January 26, 2015 § 2 Comments
This essay is my reaction to Thomas Piketty’s book, Capital in the Twenty-First Century. Based on a massive database composed of comparative values of labor income, return on capital income and value of capital, Piketty argues that capitalist economic systems trend toward income and wealth inequality.
He warns that, unless this trend is countered by fiscal redistribution of capital values, the trend will, over time, result in intolerable degrees of inequality. His thesis is generally based on data that shows that the rate of return on capital, which he designates “r” exceeds the growth rate of total income or output generated by the economy, which he designates “g”. His equation is thus r>g.
Mortality and Economics
We have a unique ability. We perceive our own mortality. As medical science progresses, it becomes increasingly capable of predicting our life expectancy, based on our life styles, habits and infirmities. This information, however, is individually specific and typically concerns relatively short time periods.
Mortality tables, instead, are broadly based on aggregate groups based on age, sex and national location. They analyze longer time periods.
Until recently, we have not had a mortality table to measure the life span of our capitalist economic system. Thanks to Thomas Piketty, we now have one.
He has compiled, charted and analyzed an unprecedented database of income and wealth measurements in history, gleaned from records kept by industrial capitalist countries including the United States, European nations and Japan. His data covers the period of time from 1800 to 2012. Based on that data, he does not furnish us a date certain when capitalism will implode, but he does offer a road map of why it will implode, if several very significant and unprecedented measures are not utilized.
This is an issue that has been the subject of pivotal scholarship since 1776, when Adam Smith’s Wealth of Nations was published. Smith concluded that capitalism was a perpetual motion machine, guided by “an unseen hand”. He thought it was immortal.
In 1936, John Maynard Keynes published The General Theory of Employment, Interest and Money. His book was like Dr. Spock’s 1946 Baby and Child Care. Keynes diagnosed chronic problems of capitalism and prescribed specific remedies that would avoid their harmful results. If his directions were followed, the health of capitalism could be maintained, just as Dr. Spock explained how to guide parents’ management of their children’s way through childhood.
Piketty differs from Smith and Keynes in two ways: He differs from Smith because Smith was not analyzing reality. He was reasoning a priori, based on unrealistic assumptions about human motivation and the aggregate effects of that motivation in an unrealistically assumed marketplace. Piketty, with meticulous discipline, bases his analysis on actual data, acknowledging, step by step, its limits and approximations.
Piketty’s analysis differs from Keynes because his horizons are measured in decades and centuries, while Keynes’ are designed for solutions to problems that emerge and require solutions in months, sometimes days.
Again, Keynes’ remedies are like Dr. Spock’s short term advice for childhood’s time period. Piketty has constructed mortality tables for use during indeterminate time periods. [I have not mentioned Marx, but Marx, like Adam Smith, based his prediction of worldwide revolution on assumptions about human motivation that have, so far, proved to be inaccurate.]
A Personal Note
Beginning in February, 2014, I posted four or five essays on this blog about Piketty’s book. [See Dr. Piketty’s Remedy for Capitalism’s Potentially Terminal Illness and several subsequent posts] When I wrote those essays I thought the daunting length (over 700 pages) of his book would prevent me from ever reading it. I also feared my meager knowledge of math would put his analysis beyond my intellectual reach.
Since then two things have happened. I developed a need for a diversion from worrying about my wife’s health [She has been in hospice care for the past several months.] So, I bought a Kindle, downloaded the book and began reading.
And, as I delved into the professor’s writing, I discovered that he shared my aversion to complex mathematics, not for lack of ability but because he believes mathematical models have limited utility as tools to explain and analyze macroeconomic phenomena. He argues that, more often than not, such models are either misleading or irrelevant because they are not firmly rooted in actual data.
He writes, “For far too long economists have sought to define themselves in terms of their supposedly scientific methods. In fact, those methods rely on an immoderate use of mathematical models, which are frequently no more than an excuse for occupying the terrain and masking the vacuity of the content.”
And again: “Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.”
The Piketty Experience
Reading his book is like taking two or three college courses from the same professor, whose syllabus might be entitled “Everything You Ever Wanted to Know About Everything.” He cites Honore de Balzac and Jane Austin more often than economists. He refers to the TV series Madmen. He presents his subject in short essays, using conversational language, punctuated with occasional deadpan humor that surprises you.
