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Give Me Capitalism Without the Cronies
Much of the
monetary actions made by the Federal Reserve and other central banks last year
were done under the auspices that they were “trying to save capitalism” or “the
free market.”
Setting
aside the fact that the US hasn’t been a free market in decades, IF EVER (we’ll
address that point in a moment), this statement is so boldly stupid that it’s
amazing no one laughed at the powers that be when they claimed it.
“Save
capitalism?” what exactly does this statement mean? How does one save a system
that by very its nature encompasses failure and collapse for those who mess up?
For capitalism, in its purest form, is nothing if not a system through which
bad business decisions result in failure and good business decisions result in
success.
Indeed, if
some financial firm makes a colossal mistake (say, betting trillions of dollars
of mortgage backed securities the wrong way for example), and subsequently
finds itself insolvent, capitalism dictates that said firm should GO UNDER. End
of story. That IS Capitalism. And we have a bankruptcy system in place to hand
off the assets to creditors and more capable business people.
However,
that’s not the system we have in the US today. Indeed, it’s not clear to me
that we ever had that sort of system. As far back as the 1850s the US business
game was somewhat rigged as various entities attempted to form monopolies to
increase their leverage over their respective industries (John D Rockefeller’s
Standard Oil being the most obvious example). To think that these monopolies
were formed without some degree of government allowance or even approval is
naive.
However, at
least Rockefeller’s company actually MADE money.
In today’s
Crony capitalist economy, the political system is bought outright by the large
multinational corporations via various lobbying efforts/ corporate donations.
These multinationals then receive kickbacks in the form of deregulatory
policies and other tax loopholes, which permit them to further expand their
power and influence.
However,
unlike Rockefeller’s Standard Oil, most of these large-scale firms, especially
the banks, are in fact insolvent or would be if they did not have unprecedented
access to the US Federal Reserve and taxpayer dollars.
These groups
aren’t strong pillars of profitability, they’re massively insolvent,
unprofitable messes that wouldn’t exist if not for the fact that accounting
standards have been suspended or disregarded as a national policy (unless
you’re talking about ordinary Americans).
These companies
don’t “add value” to the US economy, if anything they are a net drag on US
productivity as they simply move capital around, most often from their clients
accounts into their own. How many Goldman Sachs clients made fortunes in
2008-2009? Not many. How many Goldman EMPLOYEES made fortunes or took in record
bonuses during that time? Quite a few.
Goldman of
course is only one example. But the whole US system operates based on the
principles of moral hazard, double standards, and crony capitalism.
Which brings
me to my final point.
The US is
NOT a capitalist country. And is sure as heck ain’t a free market. No, the US
is a CRONY capitalist state: a state where one’s position in the socio-economic
complex dictates the rules by which one can play. END OF STORY.
Look at the
individuals dictating our economic policy: Geithner, Summers, Rubin (to a
lesser degree). All of them have either been responsible for massive blow-ups,
which should have ended their careers OR have played by a different set of
rules their entire lives.
Instead,
they’ve been promoted to the most powerful economic positions in the country.
Why? Because they understand the part of Crony Capitalism that matters the
most: it’s the Cronies… not the Capitalism.
Until we
change this, and start leveling the playing field so that individuals with REAL
ideas and solutions and STRONG track records can rise to positions of power in
public policy, the US as a whole is screwed, or rather, those of us who don’t
fall into the “Crony” category (the 300+ million) are.
Good
Investing!
Graham
Summers
PS. If
you’re worried about the future of the stock market and have yet to take steps
to prepare for the Second Round of the Financial Crisis… I highly suggest you
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come.
I call it The Financial Crisis “Round Two” Survival
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Here today Gono tommorrow
need a monetary system. crony / pal.
I agree with the article. The crisis that the Mussolini wannabe wanted to take advantage of is blowing up in the Loser in Chief's face. Instead we have a chance to clean both dems and repubs that keep the game going out of Congress. Mitch McConnell has already lost two of his kitchen cabinet Senate club members. All these club members will face primary challenges in 2012 and 2014 if they don't restore Constitutional law along with impartial taxation, free enterprise and sound money. After doing everything else, we can try what has been proven to work. Mainstream America has never been so riled up. The ruling class and its media stooges are having fits. And we're just getting started.
Never going to happen WWIII, suspended elections. These punk's are desperate.
Please stop spamming your free report/website/Free Slanket With Each New Membership at end of articles at ZH.
It...is...getting...old.
If I think what you published is insightful, I'll look your website up.
Cash Stuffed Heads - ex VRWC
Too angry?
economicprotestproject.blogspot.com
A non-profit? There is so much wrong with your plan I'm not even going to waste my time. Good luck with that, keep us posted!!!!!
