Recently, I have been giving a lot of thought to the issue of wealth distribution, and consideration to whether or not the situation can be markedly improved. After much thought, I am reasonably convinced that there is little to be done to reverse the current distribution patterns, where the top 20% control around 88% of the nation’s wealth. Particularly, I am unable to see a way in which the wealth can be redistributed to the bottom half of population.
The factors that have contributed to my position include the following:
– The American middle class was largely built upon manufacturing. Manufacturing provided relatively well-paid jobs to a large number of unskilled and semi-skilled Americans. A large percentage of Americans had previously relied on low paid agricultural work. When the shift was made from an agrarian society to a manufacturing society, the middle class took off.
– Manufacturing employment has dwindled away markedly – jobs have been lost to low cost countries and as a result of technological development, and as a result of poor government decision-making and excess regulation.
– I do not see these jobs returning in bulk. There are some things that may happen around the fringe, but on the whole the ability of Americans to rely heavily on manufacturing to provide middle-class jobs has disappeared.
– I do not see any business sectors currently able to fill the void of middle-income jobs. There are some opportunities in the energy sector, in provision of educational services to the world, etc., but on the whole I do not believe that enough jobs will be created to offset the number of manufacturing jobs lost.
– Low-paid service sector jobs have replaced many of the more well-paid manufacturing jobs.
– Modern economies are tech driven and require considerable technical expertise
– The bottom half of economic society would have these basic characteristics (in general, where education levels attained correlate to intelligence and education attained correlates to income):
o A median IQ of around 89, and a top of 100
o Less than high school education
– My experience is that persons with IQs/education in this range are capable of menial or repetitive tasks, but cannot undertake tech jobs, operate high-tech equipment capably, be responsible for managing the quality of their own work, etc. As an example, these individuals are often unable to make change for a dollar without the use of a calculator or computer.
– The quality of the education that Americans receive is generally poor, and those in the bottom half are receiving an exceptionally poor education indeed.
So, looking at these factors, I simply cannot see large numbers of jobs to be created that will provide these people with work that will pay well enough to provide what we have come to understand as a middle class livelihood. The work available to them will largely be menial and very poorly paid. I simply see no other possibility. The result is that this group will be incapable of attaining a greater proportion of the nation’s wealth, and will be entirely dependent on capitalists to develop and provide employment.
So I then have considered the top half of the economic pool. At the upper end, the wealth is indeed highly concentrated. As an aside, I have no great problem with that. What I have a problem with is the extreme influence they have over the political system.
If these individuals were unable to influence the political process, then I believe a significant portion of their wealth might be redistributed. That is the good news. The bad news is that I believe that this wealth would make its way into the hands of the lesser wealthy – business owners, etc. I do not think that it would shift the balance of wealth outside of the hands of the top 10%. The top 1% would likely have somewhat less of the total wealth, but the top 10% would remain unchanged. That said, I think this is by far the best option, and needs to be implemented urgently.
Another option would be to “tax the rich” in one form or another. This might work. However, I expect that it would not redistribute wealth, but would rather tend to destroy it entirely. The rich would have less, and the receivers of the largesse would almost universally tend to spend the money and not create wealth, and in the end would be no better off. Additionally, there would be something of a disincentive created, which would result in reduced wealth creation over the long-term.
There may be other options re redistribution of wealth from the very wealthy, and I welcome thoughts on this. However, I do doubt that the redistribution would filter down to the bottom half of economic society.
With respect to those at the lower end of the top half, redistribution of wealth by elimination of the ability to wield political influence would greatly assist in economic mobility. People could start businesses, or grow existing business, without being hindered by influence peddlers. There would be some greater hope of attaining the American Dream.
In summation, I think that there are some issues which simply may be insurmountable. The combination of advanced technology and low-cost competition has created a situation where a significant proportion of the population will struggle mightily to earn a middle-class wage, given that they lack the skill and ability to thrive in such an economy. I truly hope that I am wrong in this, but I simply do not believe that the problem can be fixed.
I’m not looking for a redistribution of wealth. I’m looking for a system that is not rigged in favor of the super wealthy. The system is captured by the bankers and the mega-corporations who pay for influence in Washington DC.
LLPOH – Do you have your very own lobbyist in Washington DC? Do you think you would get more business if your lobbyist bought off a few Congressmen?
We have become a consumer debt society since 1980. If consumption was to fall from 71% of GDP back to the long term average of 64% and people saved and invested their money, we could rebuild our infrastructure and have a more balanced economy that could survive over the long haul.
dmin – I am not disagreeing with you. Above I said “At the upper end, the wealth is indeed highly concentrated. As an aside, I have no great problem with that. What I have a problem with is the extreme influence they have over the political system.” We are in absolute agreement there, I think.
And I agree we are overspending. The point I am making is that the realities of the world are such that good paying jobs for low skilled/low educated/modestly talented people just no longer exist. And I do not see them coming back. We can make things better, but the fact is that low paid service work is the modern equivalent to agricultural work of 1900. But I do not see an industrial revolution coming along to adress the issue. That has already happened.
