Beyond Economics

The End of Growth and Time for a New Era

Category Archives: Government

How Companies Bypass the U.S. Corporate Income-Tax Rate

Advertisements

What Would Andrew Jackson Do?

Today, some of us, myself included, have tolerated the disturbing policy response so far in the hopes that this was a necessary step for achieving a long-term solution. But as a recent WSJ article “Loopholes Lurk in Bank Bill” highlights the red flags all over proposed legislation, there does not seem to be any substantial source of opposition to banking interests in Washington. While certain individuals are fighting tirelessly, this is the exception rather than the rule.

In a recent Bloomberg opinion column Cowboy Banks Get Big Bucks as Indians Get Little from Ann Woolner

 Over here you have the bazillions of U.S. bucks doled out to Wall Street’s cowboys for reckless conduct that wrecked the world’s economy.Over there you have a $3.4 billion federal settlement with people from whom the U.S. had been essentially stealing for more than 100 years.

To seek what was owed them, American Indians spent 13 years in court where judge after judge decried the government’s gross mismanagement of their funds and “mendacity” in litigation.

And yet it took that long for the Justice Department to step up to the plate and agree to pay more than a pittance.

If the Indians had been AIG, the $3.4 billion settlement announced this week would have been many times larger. The real AIG — insurance giant American International Group Inc. — sopped up $180 billion in government aid after helping to create the economic havoc felt around the world.

The Indians sought no bailout, no handout when they filed suit in 1996 to claim royalties due them for oil, gas, timber, mining and grazing rights to lands allotted them under an 1887 agreement with the federal government.

I would just like to take a moment to look back to our seventh President of the US, Andrew Jackson. While he may have been a son of a gun, we knew what we were getting. He was a fierce opponent of the bankers and fought to take them down. He stood up for those he swore to serve (so just the whites) and although he did a terrible job once he defeated the Second Bank of the US, at least he never backed down and got the job done.

While Andrew Jackson was a Native-American slaughtering racist, EVEN HE REFUSED to bow down before the banks. Nowadays, our political leaders continue to treat American Indians like dirt, AND NOW they don’t even have the courage to stand up to powerful interests. JUST FANTASTIC!

I would argue Andrew Jackson was a product of his time to a certain degree, the biggotry, prejudice etc, but if our current leaders are also a product of their era, what adjectives come to mind?

I probably shouldn’t go there!

Here’s an interesting Andrew Jackson quote:

I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!

You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, I will rout you out.

 

America, Inc.

Beware: If you see Food, Inc., you may never be able to eat meat again. Not that the movie covered that much new ground, it just really puts it in your face all at once. While this movie and post are about agriculture, the message applies to finance, energy, media and many other industries.

Corporations have captured both markets and government
The movie is not the liberal screed you might think. It vilifies corporations and demonstrates how the food industry has taken over both the free market and the government.

Hamburger Helper (thanks to Ray Kroc and the McDonald brothers)
McDonald’s needs an almost infinite supply of uniform tasting beef. Feedlots of cattle are fed (taxpayer-subsidized) corn to fatten them up quickly and cheaply. But cows can’t digest corn properly so e. coli builds up and antibiotics (which become resistant) need to be added. The cattle are slaughtered and processed in huge plants by illegal immigrants who dare not complain about the dangerous and unsanitary working conditions. (The INS only nabs a few at a time so as not to disrupt the plants.) A ground beef hamburger is literally that, with meat that might come from up to a hundred different carcasses. Sounds tasty, doesn’t it. That’s why you need all the fixings and the special sauce. Tyson and Perdue have the same needs for uniform quality(?) chicken.

There’s always Tofu (courtesy of Monsanto)
Here is an example of how one corporation, Monsanto, has gamed the entire system. Monsanto developed a GMO soy bean that now accounts for 80% of the soy beans grown in this country. They have a patent on the seeds and do not allow farmers to keep any of their seeds for the following year. They have a team of 75 investigators that go around and intimidate farmers who are not using Monsanto seed into doing so. (Since Monsanto seed invariably spills over from neighboring fields, they go after these farmers with law suits or visits in the night until they succumb.) During the Bush administration, Monsanto was able to place its people in charge of key regulatory agencies throughout the government.

Don’t say anything bad about corporations (even Oprah got slapped)
There are laws on the books in some states against criticizing the agricultural industry publicly. Remember when Oprah Winfrey was sued for saying she would never eat hamburgers again? She won, but she is big. There are also laws preventing any pictures taken from inside a meat processing plant to be shown publicly. How can markets function without transparency?