He is often at the blackboard, illustrating his lecture with yet another graph. He weaves his story back and forth from the French Revolution of 1789, to the two world wars and the Great Depression between 1910 and 1950; from the “Gilded Age” to the Great Recession of 2008. He transitions easily from French politics, to the policies of Margaret Thatcher in Britain, to those of Ronald Reagan in the U.S..
Piketty’s book reminds me of Maurice Ravel’s Bolero. [If you want to hear what I am referring to, here is a link: Bolero ][A comment appended to this performance declares that the worst job in a symphony orchestra is drummer during Bolero.] The professor discusses and analyzes each of the three parts of his argument from every angle, citing several, diverse sources of information about them, but he ties each digression tightly to the relevant elements in his argument.
His message is this: The return on capital exceeds the growth of the “flow of income” generated by a capitalist economy. The result is progressively increasing inequality of wealth favoring a dwindling number of very rich people and an expanding number consisting of everyone else.
This happens regardless of periodic cyclical gains and losses. It happens despite government efforts to counter the dislocations caused by market collapses or periodic “bubbles” resulting from “irrational exuberance”. The pace of progression may vary and may at times pause but, over time, the direction trends toward inequality.
The reason is twofold: Those with large stocks of capital cannot consume all the income generated by their holdings, so they save portions of their income and invest those savings in buying more capital. And, when they die, they leave their winnings to their heirs, who, thus, begin their lives with an unearned stake which they can invest in still more capital. So, each generation accelerates the pace and extent of inequality.
Piketty identifies the Great Depression, bracketed by two world wars, as a unique exception to this process. Those events destroyed so much capital that the trend toward inequality was temporarily interrupted. His data confirm, however, that the capitalists have recovered and the extent of inequality in western industrial capitalist nations is now equal to or greater than the days of the Gilden Age.
The bottom line is: Capitalism is like casino gambling: If you play long enough you will lose because the house skims off a little of every dollar risked so the odds and the math will get you. You may escape with some luck and careful decisions, but the crucial decision is to quit while you’re ahead. In this regard, capitalism is a crueler game than the casino’s: You can only escape from capitalism by dying. You could join Edward Snowden in Russia, but that doesn’t look like an improvement.
If you want to review the so-called “laws of capitalism” that Piketty uses to explain his argument, you can refer to the discussion of them in my “Dr. Piketty” post cited above. I discussed them and cited an excellent discussion of them in a review of Piketty’s book by Branko Milanovik.
Piketty’s Paradigm Shift
Until I encountered Piketty, I identified the basic difference between liberals and conservatives, in political terms, as follows: Liberals believe that government should redistribute income obtained through progressive income taxes to finance expenditures beneficial to the working class. Conservatives believe that progressive taxation discourages business owners from striving to expand their businesses, invest in innovative improvements in technology, and create the need for employees: Liberals deride this “trickle-down theory because it assumes that job creation is investment-driven. Liberals believe job creation is consumer-demand driven and is stimulated by distributing money to lower income workers, who will spend it and, thus create consumer demand.
Piketty has not dissuaded me from these beliefs, but he has convinced me that progressive taxation is insufficient to solve the problem of wealth inequality. Instead of proposing higher taxes on the wealthy, Piketty proposes to tax capital, not income. At first, I didn’t appreciate how fundamentally different this idea is. If it were implemented, he has convinced me that it would forever change the nature of capitalism.
The free access to investment and encouragement of technological innovation would remain. But the deception and anti-competition feature of capitalism would be severely thwarted.
Why? Because, in order to implement the taxation of capital, it would be necessary for the location and existence of capital to become accessible to the taxing authority. Stringent sanctions would become necessary to prevent the owners of capital from hiding both their property and their ownership. International agencies, modeled after the International Monetary Fund and other multinational agencies would be employed to deny access to the means of cross-border financing and transfers of funds to any money-storage facility that refused access and disclosure to the capital-taxing authority.
Piketty recognized that taxation of capital would have to be administered multi-nationally. He proposed a kind of “pilot program” to consist of the Eurozone. Eventually, he proposed that the taxation be administered on a world-wide basis. He recognized that this is not feasible now and that much political and educational work must precede such a radical change in the way business is taxed and conducted.