I think that if we could move this country back to where people save 10% of their income, live within their means, and we start investing in capital rather than in consumables, we could get the country back on track. Those at the bottom might not be elevated, but the middle class wouldn’t be getting as screwed as they are today.
The chances are slim to none, but I’m ever the optimist.
How the hell do you expect me to pull off a convincing doppelganger if you change your icon???
Admin – now we are 100% saying the same thing. I agree totally.
Fred – I will log out and give you your chance. You have put up classics recently.
Why the fuck should I care if someone has a million dollars or a billion dollars? I don’t give a flying fuck how rich someone else is, what they own, what percentage of what they own.
Here is what I care about. The opportunity to live free and and the opportunity to prosper.
That’s pretty much it.
The rest is pure jealousy bullshiit. Wealth re-distribution is theft, pure and simple.
Economic success does not always have a direct correlation to intelligence, industriousness or ability. It very often does, however. If you reset everything to zero with the same playing conditions, the same people would control the wealth in short order! Dollars are just our scorecard. The only way to win is to have intangibles that make life fulfilling regardless of how many zeroes are in your bank account. The standard of living is ridiculously high for the poorest in our country. So much so that obesity and not starvation is our problem. The malaise of not having a purpose filled existence or stimulating work allows these people to focus on what they lack rather than what they need and already have. Everyone is given a certain amount of abilities, resources and time. Whatever they make of it is their choice.
Stuck – I agree with that too.
Fred – you said “If you reset everything to zero with the same playing conditions, the same people would control the wealth in short order! ”
That was a point I was making. You can strip wealth away from the toop 400 people, but in my opinion it will either be lost entirely or will make its way into the hands of people who are already pretty wealthy. We need to eliminate the ability to wield power, and then hopefully everyone will be on the proverbial level playing field.
The enemies of the populations of the world are concentration/TBTF anything. Corporations are an example of this, as well as the concentration of government, concentration of banking and the concetration of wealth and military power.
IMO, the only way to correct our problems is by reducing all of these. Never happen without chaos/war/revolution.
An inheritance tax is vital and it is NOT about jealousy. It is to reduce the Master/Slave relationship that we have now. If a person is born dumb/poor, is he not entitled (this may be too strong a word) to earths bounty. After all, he is a human being. But if a person or their lineage has bought up all that the earth has to offer then the poor/dumb are born into servitude, no?
So, the answer is, if you are a poor dumb fuck then do not have kids. This will eventually end all slavery (the slaves will be dead) and the rich will have to eat each other. Or labor will have much more leverage in negotiating their pay if they are not too stupid.
Hmph. I’ll have to get back to this one later.
This mentality is still way behind the curve. There isn’t going to be enough of anything left to ‘rebuild infrastructure’ or for robots to do the work of people or to continue anything high tech. The system of human industrial civilization is predicated upon cheap and plentiful oil. That is gone and is not coming back. This system will collapse. It is already. Roads are being turned into gravel, streetlights are being turned off never to come back on. In the future there isn’t going to be such a thing as a factory any more, or a job. People will have occupations, the most important of which is going to be FARMER. Relocalization of agriculture is the single most important step to the continuation of civilization, and indeed humanity, on any scale.
“Everyone is given a certain amount of abilities, resources and time. Whatever they make of it is their choice.” -Fred Flinstone
That by far is the most actionable statement I have read on this -the burning platform.
You Fred have in one sentence (well, two) have eclipsed llpoh, admin, that fuckwad colma, sss, howard, stuck, newsy, muck, fuck, and duck.
thank you.
King-shat
Income brackets are not rigid. There is much movement between them. If I correctly recall a Thomas Sowell piece I read recently, of the top earners today, one-quarter were in the bottom bracket in 1970. Inheritance taxes are unnecessary and counter productive as a method of income redistribution, as much of the money disappears in the bureaucracy and that which actually makes it back to people is pissed away on shit. What needs to happen is for government to get off the roof of the building and stop holding the ladder fast so the top earners don’t fall off, and people with better ideas and products can make the climb.
My grandfather built a steel fabrication business and was a multi-millionaire before he fucked it up and lost everything. His tale is a classic American rags-to-riches-to-rags story. It can and frequently does happen, unless you are plugged in to the power structure.
As far as “if you are a poor dumb fuck then don’t have kids,” everyone’s favorite socialists the Scandinavian countries did precisely that through forced sterilization. I personally find it morally reprehensible, but you can’t really argue with the results.
KaD – I see you fall into the RE view of the future. Following is the cahnge from 2006 to 2007 of enegy consumption in the US by percentage and type.
