.3%. In total, the top 1% now has an all-time high 39.8% of wealth.’’
The problem, as I see it, is that we need to be educated on a fourth economic system, that of Crony Capitalism. Isn’t that a more reasonable description of what we see today? Let’s look at a definition from Wikipedia;
‘’Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of state interventionism.’’
In the 2012 election cycle, the Obama campaign spent a report $1.1 billion to gain re-election. We can guess where that money came from, or we could look it up. On www.opensecrets.org we count corporations like Microsoft, Google and Keiser Permanente.
The largest donors to Mitt Romney’s failed campaign were Goldman Sachs, Bank of America, Morgan Stanley, J.P. Morgan and Wells Fargo Bank.
The first questions I ask when seeing this are, what do donors expect in return, and what do candidates offer for all those millions in donations? Is anything offered or asked for explicitly, or implicitly?
I think we need only look at the results. We already know the wealth inequality statistics seen in America, a trend firmly in place since the 1980’s. Further evidence is found in a study done by researchers at Princeton and Northwestern Universities.
A quote from the spokesman for each school, as posted on HuffPost recently offers this;
“[W]e believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened,” write Martin Gilens and Benjamin I. Page in an April 9 article posted on the Princeton website and scheduled for fall publication in the journal Perspectives on Politics.
‘’Gilens and Page analyzed 1,779 policy issues from 1981 to 2002 and compared changes to the preferences of median-income Americans, the top-earning 10 percent, and organized interest groups and industries.
“Not only do ordinary citizens not have uniquely substantial power over policy decisions; they have little or no independent influence on policy at all,” the researchers write in the article titled, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.”
‘’Affluent Americans, however, “have a quite substantial, highly significant, independent impact on policy,” Gilens and Page write. Organized interest groups also “have a large, positive, highly significant impact upon public policy.”
Are you surprised at any of this? Is anyone? But why does it persist for generations as it has in a democracy like America? It does, simply, because we let it. Until we stand up to our media, our school system and government to work for our the benefit of all of us and not just the few who pay the most for influence, expect more of the same.
And until we stand up to each other and demand answers as to why we keep electing people to Congress while it sports a 10% approval rating in recent polls, nothing will change.
16-44
2014
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