Piketty is like the Surgeon General, warning about cigarettes. When the first timid warning was issued, nothing much changed. Smoking was a worldwide habit and business. It took decades of litigation, research and thousands of warnings and legislative battles before smoking started to decline.
Piketty has notified us that, unless we take steps to redistribute capitalistic wealth, most of us, or our grand-children or their grand-children will be working for, and at the sufferance of a very small group of very greedy people. And, by that time, the media sources will have convinced everyone that such a system is preferable to all others.
This will not happen if the transparency contemplated by Piketty becomes a source of growing political demand. The curious thing is that we already have a working model of how it works. People typically don’t hide their ownership of real property because, if they are not the recorded owners, they cannot use it for collateral to borrow money and, if they don’t pay taxes on it and, thus identify themselves as the owners, the state or someone else may dispossess them.
This system developed here in the U.S. beginning with the Homestead Act of 1862. It tolled the end of the “open range” that has been featured in countless western novels and movies. The history of the development of this system is related in a book, The Mystery of Capital, by Hernando de Soto Polar. I described my reaction to the book in an essay posted a few years ago. [See Keeping Up With the Jones’s]
The point is that a system requiring ownership disclosure can be created. There is no reason why forms of capital other than land could not be subjected to disclosure. Tax avoiders would not be so eager to transfer their capital to the Cayman Islands if Cayman banks were required to disclose the ownership of it to a multinational taxing authority. The Piketty tax would be levied on the capital, not on its owner. But the motivation to hide ownership would be attenuated if stealth could not prevent tax liability.
Perhaps corporate lawyers would transition from being wealth-hiders to property valuation experts.
I don’t want to be too naive about this. Thomas Kuhn’s The Structure of Scientific Revolutions describes how reluctantly investors wedded to status quo techniques and “conventional wisdom” yield to new information. But, they do finally yield, if confronted with undeniable evidence.
Some “ah-ha” Piketty Moments
I know this essay reads like it was written by a college sophomore who just read Walden or The Theory of the Leisure Class. As I read Piketty’s book, I did have an echo of that kind of excitement, long since forgotten. Brain re-wiring is no longer part of my usual intake of information.
1. Piketty has not made me change my moral judgments, but he has given me new ways to see some features of my world. For example, he explains why he prefers taxation to deficit spending by government: Deficit spending is paying wealthy investors for money to finance public needs, while taxation gets their money without paying for it. Public borrowing is justifiable only when there is not enough time for the taxation process to occur.
2. Inheritance of wealth is a major contributor of wealth inequality. It is affected by the life expectancy of the population So, when medical research extends life expectancy, it slows the trend toward wealth inequality.
3. 19th Century fiction featured inherited wealth as a major determinant of a wealthy life style. 20th and 21st Century fiction does not. The reason is that land is no longer the main component of wealth. Corporate wealth now dominates.
4. Piketty writes that we are becoming a culture dominated by managers, not wealthy owners of land who no longer need to work. He also observes that we now have an elite group of managers who can fix their own salaries, so the size of the salaries is not dependent on the value of the managers’ performance. At the very top of the economic scale, meritocracy no longer prevails.
5. One reason the return rate of capital exceeds the growth rate of the economy: As the size of capital owned by an individual increases, the ability to hire expert financial management dramatically increases. So, if a person, or a foundation or private fund group owns a billion dollars worth of capital, he or it can easily afford to hire a large team of economic advisers. A person owning a few million dollars worth of capital cannot afford to hire that kind of super-managers with that kind of diverse talent. And so on, until, as Piketty puts it, the guy with a few hundred thousand dollars to manage has to depend on a CPA and “his brother-in-law”, who furnishes market tips.
The top tier of owners have managers who can find investment opportunities not publicly traded or known to less knowledgeable and less “connected” sources of information. Piketty cites data to show that the differences between the returns of different sizes of capital ownership are very significant.
I will be returning to the information in this book. It has already provoked a whole new array of comments, books about it, online interviews and press articles. I have not yet heard it discussed by politicians or featured on Sunday talk shows. I may have missed it, because I have limited my weekend commentary to Fareed Zakaria and Steve Kornacki.
My conclusion is: Piketty has convinced me that the problem he poses is real. I don’t know how bad it will have to become before it becomes intolerable and his solution becomes feasible.
