In this excellent essay, George Washington II concludes that America is no longer a nation governed by the rule of law. Might this be why the stock market rally over the past year has been labeled by some as the "most hated rally"? – Ilene
Concentration of Wealth is Destroying Democracy
Courtesy of Washington’s Blog
As I wrote in 2008:
The economy is like a poker game … it is human nature to want to get all of the chips, but noted that – if one person does get all of the chips – the game ends.
In other words, the game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone’s money, the game ends.
The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed.
No wonder billionaire George Soros says that the way US Treasury Secretary Henry Paulson was handling the situation was "very reminiscent of the way the central bankers talked in the 1930s", the time of the Great Depression.
And no wonder Nobel-prize winning economist Joseph Stiglitz stresses putting poker chips back in the hands of the little guy …
This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).
It is a question of focusing any government funding which is made to the majority of poker players – instead of the titans of finance – so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.
As FDR’s Fed chairman Marriner S. Eccles explained:
As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
As I pointed out last August, and again last month, fewer people have more of the chips than at any time since before the Great Depression. And see this.
Indeed, radical concentration of wealth not only destroys the economy by stopping the poker game, it also destroys democracy.
Everyone knows that politicians are bought and paid for by the financial service giants. And the 800 pound gorillas just keep getting bigger and bigger.
As Supreme Court Justice Louis Brandeis said:
We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.
Dennis Kucinich said in January:
There’s nothing liberal about the bailouts. There’s nothing liberal about standing by and watching banks use public money to get their executive bonuses. There’s nothing liberal about giving insurance companies carte blanche to charge anything they want for health care… Since when did that become liberal?
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Every area of the economy is still about taking wealth from the great mass of people and putting it into the hands of a few. If you don’t have an economic democracy, you don’t have a political democracy.
Indeed, when wealth and power become too concentrated, capitalism becomes virtually indistinguishable from socialism or fascism.
Of course, antitrust laws were enacted to protect the economy and democracy, but – like the Depression-era laws separating depository banking from investment banking – are not being enforced.
And the government could use existing laws to force ill-gotten gains to be disgorged (see this and this), fraudulent transfers to be voided and – perhaps – even bonuses gained at the expense of taxpayers clawed back. Such actions would make the 800 pound gorillas a little smaller, helping to reduce concentration of wealth somewhat. But that would assume that America is still a nation governed by the rule of law.
Currently, it’s not. Only courageous prosecutors and brave judges can restore the rule of law to America.
