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Wednesday, October 13, 2010
 The wealthy's assault on America

While the Tea Party crowd is busy called the Obama administration "socialist" for maintaining the status quo, the reality is that America's wealthy are turning on the country like a pack of wolves on an old and weak former pack leader.

We still hear arguments from Republicans and other "conservative" ideologues that "private individuals" can better make use of resources than the government, and thus increased taxation, specifically on the wealthy, and increased government efforts to manage or stimulate the economy are all doomed to fail, etc.

Let's be clear about what's really going on right now.

First of all, huge portions of the wealth accumulated by the wealthiest Americans, especially those in the financial sector, over the past 30 years is effectively stolen wealth that has been redistributed from working class Americans and foreign workers to capital owners.

Secondly, the vast majority of this wealth held by the American wealthy is not being used in ways that are beneficial to the American economy at all, and arguably not even to the world economy. Indeed this wealth is being used in ways that sabotage the American economy, and effectively the world economy as well.

Are "private individuals" better at allocating resources than a government in theory? Depends on the government and depends on the current economic conditions. Right now that answer in America would be a resounding no if we had a government with any will to do anything.

We've had basically two years of very low interest rates now, primarily in America, but also in Europe and Japan. And yet, specifically in America these low interest rates have done little to spur improvements in the economy. Now the theory is that if the American central bank provides "cheap money" to people, then they will borrow now and invest it in businesses and hire more people. Of course there is no reason to do this in America because 90% of the population has no excess money to spend on anything more than what they are currently spending on, so what is the deal with these low interest rates?

Well, what's happening is that large financial institutions and super-rich individuals are borrowing lots of money in America and Japan at near zero interest rates, and they are taking that money to developing countries like Brazil, India, China, Vietnam, Indonesia, Russia, and heck even places like Saudi Arabia, etc. and they are investing it there.

The wealthy are essentially banking on the demise of the US and the rise of these other countries, which makes sense to a degree, but in fact what they are doing is they are accelerating the demise of the US and they are creating new bubbles in these other countries. You see, the low interest rate policies of Greenspan and the entire "free market" gang that has ruled American fiscal and monetary policy for the past 30 years is what created the first big set of bubbles in America, the big bubble that Clinton rode and still tries to pretend today wasn't a bubble but rather a product of his good leadership. In fact, Clinton just oversaw the creation of the problem because he himself bought into the whole "free market" nonsense and much deregulation occurred under his watch.

Right now what has happened is that the imbalance of wealth in America and around thew world has become highly toxic to the entire economic system in and of itself. We have a situation where such a huge portion of wealth is owned and controlled by so few people that they don't really know what to do with it, and the result is an ongoing chain-reaction of bubbles, and each time a bubble bursts the reaction is to implement polices that create new bubbles since that's the only way to try and quickly maintain the status quo; the status quo is a rising tide of bubbly foam.

So we have this relative handful of people with trillions of dollars of wealth at their disposal and of course there is simply no reasonable way for so few people to do anything with this wealth, especially when they are driven by an ideology that whatever wealth isn't be used for personal gratification at the moment needs to be employed in some fashion that will generate more wealth for themselves. So this mass of "capital", which is really just money, goes sloshing around from one thing to the next creating bubble after bubble and leaving wreckage in its wake at every turn.

And as we see revenues going down, but incomes for the super-rich going up, what's happening is that they are trying to grab whatever they can right now as fast as they can. Basically the ship is going down, and they are running around grabbing all the silver and fine china and dumping it in their lifeboats, and filling up additional lifeboats with the treasures on the ship, while they kick the coach passengers in the face to keep them away from the lifeboats so they can load them up with more silver and china. And the Tea Party folks are like complete idiots who are helping to keep everyone else away from the lifeboats so the rich folks and can use them all to take their treasure plus every else's with them, and they're too stupid to understand that in the process they are being robbed and dooming themselves to go down with the ship as well.