I am sure of one thing: Marx’s vision of capitalism’s demise because of the collective outrage of the world’s workers was illusory because it was based on the motives and emotions of its victims. Piketty’s prediction is based on the internal mechanics of the system. The implosion will occur, not because of its victims, but because of flaws in the system unless Piketty’s tuneup saves it.
December 13, 2014 § Leave a comment
As I write this, the United States Senate is debating a measure that would weaken Dodd-Frank’s regulation of Wall Street banks, increase the amount of money a single donor can contribute to political parties and enable employers to reduce pension payments of retirees after they retire and have earned their pensions.
These outrages are attached to a budget bill whose passage is required to keep the government operating. None of these dishonest and unwise amendments have anything to do with the budget. They were attached to the budget bill by anonymous members of the House of Representatives at the behest of Citigroup. There was no committee hearing. There was no opportunity to vote on them separately.
In other words, they were so obviously the result of corruption that their sponsors would not own them. They could only be adopted as part of a legislative blackmail scheme.
This is not, however, the real scandal. The real scandal is that this dishonest scheme could only proceed with votes by Democratic Party members. The bill passed the House by a narrow margin, including aye votes by 57 Democrats.
[I note with some satisfaction that no Texas Democrat voted “aye”.]
No, that is really not the real scandal. The real scandal is that the only two elected officials who are personally identified with pressuring members of Congress to agree to these outrages are named Barack Obama and Joe Biden . Yep. Some things are too dishonest to make it, even given the present sorry state of our politics. So you have to bring out the Big Guns, the Prez and Vice (pun intended).
How did this happen? Well, we get the usual explanation. It was a compromise; the best deal we could get. If we don’t go along, the President won’t be able to work with Republicans on other matters.
Whoa! Say what? When has the President been able to work with Republicans on anything significant? What makes anyone think this will improve in a few weeks when the GOP majority will become filibuster proof? Just how stupid and naive are we suppose to be? Will this be an adequate explanation for the retirees whose pensions will be decimated? When the power of the Koch Brothers and others like them is used to gain even more control of our political parties, will we view the results and say, “Well, it’s bad, but it was worth it to avoid an ugly argument about the 2014 Budget Bill.”
The Perpetuation of “Too Big To Fail/Jail”
Dodd Frank addressed a problem that confronted us when the Wall Street Banks faced insolvency because of their fraudulent marketing of mortgage based derivatives. They used depositor money to finance those derivatives. If they became insolvent, the taxpayers would have to make the depositors whole because of the FDIC insurance program. That is, the taxpayers would belatedly finance the reckless greed of the Wall Street pirates.
Dodd Frank cured this by requiring that future trading strategies that depend on derivatives and Byzantine schemes involving sketchy tools like credit-default-swaps, that look like insurance but have no reserves, would have to be conducted by entities separate from FDIC insured deposits, with money other than depositor money.
In other words, the ones who profit from high-risk gambles would have to risk their own money, not FDIC-insured depositor money.
Predictably, this was regarded as a terrible idea by the high-risk gamblers. They have become addicted to the system of “If I win, I pocket the money. If I lose, you pay for the loss.” So, Citigroup, acting for the other pirates, just wrote a solution to their problem, forwarded it to some elected officials they owned, who transcribed it into an amendment to the budget bill. Their solution is part of the bill Obama and Biden have been frantically calling House and Senate members about, begging them to vote “aye”.
Thank God For the Women
Nancy Pelosi was left out of the negotiations that led to this piece of garbage. She did not join the cheer leaders who whooped it through the House. But the one who has filled a gaping chasm where the political soul and conscience of the Democratic Party once rested, is Elizabeth Warren. What a thrill to see a Senator who has not forgotten how to express moral outrage. And knows how to do it while exhibiting a razor sharp wit and a mind to match.
When she spoke on the floor of the Senate, looked squarely into the camera and addressed Citigroup, the sponsor and author of the Dodd-Frank gut job, and said, “I agree with you. Dodd-Frank is not perfect. It failed to break you up into small pieces.”, I just about fell in love again, despite 65 years of marriage. She is a wonder!
Which Side Are You On?
This episode reminded me of an old union song I taught my daughters to sing when they, and I, were young. It was written in 1931 by Florence Reese, the wife of a coal miner in Harlan County, Kentucky, during a bitter strike. The Harlan County Sheriff was J.H. Blair, an enforcer and strike breaker for the mine owners.