ADM, “Supermarket to the World”
The corn industry is subsidized and corn products and derivatives are found in many of the products we buy from sodas to pet food to medicines. It’s no accident that presidential primaries start in Iowa, the heart of corn country.

Where is the outrage?
What I am wondering is why free market proponents are not more outraged by the tremendous consolidation of corporate power (in agriculture, finance, health, media, etc.) over the last 20-30 years? There is such fear of government taking over, what about the corporations? In many cases, large corporations are systematically destroying small businesses and competitive markets. And how about dealing with customer service from a corporate bureaucracy? Perhaps the problem is size, whether it’s government or business. Adam Smith’s vision of free market capitalism did not include the corporation.

Free market advocates would say that we just need the appropriate regulation to set the rules of the game. But whether one is a proponent of socialism or free market capitalism, how do you stop this kind of corporate power? Where will the regulation come from if the corporations own the politicians that pick the regulators? National, state, local…what we have is corporate crony capitalism at all levels. A small example: We had some officials from a local town who spoke to our Business & Economics club describe how one large supermarket chain has bought up all the dead strip malls in their town and is just sitting on them to keep out other large competitors.

Will change come from the top down or the bottom up?
The concluding message is actually market focused, giving up on much hope of political leadership or government regulation and calling on consumers to vote with their spending dollars. For example, Walmart is now carrying organics (and “going green”) in response to consumer demand. In addition, it calls on individuals to get involved in the food system in many different ways, reading food labels, writing elected officials, supporting local farmers’ markets, etc. This is an optimistic message but I fear that, when you consider the public as a whole, there are not enough educated, well informed, and responsible individuals to change the the system from the bottom up. (Not, that I am implying that change can only come from the top down.)

Food Inc. provided some hope of a market based approach although they did note that the big food conglomerates (ADM, Cargill, etc.) are already buying up the small organics. The head of Stoneyfield Farms said he had told his activist friends that he had decided to work from within.

If not Obama, who?
Conservatives had their chance under Bush and Republican rule and they put foxes in charge of the hen houses (FDA, SEC. etc.). Progressives hoped that the historic election of Obama could be a catalyst for change from BOTH the bottom up and the top down, but he has already stumbled, run into a buzz saw in Congress, and is losing the confidence of many of his (perhaps fickle or naive) supporters.

If not now, when?
Whatever your point of view, one would think that the severity of the current economic crisis would have been a wake up call to everyone and given the country a chance for a meaningful national debate and an opportunity to rewrite the rules. Now that the near death moment has passed, it seems that we have quickly descended into politics as usual. I am in deep despair.

Health Care, Markets, and Government

Bob Searles’s post got me thinking about health care and the underlying issues. This post is partly a response, but it turned into more of a rant against those who worship at the alter of the free market. In the process, I admit to using some hyperbole to illustrate my points. I do not mean to lump Bob in with these faux free marketeers entirely as his perspective is much more thoughtful and authentic. What I am reacting to is a free market ideology that seems to assume that more government necessarily means less individual liberty and that “government run” by definition is inefficient and inferior to the market.

The motivation to define things as goods vs. rights
Obviously, many things like hamburgers and haircuts are clearly goods (or services). More generally, if something is a right, then government may be needed to protect it (e.g. free speech) or provide it (e.g. national defense). If something can be defined as a good, then perhaps the market can take care of it. Therefore, the more things we can define as goods the less government we will have. If you believe that government is inherently bad, then you would like to define health care as a good, lest we turn it over to government (making it bigger) and lose fundamental political and economic liberties.

Rights are those things which are fundamental, but what’s fundamental?
Which is more important to most people (and to society), the right to carry a gun and spout off their opinions or having health care for their families? I guess you could argue that the right to bare arms and the right to free speech are fundamental to protecting us from the tyranny of government. Tyranny can be evil. I guess you could argue that you would rather be dead (from lack of health care) than imprisoned in a concentration camp. But let’s step back. You don’t have to give up these rights to have universal health care, even single payer. My point is that individual freedoms may not be the be all and end all. Even if we moved to a system of complete socialized medicine and government gets bigger, why does that threaten individual political liberty? That’s just an assumption.