What we should be talking about right now is how much wealth we are going to confiscate back from the super-rich, 50% of it or 80% of it, but instead the mainstream media and the politicians are propping up a debate about whether increasing taxes on high end incomes by a couple of percent is justifiable and if it will "just hurt the economy" by reducing the amount of income that the wealthy have to "invest in businesses to grow the economy".

The wealthy aren't investing in the American economy now! There are fewer than 500 people in America right now who could, with their combined wealth, pour trillions of dollars of investment into the economy today, right now, and still have a comfortable cushion left over. They aren't doing it. Allowing them to keep a few percent more of their multi-million to billion plus a year incomes will neither encourage nor discourage them from doing anything different.

These people are taking their money and jumping ship; they are sending their money over seas. They aren't helping America, and they aren't really even helping countries over seas. They are creating bubbles, consolidating property ownership, and buying influence among the next round of banana republic dictators. Even if you take folks like Bill Gate who gives a lot to charity, the rest is still invested in the same manner as I'm describing.

Is it better to reduce taxes and government spending so that individuals can keep that wealth and allocate it themselves? Not necessarily, certainly not when wealth is highly concentrated such that the allocation isn't determined by a majority of the population but rather by a small number of super-powerful individuals, and certainly not in this case right now when the wealthy are essentially scuttling the United States for their own gain.


Posted by rationalrevolution.net at 10:20 AM EDT | Post Comment | View Comments (7) | Permalink
Updated: Wednesday, October 13, 2010 9:16 PM EDT

Wednesday, October 13, 2010 - 3:59 PM EDT

Name: "Walter Pongratz"

Dear Mr. Price: When I went to Graduate School I couldn't afford a PC. Today they are well affordable. Is that because of government intervention? Higher taxes? Or because of the free market? Microsoft offered me a product I wanted. Mr. Gates did not need to hold a gun to my head. Only government does that. It leaves me no choice. I have to turn over my property or I have to go to jail. Government forces me under threat of violence to accept its product. Does Sears? You never tire to attack the wealthy. Why don't you attack government? The true malignant force in our lives. It pours Trillions into its wars, it murders, it occupies, it invades, it jails, it exercises raw violence and force. It gives us no choice. The free market does. The rich don't withhold money from my paycheck, government does. And, by the way, do you know of a poor man who offered someone a job? wp Seubersdorf, Bavaria

Wednesday, October 13, 2010 - 11:08 PM EDT

Name: "rationalrevolution.net"
Home Page: http://www.rationalrevolution.net/

Yes, you are also using the internet, something that was created  by the American government and would certainly never have been created by private enterprise as any company that would have ever created such a thing would have made it proprietary.

There are roles for both private enterprise and government investment in public goods. 

However, there is a difference between "the government" and "government". Indeed there really is no such thing even as "the government". The American government is administrated by thousands of people, many of whom have major conflicts of interests and ideas, with thousands of laws and policies, which have been written and implemented over hundreds of years, by competing interests and for wildly differing goals. There are people in the government actively working against policies of the government, there are agencies working both for and against each other, etc., etc.

So, its very difficult to talk about "the government". Certainly many aspects of American government are dominated by the interests of wealthy private citizens and corporations, but there are other departments, programs, and individuals working against these interests as well, etc.

What's clear, however, is that no society can be successful long-term without good government. There are many problems with "our government", but that is a different matter than understanding the proper role of "government" in the generic sense.

I've address the isse of cheap consumer goods in America numerous times on this site, for example:

http://www.rationalrevolution.net/articles/americanprosperity.htm

I certainly believe in a role for  private enterprise and "free markets" within an economy, but private enterprise isn't the solution for everything, and "free markets" can only be "free" if they are regulated, just like a sports competition can only be fair with referees and we can only be free to drive down the road with rules that regulate driving behavior. Roads with no rules aren't "more free", they are less free, because a roadway with no rules would be so chaotic and dangerous that it would inhibit travel. The same goes in an economy.

I'm not even going to get into the issue of taxes, there isn't enough space here to address it. Taxes are the price you pay for living in a civil society, and the fact is that you are better off for paying them. Sure if you could freeload by not paying taxes that would be better for you, but that's freeloading, freeloading is always better for you, the problem is that everyone can't freeload.