One night some of Blair’s thugs stormed into the Reese home, looking for Sam Reese. He had been tipped off and was not there. They terrorized his wife Florence and his children but didn’t get Sam.
After they left, Florence, angry and scared, wrote a song on the back of a calendar, expressing her devotion to the union and her contempt for those who failed to support the strike. Here is a link to Pete Seeger and his banjo, singing Florence’s song:
While watching CNN and MSNBC about this budget episode, I kept getting madder and madder and I remembered that old song. So I wrote my own version:
In our US Congress
There are no neutrals there
You either vote your consciences
Or whore for billionaires
Which side are you on?
Which side are you on?
Which side are you on?
Which side are you on?
Obama we’re in danger
The wolves are at our door
We don’t need reasoned argument
We need a two-by-four
Barack Hussein Obama
How dumb can you get?
A shepherd cannot safely try
To make a wolf a pet!
It’s time to rein in Wall Street
Our country’s not for sale
At ballot box and in the streets
We must fight and prevail.
Thank God for Betsy Warren
She speaks for us out loud
She does not hedge or compromise
To blend in with the crowd
No go along to get along,
She hews to moral rules
She tells it straight and tells the truth
She has no time for fools
I don’t yet know how this drama will end, but I’m not optimistic.
November 9, 2014 § 5 Comments
On October 20th I woke up and discovered that my eyesight had malfunctioned and, as a result, everything I looked at was a double image, one atop the other. When this problem persisted and my effort to ignore it proved to be too taxing, I finally went to a neighborhood hospital center. After a CTscan, an MRI, an EKG and a thorough series of blood tests, the message from this premier medical center was: ” Good news! You don’t have diabetes; you didn’t have a stroke; one of your cranial nerves has malfunctioned; we don’t know why, but it will probably correct itself and your eyes will return to default condition sometime in a few weeks. Put a patch on one eye and you’ll be fine. And, if that doesn’t happen, we’ll fit you with a pair of glasses with an embedded prism that will correct the problem.”
So, now I have a clue about how pirates feel, except I don’t have a peg-leg and a parrot.
This mishap has curtailed my reading and my attention to this blog. But, I do have one comment on last Tuesday’s “Republican Sweep” and the “Top to Bottom Assessment” that the Democratic Party has now launched.
I find myself agreeing with Bruce Bartlett, a conservative writer and former adviser to HW Bush and Ronnie Reagan. He recently wrote an article in American Conservative magazine entitled, “Obama Is A Republican”. He supported Obama in 2008, because he was furious at GW Bush because of GW’s fiscal policies. In his article, he cites chapter and verse to explain his contention that Obama forgot his Saul Alinsky roots and governed like a moderate Republican. Here is a link: Bartlett
I commend the article to you. Bartlett is a right-wing true believer in some economic policy fairy dust, but he has produced a thoughtful reminder of some of Obama’s policies.
I mention this article now because I think it offers a clue about why the Democratic Party voters did not vote last Tuesday. Maybe it was because they were no longer convinced that Barack Obama’s policies promised the kind of relief and change they needed. Their wage levels were dwindling. The jobs they lost were not being replaced with work that enabled them to support a family. They needed policies that targeted the excessive greed of the rentier class. They were looking for Elizabeth Warren and what they were offered was a now-fully-disclosed Barack Obama and the future prospect of Hillary Clinton. They didn’t perceive Obama as an enemy. What they perceived was indifference, not in his rhetoric, but in his actions.
I don’t think those voters were thrilled by speeches about women’s reproductive rights and gay marriage. There were three groups of potential supporters for Democratic Party candidates: Chicanos who want legalization and a path to citizenship; young people who want relief from oppressive debt and prospects for decent jobs; and working class wage earners who wante decently paid jobs. I didn’t see or hear many campaign speeches talking about those issues.
I hope the post election assessment convinces the Democrats to forget about “reaching across the aisle” and foreswearing “class warfare” and “populism”. We live in divided country. There are two sides. When the Republican side talks about “compromise” and “getting things done”, they mean “agree with us”. The voters are not sophisticated. They do not understand how the nuts and bolts of government work. But they do understand discussions of their fears and their desperation. If we want to preserve our democracy, we better begin to offer some solutions even if the solutions don’t please the tiny fraction of our population that furnishes most of the money that corrupts our politics.