The real motivation of the faux capitalists
Oh, but there’s economic liberty…the right to get paid hundred’s of millions of dollars  to run Home Depot’s stock price into the ground over 10 years (while Lowe’s skyrocketed) and then get paid hundreds of millions more to go away. Just knowing that’s a possibility is so motivating, it’s my reason for living and the idea that, if I were to make that kind of money, the government might take away an extra 10-20% is just more than I can bare. Why that would just kill the economy and anyone’s incentive to work or invest and create jobs. And nobody would want to invent anything any more.

Choosing to make health care a fundamental right
So is health care an inalienable human right? One could argue more so than anything else. But even if it is not, societies can choose to make it make it a fundamental right. I want to live in a society that does. Rights, whether to health care, free speech, or to carry a hand gun are what we, collectively, decide them to be. If you don’t want to be affected by anyone else, go find yourself an island.

Then move to Canada
Oh, but I might have to wait for certain medical procedures that I don’t have to now. Full disclosure: I  have great health insurance provided by my employer and my job is secure. Actually, I am tired of that straw man. Limitations in some areas of the Canadian and British health care systems are cherry picked and constantly cited as examples of why “government run” health care would be so terrible. Even then, those are only two out of many, most of which work quite well. And their citizens are often quite happy with the size of their government and have plenty of personal freedom. Oh, but I forgot, they will never have the ability to throw a $70,000,000 wedding anniversary party.

But how much health care would be a right?
So if health care is a right, the question becomes: How much? What is basic health care? Does it include drugs for chronic diseases? What if it was my fault that I got the disease? Do I have the right to cancer treatments if I am 20 years old? How about if I am 90 years old? Do I have the right to a liver transplant? What if I wasn’t an alcoholic? What if I am willing to pay for it? Do I have the right to plastic surgery if I think I’m not good looking and it’s causing me mental distress? Where do we draw the line? Oh, it’s so complicated, I guess only the market can sort this out. Or perhaps the churches. But what if I am an atheist?

We can figure this out, but not in less time than it takes to choose a puppy
There will need to be lines drawn. We can’t prolong everyone’s life indefinitely with artificial or transplanted organs even if we redistributed all the wealth in the world. We do need a national/societal debate about this. There has to be rationing and lines drawn at various points. While we don’t need to stall, it certainly is going to take a lot longer than selecting a White House dog.

Arguably, there’s a pragmatic reason for universal health care
One could argue that even if health care is not a right, we should, as a society, provide it anyway because it would cost us less to do so when externalities are considered. If the child of an unwed mother does not get proper prenatal and child health care, how much do you suppose that child might cost society if it becomes delinquent or violent. How much will it cost to incarcerate that child as an adult for 5, 10, or 25 years, let alone the damage that child might have caused along the way?

Time to redefine economic scarcity
But even if it did cost us more to have universal health care, in the 21st century, what we think of as scarcity is a myth. There are plenty of resources in the world for everyone to live well with a lot left over for some to benefit from incentive systems that reward them for hard work and responsible behavior. Yes, we do have to be careful about handouts creating dependency. We can figure this out. But I don’t lose sleep about some people intentionally or unintentionally mooching off the rest of us. I am far more outraged by how much the best and brightest were paid billions in bonuses to trash our economy while so many go without anything.

Utopian myth of the free market
The utopia of a free market is a myth. As soon as anyone gets ahead,  they will begin to work with others to protect and expand their position.  A ruling elite will develop and take over the government (as they have in the U.S.). The ruling elite will convince the ignorant masses that the government is their enemy. Because they control the government, but really despise it, they will only use it to their advantage and run the rest of it poorly, proving their point. There will be the illusion that there are two opposing political parties, one promising to protect you from the government, the other promising to protect you from big business. But government and big business are in bed together.

Beware the one-size-fits-all ideologies
Both governments and markets are needed to manage human affairs and resources. There will always be a natural tension between individualism and collectivism, between government and free markets. We have seen what happens when the government completely runs the show (Soviet Union, etc.). Now we have seen what happens when individual economic actors and markets are essentially unregulated. Oh, but that doesn’t really count because we didn’t really have free markets. Well, that’s about as close as you are ever going to get. The problem is that any system is subject to corruption and subversion. If too much power is given to either governments or markets, one will capture the other. A healthy balance is needed. If both political  and economic power are not limited, you will get a ruling elite. It’s complicated and messy and requires periodic corrections when the pendulum swings too far in one direction or the other.