The idea that the wealthiest most powerful people in the world, living in a level of luxury that no other humans in history have ever enjoyed, are "victims" is just beyond absurd. The issue is balance and appropriateness. Yes, society benefits from achievement and advancements of individuals who develop and bring to market new technologies and production systems, and ideas, etc., but these individuals also benefit from society. The vast wealth of the super-rich is only possible within a society, and not just within any society, but within a well functioning and fair society.

The wealth of today's wealthy Americans is only possible due to the solid foundation built in America during the 1940s-1970s, when there were heavy investments in public goods. Without a stable and educated society, with substantial public goods and a fair economic system, long-term wealth creation isn't possible. The idea that a few individuals should be able to profit from the work of others, and take advantage of public goods and the entire social system, without paying for those public goods and without paying to support the system is just absurd, and whether absurd or not, it's a recipe for failure and economic collapse.

Look at countries like Sweden, Denmark, Finland, Norway, Germany, etc. These are very stable countries, they have good long-term economic outlooks, they have thriving private sectors, they have happy and healthy populations, they have wealthy people who live very comfortable lives and are well rewarded, but they have much more balance and that balance in the long run will not only produce better results but it is a much more accurate representation of the relative contributions of individuals within a society to the overall creation of wealth.

Thursday, October 14, 2010 - 6:08 AM EDT

Name: "anonymous"

Dear Mr. Price: "Good government" is a contradictio in adjecto. Whatever any government desires to achieve it first has to apply force and coercion. You reveal how you truly think by insisting on rules governing the use of roadways. You can't imagine that the users of the road would be able, and also want to, control, organize and govern themselves. I remember when "Berlin" refused to let the people vote on joining the European Union. The people could not be trusted to make the right decision. Hillary Clinton said something similar. The American people should trust her and Bill, because both know what is good for them. Isn't that the stuff revolutions are made of? I have read through a good piece of your web site. The concept of Liberty (Mündigkeit) is not well developed. You quite cogently trust government much more than the plebes. Maybe you feel good about yourself wanting to control the means to an end but it does not foster a free and independent people. What led me to engage with your thoughts are your erudition, your grammar and your civility in arguing your opinions. I am an Austrian (Ludwig von Mises) anarcho-capitalist libertarian and part of a minute minority in the Oberpfalz. The local SPD and union thugs think my cerebellum is deficient. wp

Thursday, October 14, 2010 - 12:49 PM EDT

Name: "progressiveaudio"
Home Page: http://www.youtube.com/progressiveaudio

The SPD of Germany are not the major left-wing party or trade union party of Germany anymore, and never was very left-wing to begin with.  It always marketed itself as the middle between communism and free market capitalism.  The major left-wing party is fittingly enough called The Left, and has most of it's power base in eastern Germany.  When the SDP was in power in the 90s, most of it's left-wing policies were crafted from the Alliance 90 party, which is the Green party.  Just thought I'd add that before someone starts calling them left-wing thugs or whatever.

Social democratic and labor parties across Western Europe, from Norway to the Netherlands to Switzerland to the UK are no longer very left-wing, since they've been in power for 50 years now.

Thursday, October 14, 2010 - 6:47 PM EDT

Name: "hank49"
Home Page: http://hank49.com

Excellent as suual!

Thursday, October 14, 2010 - 11:04 PM EDT

Name: "Oscar"

it's so frustrating to know that your material is not more widely dispersed.  Have you tried getting this out there, and if not, why not?

Friday, October 15, 2010 - 3:29 PM EDT

Name: "Walter Pongratz"

Dear Mr. Rice: As long as we have a government which threatens us, steals from us, extorts from us, exercises force against us, kills us, enslaves us, sends our young to die in its wars, your outrage over the rich and wealthy will sound hollow, empty and false. Our problem are not the rich and the wealthy but government. But for a progressive that would be difficult to admit. wp

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