2009
* Oil 35.3%
* Natural gas 23.4%
* Coal 19.7%
* Nuclear 8%.3
* Renewable Engery 7.7%
2006
* Oil 40%
* Natural gas 22%
* Coal 23%
* Nuclear 8%
* Renewable Engery 7%
This clear shows a trend away from oil. The US seems to have some hundreds of years supply of coal at current levels of use. Natural gas is not in good shape and may only have 10 years supply. We will clearly turn toward nuclear and renewables going forward, and we will obviously make heavy use of coal reserves. Additionally, as oil becomes more expensive and scarce, we will retrieve oil from currently uneconomic sources. Farming will not become a heavy provider of jobs any time soon. In worst case scenarios, energy will be funneled into agriculture and transportation of food. We are very far from reverting to an agrarian society.
Thought it may be helpful to provide an example of how cronies are wreaking havoc on small businesses, destroying economic and individual freedom.
Back in the day, all a house painter needed to earn a living was a bucket of paint, ladder, brushes, rollers and a drop cloth. He was free to earn an honest living by providing a service and was paid a living wage. His customers were free to hire or fire him, based on the quality of his work.
Not today.
The EPA Mandates that all house painters wear protective gear – special suits, masks when they paint or prep a home constructed before 19something. The housepainter is also required to cover the structure in a particular way so that paint chips do not fly into the air or soil.
The painter, who once could fly solo and keep his overhead costs low, so that he could keep more money for himself, now has to hire an assistant.
I addition to higher labor costs, his material costs sky-rocket. Now he has to purchase the special clothing and mandated materials from an approved state vendor.
He is also required to test the paint chips with a special government approved device, that once again can only be purchased from a state approved vendor.
Is the gov finished torturing the poor house painter? Not by a long-shot.
A state bureaucrat, who must report into the federal bureaucrat requires the housepainter be certified in the new procedures. He must take a state-approved course, from a state-approved vendor – which of course he us required to pay for.
If he doesn’t comply with the new regs, he face egregious fines and slam time.
What about the consumer you ask?
Since the painters costs have risen – he passes those onto his customers who now pay more for the same service. The customer is no longer free to hire any painter of his choice. He must hire a painter certified to perform the new procedures. If the customer doe not comply, he faces significant fines and imprisonment.
This is a painful post on so many levels but thought it may be helpful to illustrate how much freedom we have lost.
The manufacturers and sellers of the new EPA mandated materials have spent their lobbying money well. These firms – whose lobbyists help write the new regulations have carved out a lucrative niche and have the playing field all to themselves.
The little guy, who’s just trying to make an honest living is no longer free to operate his business according to free market principals. He is enslaved to a expansive government that no longer represents his interests.
If we can change this paradigm our economic and personal freedoms will return.
Sorry about the typos – “change”, “energy consumption”
Bob. A Millenial (or X’er?) who reads Thomas Sowell. Please reproduce faster.
Mary – you are very correct in what you say. But although return of economic freedo will indeed help the situation, tech advances and low-cost competition will still make it very difficult for vast numbers of Americans to maintain a reasonable lifestyle.
I hear ya Llpoh.
The prospect of turning back the cronie capitalists and ending the tyranny is so daunting, I tend to file the unskilled worker dilemma under “tackle later” file.
But you are right to pose the question and analyze how we can reboot America’s economic engine and prepare the largest number of workers for a prosperous future.
Great article and conversation. Thanks!
Thanks Mary. It is not a topic our esteemed politicians will go near with a ten foot pole. And by the look of it some readers herein are uneasy about it as well – it is difficult to face a situation that may simply have no good solution. We can improve things by ensuring there is economic freedom, but that doesn’t mean there will be universal success for all.
llpoh
Don’t worry. When the SHTF and the oil runs out and everyone’s wealth evaporates in hyperinflation, we can just eat the poor. See. I solved another dilemma. Next problem.
llpoh-
Do you think there could ever be a technological backlash? That people may throw up their hands and say enough is enough? It seems that we could eventually reach a point where it becomes overwhelming just managing the devices that increase our productivity to which we’ve become accustomed.
Or is this a potential growth area in and of itself? That is, technology that is developed just to manage the existing technology more effectively.
Now that I read that it sounds kind of like something that already exists, but I’ll just post this to see what you have to say. I’m having a hard time articulating this idea…..
Modern technology requires massive inputs of oil to function. Peak oil means peak technology.
Bob – seems to me that each generation becomes comfortable with the tech that is around them when they are young. I can handle computers and robots and such just fine. It is all the new stuff that trhrows me – I can’t use but 5% of my mobile phone’s capability. What is Blackberry messenger? How do I download pics off of it? Facebook? No fucking idea what that stuff is.
But my kids would deal with it without missing a beat. As a rule, manufacturing seems to get about 2.5% more efficient each year (although it seems to be slowing). Over twenty years, a company employing 100 people initially would need only 60 to get the same output. Over fifty years that number would be around 30 employs needed to get the same output.
So in a nutshell, over time, manufacturing is doomed simply owing to becoming increasingly more efficient, and due to the fact that there are finite needs for “stuff”. Companies like Apple try to make up for this by planned obsolescence – but in general over a fifty year period the need for manufacturing employees will drop by about 70%. Interesting to note that in 1965 manufacturing was around 50% of the countries output, and today it is around 15% – a 70% drop.
