Friday, December 12, 2008

It's Theft, Feudalism is Back

Ayn Rand: The only social system that fully recognizes individual rights is capitalism. When I say "capitalism," I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics.

the proper moral purpose of one's life is the pursuit of one's own happiness or rational self-interest

The disciples of Ayn Rand and laissez-faire capitalism, Milton Friedman, Alan Greenspan and Reagan were the culprits who kicked off this mess and for the next 20 years Bush I, Clinton and Bush II ably guided by Greenspan and a dominant Republican congress joined the ride. It was quite a trip with a systemic enrichment of 1% of the population while flattening middle class earnings and reducing the buying power of another 40% of the population. It's what happened in the period leading up to the Great Depression.

I don't know what the outcome is going to be from this meltdown but I can't see a simple turnaround because in America greed has trashed the system and it has to be rebuilt.

We have returned to an 17th century feudal model where the wealth of the nation has gravitated to a small number of powerful people. The reality is that deregulation released those with power from any constraints on their desire to have more. Like the dukes and kings of old they took as much as they could; and if there was more they would take that too.

It's theft when a young hedge fund manager can earn in 10 minutes what the average worker earns in a year or many times the income of a Nobel Prize winner, the President of his country or that of an internationally renowned artist. It's theft when CEOs of merchant banks and hedge funds become overnight billionaires and Presidents of large organizations now average incomes eight hundred times that of an average worker. Forty years ago it was only 30 to 40 times an average workers wages. Its theft when they influence politicians to remove inheritance taxes and promote flat taxes so they and their children can take it all home. It's theft when they hide their ill gotten gains in offshore tax havens (and most do) so that they and their corporations can avoid paying their fare share. And its theft when each year they manage to gain a bigger share. (A 2007 study of the Congressional Office Bureau found the wealth of the richest 1 percent of Americans totalled $16.8 trillion, $2 trillion more than the combined wealth of the lower 90 percent of the population)

Now dumping public funds on financial institutions to flood the market with easy credit again and subsidizing mortgages and car buying avoids the basic issues facing working families and will at best put a temporary halt in the inevitable collapse that is bound to continue. The reality is that the wealth of the nation has been stolen, workers have lost buying power over the past twenty years, and unless that changes another frenzy of credit buying will just repeat the cycle.

America has to rebuild with a different model and I have my doubts they can do it. Too many powerful people have an inbred belief in laissez-faire capitalism and have too much to lose. That means, I believe, despite the good intentions of Obama, it is going to get a lot worse. If Merkel has her way the same will happen in Europe.