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August 23, 2013


Robert Kuttner throughout his book (The Squandering of America) emphasizes that we the people (through our government) must manage capitalism not just for our own sakes, but for the sake of the capitalists themselves. Left to the jungle of laissez faire in a lawless and unregulated atmosphere of dog eat dog, the system will either crash, or in the nature of things, there will only be one dog left. Capitalism by its very nature requires expansion, more this quarter than last, more this year than last. Sayings have sprung up to aid such inherent views: “If you stand still, you’re going backwards,” or in cases of slackened demand and cost-cutting austerity sure to follow, “we have to do more with less.”

The point guard for capitalism is the corporate structure. Corporations carry the ball for laissez faire capitalism and fiercely resist and resent intrusion (aka regulation) into their activities by government (the rest of us). Some seem to feel they have a God-given right to pollute, lie, cheat, embezzle and in general exploit the rest of us for the benefit of their bottom lines.

Government can be of use only as it provides benefits to their bottom lines and the means to achieve their goals of ever-expanding profit. Government can be useful, for instance, in seeing to it that financial corporations and those in the real economy enjoy trade and tax preferences over those given to you and me, not for any social worth to be rewarded, but plainly to enhance their profitability. Vulture corporations which swoop in to dismember other corporations in financial trouble and often gather in huge commissions and fees in the process are taxed at a “carried interest” rate of a maximum of 15%; you and I pay far more on our wages. As a matter of social worth, the efforts of vulture capitalists are apparently deemed to be of more value than those of sweaty wage-earners, a political decision with which I vehemently disagree. Paper exchanges do not create value; work in the real economy does.

Government can also be useful in negative ways; like not enforcing the provisions of the Sherman Anti-Trust Act. Bush, for instance had a grand total of a few anti-trust actions in his 8-year stewardship, none  of which never reached the trial stage and died on the vine, thus reinforcing the idea that corporations can commit anti-trust violations and get by with it. They are right; they can, and are, daily.

We go even further; we officially encourage monopolistic policies by allowing mergers of companies (see the then illegal merger of Citibank and Travelers Insurance Company years ago which was legalized by post-merger special retroactive legislation – a Bob Rubin maneuver) who merge in the interest of their bottom lines without regard to the public interest under the Sherman and Clayton Acts. By  allowing  monopolies which result from such unions instead of denying them, we the people are victimized with the higher prices and poorer services monopolies invariably bring. Without effective competition, we are stuck; we have no place to go. We pay the price to the monopolists, who are rewarded for their perfidy.

(Government-granted monopolies for patents and other such intellectual property encourages innovation, but that is another subject, and one currently being ravaged by greedmongers such as Big Pharma in its campaign to prevent generic manufacturing AFTER its patents have concluded.) As noted by Joseph Stiglitz in his latest book, The Price of Inequality, “The simplest way to a sustainable monopoly is getting the government to give you one.” He is right, though corporations can usually get their own these days without any particular fear that government will interfere with their anti-trust activities.

Government is useful in other ways as well. Corporations (especially financial corporations) typically cast “the government” as socialist, over-regulating, anti-free trade, over-taxing etc. Government is all bad, that is, unless you need a bailout to survive; then the government has to come in to “save the system,” (and the solvency hides of those who nearly brought the world down). The “system” was not devised by government; it was devised by private enterprise (i.e., free-market capitalism), and it failed (and is still failing), with catastrophic and continuing consequences.

We all know why; the big Wall Street banks (and to a far lesser extent, our sleepy and under-manned regulators) were responsible for the disappearance of hundreds of billions of dollars in a matter of hours due to the banks’ greedy antics. We the people (aka “government”) bailed them out, and the bailout was just the beginning, because in terms of the economic damage done by this disaster, trillions more have been and still are being paid out in terms of the Fed’s buying such banks’ paper at par and lost production, wages, revenues to governments both here and world-wide etc.

With such a decrease in world-wide income, the entire globe has taken a hit – and still is. Even China’s growth rate and exports have fallen. There are other indicia – the quality of jobs for the newly employed in this country is at or near minimum wage. We are years away from having digested this toxic lump visited upon us by Wall Street banks, but all is normal there. It was the government’s fault, you know, with all of that over-regulation. How can even a paid flack for that view sleep at night? Is there no end to lying and misrepresentation in the pursuit of pure greed? The disaster occurred because of under-regulation and the hubris of unfettered greed of Wall Street in its myopic drive to profits. Period!

Our bailout and approval of monopolistic practices have historical antecedents, of course. The East India Tea Company, which was given a royal charter for all the trade to India (a monopoly by kingly and thus God-given right), ran into financial trouble in 1772. Now known as the corporation that changed the world, East India Tea’s problems (unlike that caused by the Wall Street apostles of greed) were caused by largely extrinsic circumstances. There was a famine in Bengal and a stock market crash in London. With its survival threatened, the Bank of England loaned East India Tea hundreds of thousands of pounds. That was back in the old days where the banks financed business instead of putting on their investment armor and going into business themselves, and the contrast between now and then again points up Clinton’s worst mistake in office – that of repealing of the Glass-Steagall Act (which previously had built a wall between banks’ commercial and investment activities – and which we clearly need today even more than we did in 1933 when it was enacted.)

There is some hope, and speaking of hope, I hope this is not just showcasing. Senator Warren has introduced a bill to reinstate Glass-Steagall and again put up the wall between commercial and investment banking (no more bailouts etc.). (Expect Wall Street lobbyists to resist it). The Attorney General has also filed a Sherman objection to the merger of American and US Airways Airlines on grounds that it would result in monopoly control (80 percent of air traffic would be monopolized).  American is now in bankruptcy, and wants to merge and give us a monopoly? Save us!  GERALD  E

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