I do not think there will be a backlash as long as capitalism is in play – business owners/managers will become steadily more effcient as it is in their individual best interests to do so. Robots/ high tech scheduling/rapid tool change/automated packaging and identification and storage systems/etc. will continue to be developed so long as this incentive exists. Young people will understand the tech involved, and older managers will have enough understanding to drive the transition.
I, too, am often frustrated by new tech products, but I do not see mere frustration hindering their advance.
That makes sense. There’s always going to be a demand for increases in productivity.
There’s more to this thought but I need to take a little more time developing it.
For some reason, thumbs not available to me or I would have given several. llpoh-last post and original post are right on the mark. So too Mary Malone. One factor that may slightly help domestic manufacture/middle class jobs is the inevitable increase in transportation costs due to increased energy costs. Admittedly, probably not enough to turn things around.
Aka – thanks for that. The thumbs down buttons seem to. Woork fine on all my posts. I think maybe the Admin has done me ugly.
Thumbs work now-don’t blame Admin. Thumbs ups where warranted. Again-nice piece. Dovetails in my alcohol-impaired logic with SSS’ Pink Gold piece: 1) Fed agencies preventing lower skilled but relatively good paying jobs in mining and 2) Increasing operating costs of domestic agriculture.
llpoh~
nice article. well done.
some of the points you make i agree with, but look at from a slightly different angle or perspective. and most of what you wrote is undeniably factual, or is consistent with my own opinions and interpretations.
it is going to be very difficult to discuss the slightly different angles and approaches i have, in this format. much better to discuss in person, over a beer or four.
i’ll try anyway. but only by tossing out a couple of thoughts.
first, schooling and education. because this is one of my favorite beefs. in brief, a nation that became great by manufacturing stuff needed an educated workforce. not just line workers in factories (although they needed basic education that used to be provided by compulsory public schools, as henry ford famously advocated), but middle managers. the great white collar class.
so, public schools churned out an educated populace. the best schooled nation on earth (in the 50s and 60s).
but, the wealth formation methods of the nation changed. the business of america switched from making stuff, to consuming stuff. the educated factory worker and factory manager was no longer needed, as in turn southern europe, japan, taiwan, mexico, the philipines, and finally china and india manufactured stuff for americans to consume. the term ‘consumers’ even was applied to the american masses.
consumers do not need education. in fact, certain specific areas of ignorance make people consume more. an ignorance of how compound interest works. a lack of facility with simple addition and subtraction, or budgeting. an impatience for reading fine print or product warnings. most importantly, an absence of critical thinking skills. consumers who respond to emotional appeals buy much more than consumers who think.
and voilá; like magic, the compulsory public school systems start cranking out exactly this product.
of course, there are other effects of this tremendous failure/success (depending on perspective) of our school systems. other effects that erode our american middle class; independent of the loss of manufacturing jobs. my point–if schools merely continued to function over the past three decades as they had the previous three, everything else being held constant, the american middle class does not erode as badly as it has.
but, man, schooling and manufacturing, and other factors of growing wealth inequality are so tightly interwoven. it is so hard to pull out one factor in isolation. for example, maybe a more educated populace never elects politicians who have promoted nafta/globalization/export of jobs.
manufacturing was integral in the formation and growth of the american middle class. but in the early decades of american (and british) industrialization, there was plenty of wealth inequality. our gilded age was the result of wealth amassed on the back of cheap energy and railroad distribution of goods. but a whole lot of those goods were manufactured domestically. industrialization was well under way by the end of the 19th century.
not just the top end featured great wealth in those days. the bottom end too. and a whole lot of farm boys who came to the city traded in rural subsistence for urban subsistence. dickens had a couple of tales of rural woe, but more notably wrote of profound poverty of the workers in the great manufacturing economy. even bob crachit was a white-collar worker; yet hardly middle class (although a health plan to cover tiny tim’s medical expenses would’ve helped).
i don’t intend to try to pick apart your article with 19th century london anecdotes. only suggest that manufacturing was in place for many decades before the great american (and british) middle class took hold. and there may be other social/political/cultural factors just as essential. otoh, maybe not–the other key factor might simply be time; that the manufacturing economy needed several decades to ‘mature’ for the middle management and working classes to emerge fully. but that time was also marked by greater political accountability to the masses, including female suffrage (i am sure you agree with me this was the beginning of the end), trade unionism (just sayin’, not advocatin’), greater overall wealth of society making charitable sentiments and public improvement (health, housing, education) issues more affordable. something as narrow as the concept of philanthropy of the super rich is very different today than 100 years ago. carnegie, rockefeller and even jp morgan gave away tremendous percentages of their wealth. set aside bill gates, nowadays the super rich lend their name to fund raising efforts, or the really enlightened speak out in favor of a millionaires’ tax. oprah builds one school in south africa; carnegie built thousands of libraries, as one of many of his major charitable efforts
even the issue of the size of the pie increasing so astronomically, as it did with industrialization, and after ww2 for the us by being the only big country to survive with it’s industrial base intact. a bigger pie maybe inherently alters cultural consensus on how it should be split. and those consensuses can shift with time.