Good call. I changed that part of it. I talked about Creative Commons Attribution, which is not the same as non-profit. It just covers the licensing during a collaborative music creation process. If some killer music came out, I would assume profit could come from that for the musicians involved. If fact, if someone were to want to record the songs, they could profit all they want. Other than that, what are your suggestions for the effort? Thanks for looking at it!
This was all very well known 100 years ago and was written about by Chesterton, Belloc and others. The cure for it is to break up the big corporations while at the same time breaking up big governemnt - the two go hand in hand and both must be ended in order for there to be both political and economic freedom.
This is not, by the way, a plea for a libertarian society - you'd swiftly get back to the current conditions if you just let everything be. All of living is about striking a balance - the need for freedom and the need for security; the need for private property and for public benefits, etc. There will be no happy medium - it will always call upon well-disposed people to think carefully and adjust to changing conditions. But the key to it is to bring decision making down to the lowest level possible - whatever strictures are placed on whatever activity, they must be decide first by the person and his/her social groups; secondly by the local government, thirdly by the State government and only at great need by the central government.
Hey there Mark Noonan
Chesterton's "Secret People" almost makes me weep every time I get to
And the last stanza - well, I can't read that if I've had a few sherbets, because I weep like a big girl's blouse.
The big problem that the new unhappy lords now have, is that we have the interchoobs and encryption - and access to all their secrets.
We are the people of Terra... and we haven't spoken yet.
The tension is building - quite deliberately. If the French government had foreseen that a group of very bright Australian teenagers would form a lifelong pact in the wake of the Frogs' terrorist bombing of Rainbow Warrior, and that the project would have succeeded (from WANK to the present day) beyond the expectations of the participants... well, the Frogs might have decided not to plant that bomb.
And the project of which Wikileaks is part, would never have existed.
The fucking irony...
Cheerio
GT
What a bunch of elitist drivel! Oh yeah, lets have government decide which combinations get to form monopolies (cuz only a government can perpetuate a monopoly) and, later, which combinations to break up. It even extends a corporate veil! That's a recipe for what we currently have. Good luck with that breaking up big government thing. Seems to me that they figure mightly in the power elite. So you are going to break it up with what political movement? Please share with us exactly which political movements currently seek to reduce the scope, size and power of government? Can you identify leaders in the movement that we may support them?
That libertarian society you eschew was most closely approximated during the relatively laissez faire antebellum years that de Tocqueville extolled - say, 1830-1860 (like no central bank and hard money so you could actually SAVE!). Oh,no, we wouldn't want to have the libertarian level playing field of laissez faire for our system of political economy, we need to have your utopian perfectly balanced system as maintained by your elite cadre of Aristotelian philosopher kings and we all know they wouldn't skim a little off the top, would they? Rather than have individuals make their own economic decisions, learn from their own mistakes and benefit from their entrepreneurial acumen, we would have your "well-disposed people" keep us unperfumed buffoons on the straight and narrow, our options proscribed as they think fit for our own good. They would have to be in government or have its ear, the better to enforce their descretion.
Really, what you suggest is what we already have, socialistic(progressive) mercantilism, and it doesn't work. Government is always intervening and usurping. It is a black hole. It interferes with real free enterprise, real capitalism - laissez faire. Government should only prevent force or fraud, another libertarian concept, like individual responsibility. Your society will succeed with angels but founder with men. I'll take the liberty and meritocracy of a libertarian society any day, and I venture that so would the best of the Founding Generation. We also don't need government to make "internal improvements" because they never end, don't maintain them, select the wrong thing, screw them up, crony up and cost way to much, among other things. "We're from the gummint and we're writing a comprehensive new software."
You mean like Federalism?
Each day that goes by I respect Jefferson more, and wish I had a time machine to go back in time and strangle Alexander Hamilton in his crib.
Agreed, and I'm against killing babies as a general rule.
Good ole Hamilton, setting the stage for the most reprehensible violation of Americans' rights ever known: the draft.
Do you need a cord?
How do you break up big corporations without government?
Magic spells?
You're looking at it the wrong way. We don't need more "government action." We've had plenty of it for a couple centuries. We need government implosion. Imagine the bloated behemoths of all modern industries having to deal with upstarts lead by capable, intelligent men and women and backed by real capital without Daddy Government to hold their hands. No more protection loopholes, draconian regulation that only applies to those with shallow pockets, absurd licensing and permitting fees, and arbitrary regulatory enforcement. In short, actual capitalism. It's crazy enough that it just might work.
The government needs to sit down and shut the fuck up, secure our borders, provide for national defense, and enforce objective, black-letter law. But for now, I'd settle for the sitting down and shutting the fuck up part.