I have zero confidence that my proposal will even be discussed at the high-level strategy sessions that are probably now occurring. The hallmark of political expertise in America is recognition that political policies that displease those who furnish the money in political campaigns are “tilting at windmills’ style notions and Sancho Panza is not a viable political mentor.
I have mentioned Dan Carlin before in posts on this blog. He has a channel called “Common Sense”, in which he discusses various current issues. In a recent one, he discussed what he perceives as a real threat to our democracy: Pent up rage and frustration in response to government’s indifference to the economic problems facing working class Americans. If you would like to hear his reasoning on this subject, here is a link: Common Sense
This link takes you to the home page of his blog. Scroll down and click on “The Specter of Dissent”.
July 27, 2014 § 1 Comment
Today I spent five or six hours at a “Summit Meeting” of activists and organizers working for Wendy Davis’s campaign. I thoroughly enjoyed it; met some interesting people; learned some digital tricks about political organizing and listened to some very smart, articulate youngsters present some very smart ideas about how to prepare for and execute an effective get-out-the-vote [GOTV to the cognoscenti] program.
Wendy Davis attended the meeting and made a rousing speech.
The organizers convinced me they have an amazing database of potential supporters, complete with voting histories and other clues to the likelihood that, if they vote, they will or will not probably vote for Wendy Davis. Those who issued the invitations to this meeting presumably had access to this database. [I was invited because I have done some phone-banking and hobbled around a neighborhood one Saturday afternoon with a third-year political science major from Harvard who is spending the summer doing some field work with Battleground Texas.]
My problem is: I looked over the audience, probably about 150 people from Harris, Ft. Bend and Montgomery counties, and saw only four or five Chicanos, none in leadership positions. When Wendy spoke, she said nothing about the migrant children flooding our Mexican border or the vicious and callous reaction of the Tea Party-dominated Texas Republican Party. Here is a link with some information that apparently has been overlooked by the Davis campaign. Chronicle
The irony of the experience, at least for me, was that the meeting was held in the Ironworkers union hall on Dahlia street in the East End of Houston. The route to that location is along Lawndale, a major street in that part of town, where the signs on the shops and restaurants are in Spanish and the area is obviously a Hispanic neighborhood.
I made my pitch to a couple of the organizing staff and they listened politely. I, of course, have no credentials to be giving advice to political organizers, but I do so anyway. I am very tired of living in Texas under the domination of jackasses like Rick Perry, Ted Cruz and Dan Patrick. And it seems obvious to me that, unless Wendy Davis can interest Chicanos in her campaign and can overcome their notorious failure to vote in off-year elections, she cannot be elected.
Well, enough about that. My friend, Dave Shapiro, who constantly shops the Cloud for pertinent political commentary and generously emails his finds to his friends, sent me an article in Politico Magazine, written by Doug Sosnik, a political consultant and former adviser to President Bill Clinton. Here is a link: Sosnik
In this article, Sosnik sounds the alarm that the Democratic Party is in danger of being “taken over” by liberals. He writes that the Blue Dogs are being replaced by “populists” who may even be able to force Hillary to move leftward. Horrors! He apparently believes that the days of “triangulation” and the DLC may be gone forever.
Sosnik cites polls showing that Americans have lost faith in their government. He concludes, based on this evidence, that the “big government” policies of political liberals may be a doomsday prescription for the Democratic Party unless the leftists can “reconcile” their ideology with less government.
I think this reasoning is nonsense. Working class Americans have every reason to distrust government based on the policies of Sosnik’s old boss and the Bush policies that took over where Clinton left off. Thomas Pikkety has furnished a boatload of data to show that unregulated or inadequately regulated capitalism leads to steadily increasing degrees of wealth inequality that enriches the few at the expense of the many. Clinton’s repeal of Glass-Steagall was the exact wrong way to prevent Pikkety’s nightmare scenario. His reckless facilitation of NAFTA style globalization only added to the destruction of American working class economic health. Here is a link to an article that catalogs some of that story: Glass-Steagall [I have written about this at some length in a post entitled “The Bankenstein Fiends”.]
Economic justice in America will not be restored by weakening government. It will be restored by government policies designed to benefit the ninety-nine percent who don’t have tax loopholes and 15% capital gains rates, whose taxes are withheld from their wages without benefit of clever accounting tricks and overseas hiding places. It will be restored by pro-union policies that protect the right to organize and bargain collectively with company ownership. It will be restored by programs that hire workers to rebuild infrastructure. That will not happen if economic policy is left in the hands of private corporations and billionaires and politicians beholden to them.