finally, there is one big huge factor that has to be considered. cheap energy. the sine qua non of the dawn of the industrial age and the manufacturing glory days of the usa. coal in the north of england,in appalachia and pennsylvania; then oil in those same pennsylvania fields, later in oklahoma, texas, and british controlled arabia, persia and mesopotamia.
emphasis on the cheap.
and the day the cheap oil died was 1973. although, if the key factor is oil rather than manufacturing, well just as sure as those jobs ain’t coming back, neither is $15/barrel light sweet crude. peak oil or no peak oil.
you can very easily fold everything i’ve said into your thesis. quite easily. but there are other ways, at least other angles, from which to look at the issue of wealth inequality. i’m throwing out a few. i have others too.
you dumb fuckstick.
(thought you were off the hook, didn’t you.)
Damn, Howard. I was digging on your whole comment, although thinking it was an extension of, rather than counterpoint to, llpoh’s OP. Then I see the “dumb fuckstick” line. Yeah, I thought llpoh (and I) was off the hook indeed. Now I can’t figure out whether to thumb up or down. Confused-will need to reread when sober.
llpoh said he likes my dirty sexy talk. i aim to please.
Maybe the term restitution of wealth would be better to use than redistribution of wealth.
You have to deal with the argument that is so often used ” the rich worked hard for it and they deserve it” Fine. Let those who earned it keep it. No argument. That’s the way it should be.
Whats not OK with is the people who worked hard at stealing it from folks who worked hard at working to earn it.
and let me briefly pose more of a direct counterpoint.
if there are a number of significant factors that were critical in building the equitable distribution of national wealth we had in the usa during a ‘golden age’ of the 50s and 60s;
factors which are sufficiently independent of manufacturing dominance, which eroded in recent decades;
that could be plausibly reversed, in the absence of a restoration of our manufacturing heyday,
then, a vibrant middle class can be rebuilt, and a fair distribution of wealth similar to the way things were, might be possible. even based on a ‘high tech’, ‘service based’ economy.
i don’t know. i sure am not convinced. but, a lot of those factors, like a political system not wholly owned by big money interests, a functional school system, are worthy of seeking for benefits aside from wealth distribution benefits.
kinda like i don’t believe in man-made global warming, but it is still a good idea to reduce automobile emissions (without some wacky super high cost carbon tax scheme) for other benefits aside from temperature.
and my bias/opinion based on very limited knowledge of all of this stuff, is that the concentration of wealth at the top is much more a product of government, tax and monetary policies resulting from the folks at the top having complete control of the government than anything else. and that factor at least permitted, but more likely caused the rapid de-manufacturing of our economy.
and with a return of even a percentage of our lost manufacturing base, in conjunction with reversal of a bunch of these other factors, could spread the wealth more equitably than it is done today.
but—
i remain vehemently opposed to the same government, that while controlled and dictated to by the rich to make them richer, to turn around and start seizing wealth from peter to lift paul in a manner that would make karl marx proud.
sure, tax some millionaires to build some schools, to teach exponents and actual thinking skills. swing the pendulum back the other direction. but a government limit on executive pay (for firms that don’t get bailouts) or to finance a living wage, or some other huey long bullstuff–no frigging way.
something i have been pondering is whether the growing concentration of wealth at the top, and bigger spread between top and bottom is symptom or cause. does wealth inequality cause control of the politicians, increased corruption and even fourth turning style breakdowns? or does control of the politicians lead to increased corruption and more loot for the top?
probably not either or. probably involves positive feedback processes. but i suspect, and i lean toward wealth inequality being a symptom of other situations/problems/breakdowns.
and, maybe the biggest is loss of manufacturing offshore. and here we are back at the top.
interesting, complicated topic, with overlapping and interwoven ideas and factors.
i’m just killing time anyway; shorted the s+p futures, and i’m watching them transfixed. dropped more on the london open. wish i had made my bet ten times bigger.
Great stuff howard. There is lots to cover. But I was. Only trying to focus on my main point that I do not see a huge middle class returning. I think that is past us. We can debate what happened. And I am sure I am shallow in my thinking with regard to that, but do you see any way that the lower economic classes can recover considering modern reality?
Really good stuff. Should have called it “howard’s Ruminations”.
loopy, Kudos for a fine thought provoking read.That said, it stands to reason that a huge swathe of that a huge swathe of top earners would not be so if not for access to the purse strings of the Federal government.
No doubt, the easy- money -access opportunists attached to Uncle Sugar’s teets are very intelligent players, but what happens when the money dies?
I thinking that the EMAOs along with tens of thousands of spoon fed government drones will either set about putting their intellects to work in the private sector or they will totally embrace an ever increasing totalitarian government and engage in a last feast on the remains of an already cannibalized public.