"These groups aren’t strong pillars of profitability, they’re massively insolvent, unprofitable messes that wouldn’t exist if not for the fact that accounting standards have been suspended or disregarded as a national policy (unless you’re talking about ordinary Americans)."
I'm having a hard time with the idea that ordinary Americans don't run their own balance sheets thusly.
AWESOME ARTICLE!
Legal bribing for legal largesse....biased to the "big"....
Well now....look at what happened....
Because of it....
......................................
Structural changes long time overdue....
Tax structure change
Government structure change
Both centered back to the PUBLIC...not FASCISM...
And perhaps most importantly....the restructuring of the securities marketplace....the best lever of capital to asset valuations....
Had enough of the Princeton Harvard Yale Club yet ????
My guess is about 99.99999% have "had it" with this club....
Time for "heads on poles"....
.
What an absolutely bogus close for equities.
Somebody's gotta take a hit sometime soon. Since all underwater assets float downhill these days into our nation's capital here's betting it's gonna be a September to remember.
Capitalism Without Multinational Corporations?
Capitalism Without Deregulation?
What are you talking about?
What is your theory of change here?
What capitalists are out there clamoring for regulation? What kind of regulation?
The kind of regulation which keeps new players out of the market and allows them to continue to pile it up.
I work at a major bank - the credit card "reform"? Just moved a few things around, and now you'll find it increasingly hard to find a credit card which doesn't have an annual fee. Welcome to the reformed world of revolving credit.
Exactly my point.
People on this blog clamor for deregulation that favors big corporations and then decry the excessive influence of big corporations.
How does that make sense?
I can't speak for people on this blog in the slightest, but the only deregulation I clamor for is total deregulation. What we get now is action that tightens the government's grip on the industry in question while giving freebies to the colossal losers who grease the right politicos. It's an absurd bastardization of the word 'deregulation.'
Stop making people go to years of school and pay through the nose for the privilege of applying to take a test in order to be allowed to practice their trade. Let the losers lose and the winners win. Stop forcing people to pay outrageous fees to be allowed to enter an industry with a competing product. Let businesses stand or fall on their own merits. Yeah, it's scary, but I think we're up for it. I mean, look at the alternative. "Too big to fail." I'd laugh if that phrase didn't make me want to vomit.
Life offers you all you need to be happy!
WHOEHAHAHAHAHAHAH!!!
History is filled with cronies! What you discribe is Utopia buddy.
"In order to save the village, we had to destroy it."
If we'd implemented the Swedish Solution, we'd be through with this by now. Our leadership chose to turn us into a poor imitation of Japan with a much worse ultimate outcome.
Never forget that only dead fish swim with the stream
http://apttax.com/index.htm
Very relevant idea to removing the cronyism.
APT Tax = Corporate Giveaway
Don't be silly. You don't think big players could avoid this tax trivially?
What do you think the Cayman Islands are for?
Any domestic transaction (ie., any transaction occuring in US territory) would be taxed. The Cayman's are already a tax haven. This tax is far, far more difficult to avoid than corporate taxes or capital gains taxes. Not understanding your point.
Actually any transaction where one or both sides are counted in USD. Has nothing to do with geography.
The tax is far more difficult for average Joe to avoid, certainly - and he already pays it as sales taxes.
For big corporations, it's trivial to avoid. They just relabel their domestic transactions as foreign transactions and use that cash flow to collateralize their domestic books - gaining cash benefit without a "transaction" because the transaction will be synthetic or notional.
In a world where you can trade probabilities rather than cash, you have to tax on the basis of a consolidated book.
The APT is just another VAT and corporations the world over dodge VATs with ease.
So your argument against APT is to say that corporations will try to avoid it?
Name one tax corporations won't try to avoid.
So if fiat money is evil, it should be taxed. Every time it is used. Every time it passes down a fat Fedwire pipe.
Now we are talking taking the tax base from a tiny fraction of the transaction base, the commerce done, the business to-ings and fro-ings and whatnot. If you take the tax code games off the table, and instead providing a simple funding mechanism to the essentials of keeping a free people alive and well on this fine earth.
At least $3 Quadrillion. Say that tax avoidance was still practiced, even though every single motherfuckinglast tax, excise, fee or tariff are instantly and forever gone.
Switch. Now the monetary system is based on what would be necessary to keep people healthy and happy in this country. Create the money in the peoples' pockets, and charge a fee to anyone who want to use the peoples fiat money, created debt free, on the authority of the life of the person who is buying their food or their medicine.
Subtract a Quadrillion in tax evasion:
.0049 * 2Q = $10 Trillion in Life Support. Current Federal Budget: $4 Trillion.
No reporting. No compounding. The initiate of the transaction pays the fee. The fee is collected via Fedwire, SWIFT, DTCC, et al.
You are so right Graham. Your definition of capitalism is exactly what I was taught in school.