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SOCIAL DEMOCRACY AND ECONOMIC DEVELOPMENT (PART I)

July 14, 2015

SOCIAL DEMOCRACY AND ECONOMIC DEVELOPMENT (PART I)

Much is made by the rich and corporate class and its political minions these days about how our current system of market based economics in unregulated form is the best going and as practiced superior to any other system in the free world, including those of the social democracies in Europe. Query: the best for whom, the one percent or the rest of us? Shall we measure the value of an economic system only by the profits of the elite few or shall we measure its value as applied to the broad swath of the citizenry within its reach?  Shorn of trickle down idiocy, the answer in a democracy real or pretended is obvious.

Wall Street’s big banks have relatively little capital (and who needs it in these times of leverage ratios run amok?) but instead manage others’ money in investment banking in trades, bonds, derivatives etc. in a global marketplace with Uncle Sam in a backup position for bailouts if such investments go sour. This, of course, is corporate socialism, i.e., if the elite’s deals make money, they keep the profits, and if they lose money in sufficient quantities, we the people step in and come up with bailout money so that the banks that are “too big to fail” don’t. This total misallocation of risk and liability somehow becomes “free enterprise” per the elite’s propaganda organs and purveyors of ancient economic theory.

It is not “free enterprise,” it is corporate socialism. The only risk involved is to taxpayers; you and I take the risk but do not share in the rewards, if any. Why should the elite be rewarded for risks they are not taking while you and I are taking the risks but are not sharing in the rewards? Capitalism is designed to reward those who take risks. Corporate socialism rewards those who did not take risks. Will one of the Wall Street PR hacks explain that socialist reality which the rich and corporate class call “free enterprise” to us millions of involuntary “co-signers?

The answer, of course, is that the rich and corporate class and their banks and other aggregations of pooled capital are, to be sure, capitalists, but they are also selective socialists when they can beggar taxpayers for a helping hand when their investments (which taxpayers had no hand in making) go sour, and they are greatly assisted in this process by their campaign-contribution dependents sent to the Congress to (theoretically) represent the people, spouting free enterprise slogans all the way, slogans that have little real meaning in a day of monopoly pricing, buybacks, stock options to executives etc.

We all know the horror stories of how we not only bailed out the (then insolvent) big banks (and even their shareholders and insurers) during the Bush Great Recession, of how we bought their overvalued paper at par, of how our Fed gave them virtually free money to loan out to keep the economy afloat (and which they did not loan but bought treasuries and just sat there making money while small businesses went under for lack of capital, and even paying bonuses to their executives for making such smart investments in treasuries, investments a 5th-grader would have made).

So much for trusting the big banks to loan out billions to small businesses to save us from recession! Why should they – when investments in treasuries were riskless and loans and investments were so shaky in an economy headed south? Bottom lines first! So the economy drops into recession – so what? As one corporate executive stated a few years ago, “We’re in business to make money, not to babysit the American economy.” Such a statement is disgusting, but I’ll give him credit for being honest.

In all fairness, I must report that the Fed had no enforcement machinery to require the big banks to loan out their virtually free money gifts to small and medium-sized companies; all they could do was  make the billions of our money available to such banks and suggest that the banks use the money for such purpose (which they didn’t). Here’s the rub: the Congress had the power to require such banks to make such loans to small and medium-sized businesses, but since the banks helped put many influential members of Congress where they are and did not want any restrictions on what they could do with the Fed-granted billions, the Congress did nothing. Socialism, you know. Apparently the Congress was not interested in rescuing the American economy from further recession. What!

The foregoing is prologue. In Part II I will compare the results of how the economies in the social democracies of Europe compare with the results of how our economy is working here not primarily in terms of Wall Street profitability but rather in terms of how the rest of us are faring in this two-tiered economy of skewed policy and corporate-written tax and bankruptcy codes, among other such atrocities. Stay tuned.    GERALD     E

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