All evidence suggests totalitarianism for US, but there’s always hope and faith in God.
Industrial Policy: New Wine in Old Bottles
I. The Unsustainability of the Existing System
Einstein
http://c4ss.org/wp-content/uploads/2009/01/industrialpolicycarson0109.pdf
Fascism in America
Posted: November 02, 2011
4:54 pm Eastern
© 2011
The federal government has lost another 72 million of your tax dollars. Here we go again.
The feds have gambled with your money again, and they’ve lost it again; this time with a company called Beacon Power. You’ve probably never heard of this company. Candidly, before the announcement of its bankruptcy filing this week, neither had I. Just as you probably had never heard of Solyndra before its bankruptcy, neither had I. But your government has heard of both.
Solyndra and Beacon received loans the government guaranteed – $535 million and $72 million respectively. In each case, your tax dollars were spent when these companies borrowed money they couldn’t return. In each case, federal bureaucrats used your money to pay back loans investors gave to these failing companies because the bureaucrats want to wean us off of oil and onto so-called green energy, and because the government was friends with the investors. In each case, the investment the federal government made in these firms was risky and was lost.
How did this happen? The phenomenon of the government picking winners and losers is as old as our country itself. When we were colonists and the king and Parliament imposed the Stamp Act on us – everyone needed to affix a government stamp to all documents in his possession – the king gave the monopoly on selling the stamps to his favorite colonists. Competition for business in stamps was illegal. Abraham Lincoln gave away federal land to his favorite railroads so they could have a leg up on the competition that had to pay for its land. Woodrow Wilson gave government business to bankers who were his political allies, and they made money even in bad times, while the competition struggled.
But we have not seen government intervention into the free market the likes of which has become apparent recently. President George W. Bush borrowed money in your name and bailed out the insurance company AIG, General Motors and Chrysler before they went bankrupt, and hundreds of banks. President Obama has received legal authority from Congress to bail out or even to finance whomever he wishes, and he has used the bureaucrats in the Department of Energy to advise him how to do so.
When you invest your own money, your biggest concern is that you’ll lose the investment. To relieve you of that, you research a company before lending it your money or buying its stock. You make your decision on the likelihood of yield and the amount of money you will earn from the investment, and whether or not you can afford the loss of your investment. This is your natural right to choose to do with your money as you wish.
But when the government invests money for you, its decision-making is not grounded in free choice or in sound business judgment. Its decision is grounded in power and politics. The power is its ability to extract tax dollars from you even if you profoundly disagree with the way it will spend what it has extracted. The power is the government’s ability to borrow cash in your name, even if you disagree with the borrowing. Since the government isn’t risking its own money, but yours, it needn’t worry about affording a loss.
Stated differently, the government doesn’t care if it loses your money. It only cares if it loses your votes and thus loses power. Its goal is not a return on investment; its goal is staying in power. Its decision-making on risking your money is not based in sound business judgment, but on power politics. It wants to tell you how to live, and it wants you to keep it in power.
Calling this crony capitalism actually gives cronyism a good name. Capitalism is freedom. It is your unfettered ability to do with your money – as an investor, as a consumer, as a saver, as an employer, as a worker – as you wish, with no government intervention. We have seen what happens when the government intervenes: Your money goes to a place you would never voluntarily send it. That’s not capitalism. That’s private ownership but government investment. That’s private ownership but government control. That’s extracting money by the force of law and spending it against your will. And that is called fascism.
Do we want this fascism here? It already is.
http://www.wnd.com/index.php?fa=PAGE.view&pageId=363229
llpoh
A thoughtful piece.
I have a question slightly on a tangent:
Manufacturing has been on the slippery slope for some time. Meanwhile, since the start of the housing bubble burst and subsequent decline in mass employment, TPTB have rabbited on about improving skill sets, Obama pushing the ‘all the young should go to college’ and the rest of the bullshit.
What I am wondering, of the millions subsequently disemployed, how is it they were even employed before? Earning a wage doing … something. They must have had some skills that benefitted their employment. Sure, the housing construction industry overbuilt, so a decline in that sector was inevitable. Hey, even back in November 2006, when USG laid off 1,100 workers, I saw that clue as a forecast for the rest of the meltdown.
It’s not like some 20-somethings now with a music history degree and no practical experience in real life, or common sense. I mean those intermediate middle-age workers who’d worked long years. And suddenly unemployed and … they had a mind wipe? I don’t get it.
Dump DC .It’s the only viable alternative to the economical death deal of crony capitalism .