In other words, government will be trusted when it becomes trustworthy. And that doesn’t equate with indifference to the plight of ordinary Americans.
November 15, 2012 § Leave a comment
I have just posted some ideas based on some parts of Walter P. Webb’s book, “Divided We Stand”. In the following effort I will address other parts of his book. He discusses the United States in terms of three sections: The South, the West and The North. He contends that the South (including Texas) suffers from an inequality of wealth and political power because that power is concentrated in the Northeast. He identifies the Civil War and the Reconstruction that followed as the initial causes of this inequality. He also identifies the advent of large and powerful business corporations, contemporaneous with the closing of the frontier, as a mechanism that has consolidated that inequality.
This will be longer than most of my posts, partly because I will include some extensive quotations. While I think those quotes are interesting and deserve to be included, they can be skipped over or skimmed if you disagree.
The Civil War andReconstruction
The Civil War left the Confederate states east of the Mississippi prostrate and devastated. Sherman and Sheridan burned, pillaged and otherwise destroyed most of the wealth and physical assets in those states. Texas was spared most of the physical destruction, but shared fully in the financial wreckage. This was followed by a relentless and ruthless series of federal civil and military policies and laws that were designed not only to destroy completely any vestiges of economic or political power in the “rebel states” as they were named in the legislation, but also to demean and dishonor all who participated or supported the rebellion.
Following the 1867 election, which empowered the followers of Thad Stephens and John Sumner in the House and Senate, the South was placed under military government. Its laws and constitutions were re-written; its Congressmen were denied the right to claim their seats; all who had any leadership role in the rebellion were disenfranchised; no state government authority was allowed to be exercised until the 13th, 14th and 15th Amendments to the U.S. Constitution were ratified; no former Confederate state was allowed to make any payment based on a bond purchased to finance the rebellion; the freed slaves were promoted and encouraged to claim positions in new state legislatures. No one was allowed to vote without signing and swearing or affirming an oath that read:
“”I, _____, do solemnly swear (or affirm), in the presence of Almighty God, that I am a citizen of the State of _____; that I have resided in said State for _____ months next preceding this day, and now reside in the county of _____ or the parish of _____, in said State (as the case may be); that I am twenty-one years old; that I have not be disfranchised for participation in any rebellion or civil war against the United States, nor for felony committed against the laws of any State or of the United States; that I have never been a member of any State legislature, nor held any executive or judicial office in any State and afterwards engaged in insurrection or rebellion against the United States, or given aid or comfort to the enemies thereof; that I have never taken an oath as a member of Congress of the United States, or as an officer of the United States, or as a member of any State legislature, or as an executive or judicial officer of any State, to support the Constitution of the United States, and afterwards engaged in insurrection or rebellion against the United States, or given aid or comfort to the enemies thereof; that I will faithfully support the Constitution and obey the laws of the United States, and will to the best of my ability, encourage others so to do, so help me God”‘
The statute that included this oath also provided for severe penalties for perjury.
My Reaction to This History
I have, and have had two inconsistent, illogical and conflicting reactions to this history. In the 50’s and 60’s, when I was exposed, first hand, to a new generation of white southern bigots, their mouths dripping with racial hatred, I thought that Reconstruction had been an all-to-brief moment when black citizens in the South temporarily had access to political power to which they were entitled and which had been denied to them through long decades of horrific slavery. I saw the 1876 compromise that elected Rutherford Hayes in exchange for marching the Union troops out of the South and leaving the black population at the mercy of the Klan as a disgraceful and immoral episode which postponed racial justice for almost a hundred years.
But, . . . . wait for it . . . On the other hand: When I read Walter Webb’s book while I was in college and became aware of things like the above-quoted oath, realizing that these plainly unfair, unwise and hateful laws were imposed by one set of Americans on another set of Americans, I could easily imagine how enraged I would have been if I had lived in Alabama or Kentucky, where my parents were born about the time those laws were enacted. [My dad was 54 when I was born. He was born in 1877, in Kentucky. His parents named him Robert E. Lee Hall. My mother was 45 when I was born. She was born in Alabama in 1886.]