Yep , that’s right.The Union and the Confederacy were both wrong.Central planning only benefits the oligarchy.
http://lewrockwell.com/bonner/bonner516.html
Everybody Hates Capitalism
by Bill Bonner
Daily Reckoning
But over time, the giveaways, bribes, regulations, intercessions and meddling on the part of the government have a big effect on the economy. The more the government interferes with market signals and market-based capital allocation, the less able the economy is to produce real wealth. More and more resources are purloined by the insiders before the truck reaches its destination. Paperwork, lawyers, administration, regulation, taxes take a toll. So does misallocation of capital investment to huge, unproductive industries such as education, health, and defense. There is also a shift of wealth generally from those who earn it to those to whom it is redistributed…and from capital formation to consumption. And gradually the economy becomes paralyzed and parasitic…and nearly everyone gets poorer. And often, the state…and the mobs that support it…become desperate for more money. Then…the rich had better watch out!
Stucky says:
“Why the fuck should I care if someone has a million dollars or a billion dollars? I don’t give a flying fuck how rich someone else is, what they own, what percentage of what they own.
Here is what I care about. The opportunity to live free and and the opportunity to prosper.”
My 70 years just passed before my eyes. Not a bad trip.
Wealth redistribution makes sense if you believe that the wealth was already mal-distributed. In other words, someone who earned his wealth through productive endeavor should be entitled (I hate that word, really) to keep it.
But what of the wealthy elite who “earned” their wealth by rigging the system to siphon wealth toward themselves? The crony capitalists, the bankers, the politicians. They already “redistributed” the wealth, so to speak. No productive endeavor was involved. Who can argue against redistributing it back?
The catch is, how do you differentiate one from the other? Without such differentiation, wealth redistribution simply devolves into class war, and those who truly earned the wealth, the productive segment of society, gets punished along with the moochers and looters of society. Then the productive have little incentive to produce. All outlined quite nicely in Atlas Shrugged. You can punish Oren Boyle (the crony capitalist), but then you also punish Hank Rearden (the producer).
It has always been that all men(women) are not created equal (regardless of the Bill of Rights). They are created along that odious Bell Curve that rules all of nature whether we like it or not.
As a result, there will always be people smarted or dumber than you are, poorer or richer, happier or sadder, meaner or kinder – hell, pick your trait and you will find, with a sufficient number of samples, a damned stinking bell curve will rule every one of them (not my opinion but a proven fact).
In every civilization we have been able to document- up to and including the current ones – as soon as the people manage to produce more than they, themselves, can use, they start trading the surplus to neighbors far and near for things they don’t have or want AND they start taking better care of their elderly, demented and handicapped. Up until the 20th Century, no civilization did much for the poor members of their societies except work them to death.
It would appear that we have now – world wide – decided that taking care of the “poor” (especially in countries where the “poor” vote!) is more important that being productive, producing more than we can use in our specialties and marketing this surplus to others. Now, thanks to globalization of trade, we are in the process of making everyone equally poor by raising extremely low wages in formerly non-productive countries and destroying the higher wages of the formerly middle class in post-developed countries.
What to do? One thing I would do is whack unemployment benefits which is proven to increase unemployment over time among a certain percentage of the population collecting it. This has to be done in conjunction with ripping up most of the laws, rules, regulations, 2nd books of “law”, that control labor and throw roadblocks in the way of the entrepreneurs and creators of small business. If these two things are not done at the same time (i.e. no minimum wage, no licensing requirement to limit entry into a business, et al) it just makes the problem worse. Eliminating entry barriers to small business has to come first. Then eliminate unemployment and replace it with “three hots and a cot”. Buy up a great pile of what is now seedy motels and drug distribution point, convert them into minimal caves to live in and provide the unemployed 3 hot meals and cots to sleep in. No SNAP no bullshit charge cards no nothing else. After their first hot in the AM, the unemployed would then go seek work – any work and whatever wage they could earn.
Until they worked their way out of it, they keep the three hots and a cot and can earn anything they can. Eventually, as things get pulled back together following the general crash and unrest that follows the massive change of direction, they’ll get damn sick and tire of eating military shit on a shingle every morning and save up enough to move on.
What we need is a blueprint that takes us from where we are now ($16 trillion on the books, $100 – $200 trillion in off the books debt) that will defaulted on either by inflating it away or bankruptcy) that has to include (in order) the “three hots and a cot” concept, dissolution of rules, laws, and anything else that roadblocks the formation of small business, elimination of the double taxation of corporate income, dissolution of debt, the creation of a smaller, meaner SS/Medicare systems that goes back to the purpose it was first created for : prevent the old and sick from being destitute in their last years.
Redefine and restructure the medical and pharmaceutical industry onto a level playing table so US citizens, who pay 100% of the R&D for drugs, medical hardware invention and the rest of the world gets a free ride on our backs MUST STOP..
Medicaid must be restructured to eliminate the terrible fraud and abuse that now plagues the program (some estimates go as high as 40% of Medicare changes are fraudulent) and costs of physicians/nurses can be covered by a deal whereby their student loans can be reduced at a fair rate as they work it off.
Hospital charges are a nightmare (when a not-for-profit hospital charges over $20,000 for an emergency overnight stay that found nothing wrong, something is badly out of whack) and as much as it hurts me to say it, it may take nationalization of the hospitals to cut the billing abuse. I’d love some help in figuring out a freemarket solution to hosital overcharges (and yes, I know, I know – they do it to fund emergency visits from non-insured).
I think I’ve run off at the mouth (RE style) long enough. Would like some comments please.
MA
Good post Muck.
It’s been my opinion for some time now that Americans are overdue for a “tough love” period like drug rehab, addicted as they are to the poison peddled by Uncle Sugar. I’m not a fan of the New Deal programs in general, but I’ve always wondered why unemployment hasn’t functioned like a Civilian Conservation Corps or Work Progress Administration, even if it just came down to digging a ditch, moving the dirt across the lot, then moving it back and filling the ditch in again. People becoming accustomed to doing something for nothing is never a good thing.
But I think the larger problem to accomplishing this is the widespread adherence to the religion of modern liberalism. The “it’s not my fault” crowd isn’t going to renounce its faith and learn personal responsibility. These kinds of deeply-seeded opinions don’t often change. How do we get the irresponsible to become responsible, when they’re so used to copping out and blaming others for their problems?
For example, a guy I know is self-employed. He doesn’t have any withholding and hasn’t filed a return in about 5 years so he owes $25,000 in back taxes. His business has suffered since the economic downturn and he’s trying to get on food stamps. He siphons gas from the cars at his place of business rather than pay for it himself. But he always has money for weed and never misses a Seahawks game, which is not cheap. This mentality is what’s poisoning our country today. You take away the Medicaid, SNAP, and put these people in what amounts to a work camp, this is a decline in their standard of living. They’re not going to take it lying down.
Great idea, Muck!
“Buy up a great pile of what is now seedy motels and drug distribution point, convert them into minimal caves to live in and provide the unemployed 3 hot meals and cots to sleep in. No SNAP no bullshit charge cards no nothing else”
And of course, the Govm’t is gonna contract the operation of these shantyvilles out to the owners of such.
WOW. I’m jacked!
Just think… crazyivan as King Shit of the “clients” at the ol Twighlight Motel.
You sir, are a visionary.
Called the realator, listed the farm.
Fuck…..Muck
Thanks again!
A lot of good. Thhoughts hereein. I do not profess to be a real deep thhinker on this stuff.
Admin – I disagree re the tech comment. I understand about energy issues but I see no reaon for tech advance to abate. It has often been said that there is nothinng left to develop or know in the field of technology. Each time that has been wrong.
Obviously we cannot consume oil at the current pace. It makes up about 35 ppercent of the energy used. Some portion of that will be replaced by renewables. Nuclear is an inevitable opttion as well. Further reductions in energy use will be necessary. We are not about to lose all of the energy output anytime soon. If we can drop consumption around 1d to 20 percent I think we will be ok. I am no expert tho. Ask SSS and others.
Muck/Howard/Flash et al- good thought provoking comments. Many thanks.
dmin
adress
toop
enegy
Engery
renewables
years(‘)
forward(,)
freedo
trhrows
effcient
Woork
howard
howard’s
Hi llpoh:
If the article wasn’t so wonderfully splendid, I’d have accused Davos of being a doppleganger and writing it.
One thing I’ve learned about greenhouses is you don’t throw stones.
Greenhouse:
Another thing I learned about greenhouses is you don’t inhale the pesticide…
It seems you have.
Noo
fuc
fucking
eye
d
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what the fuck you are saying.
Hey Colma Rising:
You missed a good TBP food-fight, where someone who will remain nameless said the following—
“You mention that you have limited English/grammar skills. You really think that has gone un-noticed? You are borderline illiterate. I haven’t taken you to task over it, but there it is. You are simply poorly educated. As a grown man, it is your fault that you haven’t educated yourself. You said “Some people are morons and they need to be told that they are fucking morons.” Davos, no fooling, you are a moron.”
“I am way smarter than you, tremendously better educated and experienced, more successful, and am capable of advanced reasoning.”
If you still don’t get it, I’ll give you a hint. The author of those quotes above also made everyone of those English mistakes that I pointed out.
Personally, as a longtime lurker I thought I’d point out the humor, since apparently it went largely unnoticed.
Greenhouse – I am a horrible typer. I am especially horrible when on a mobile phone. It is nearly impossible to vet before it hits the ether. Upon review I spotted the same errors. Please forgive the mistakes. The phone drops letters, doubles up on lettters, puts caps where they do not belong etc. I will try to do better.
That said, wanna compare educational creds?
You might consider an iPhone or an iPad.
If you were an Ivy league MBA and PhD would you really discuss that on TBP? Thank you, but I’ll go back to lurking now.
Cheers.
Lurk on, Greenhouse. llpoh’s typing/phone posting issues are common knowledge. Functional illiteracy is not a matter of typos and oddball spellcheck errors, it is flawed basic grammar and obvious, repeated misspelling and incorrect word use. More importantly, llpoh’s basic arguments are coherent, consistent and technically accurate. But that was an amusing exchange-I’ll give you that.