Southerners were enraged and their rage was expressed with violence and smouldering hate that has required decades to dissipate. I have read scholarly opinions speculating that the “war-guilt clause” in the Versailles Treaty furnished Hitler a basis for mobilizing German enthusiasm for WWII. That it was a mistake. It is hard to talk or write about these issues without appearing to excuse Hitler or the Klan, but there is no doubt in my mind that trying forcefully to cause a complete reversal of political, social and financial power in the South, based on military arms following a bitter war, was absolutely guaranteed to result in long term mindless violent hatred.
Concentration and Consolidation of Wealth in the North
The nature of Reconstruction, however, is tangential to the matter of sectional inequality that Professor Webb addressed. His book cites persuasive evidence that the post-Civil War devastation was only the beginning of a set of policies that concentrated wealth and economic power in Northeastern America and reduced the South to a status not unlike an ill-treated colony, exploited for its resources, but denied a fair share of the wealth generated by them.
Webb observes that the frontier essentially closed between 1890 and 1900, a decade when powerful financial and industrial corporations rose to dominance. As the factories were built in the North, they created an inspiration and a market for a myriad of machines, equipment and techniques, invented to enable and improve them. That technology was locked into the North where patent laws insured that the wealth resulting from it would remain there, owned by the corporations that either employed the inventors or bought the rights to their creativity.
The post-war Congress appropriated generous pensions for the Union troops and their families, resident, of course, primarily in the North. At the same time, to protect the products of the growing industrial complex, the Congress passed a series of tariffs that raised prices for Southern buyers, but enriched Northern corporations. The revenue generated by these high tariffs and the large budget surpluses that resulted became an embarrassment to the Congress, a problem they solved by steadily increasing the pension benefits payable to Union military survivors. Between 1862 and 1923, almost 8 billion dollars was distributed to veterans. 7 billion dollars of that went to veterans living in the North. Webb speculates that this extra money enabled families of the veterans to start businesses, some of which grew into the corporate behemoths that toned the financial muscle of the North.
Professor Webb also wrote that eighty or ninety percent of the natural resources – gold, silver, oil, timber, and, to a lesser extent, coal – were located in the South and the West. The ownership of those resources, however, was concentrated in corporations located and controlled by Northern residents.
The Rise of the Corporation
Webb’s book describes how these Northern businesses were initially characterized by personalities, the “Robber Barons” led by Carnegie, Rockefeller, Armour, Swift et al.. Then, as the size and power of the businesses grew, and the individuals who established them died, their direction passed to corporations who could raise the amounts of money necessary to finance them. That development was empowered by a legal coup that Webb writes about with a combination of sarcasm and outrage: In 1882, in Munn v. Illinois, the Supreme Court ruled that a state could fix rates for railroads, grain elevators and other business entities that affected the “public interest”. That threat of a reasonable and just legal doctrine did not last long.
In 1886 and 1889, the Supreme Court accepted the argument of Roscoe Conkling, the Southern Pacific’s lawyer, described by Webb as “former politician and Republican boss in the State of New York”, who had served as a member of the Committee of Fifteen that drafted the Fourteenth Amendment, who claimed that the Committee had intended that corporations would be legally deemed people and, hence, entitled to “due process” and all other constitutionally protected rights.
Webb’s treatment of this travesty is a pleasure to read. He imagines the cross-examination of a corporation with questions like, “Are you interested in religious freedom?”; “Aren’t you afraid of going to hell”. The corporation replies that it has no soul and thus has no fears about hell.
Relying on data in 1935, Webb wrote that of the 200 largest corporations in America, 180 were based in the North. He perceived these developments as a return to feudalism, with Northern corporate power holding southerners in bondage. He complained about gas station attendants wearing uniforms with corporate logos and shoemakers required to pay license fees to the Northern owners of patents on their equipment.
One can only imagine how he would react to the modern advent of franchised businesses and chain store empires that have destroyed the business model of small independent entrepreneurs. He was saddened and enraged at his perceived tiny hint of what has become a wholesale capitulation to the power of corporate capitalism.
The Professor’s Dated Dream
In his last chapter, he offered what he called “A way out.” He proposed an alliance between the South and the West; between labor unions and Southern agrarian activists. He proposed a constitutional amendment to undo the grotesque legal fiction that vivifies corporations with the attributes of human beings. He hoped that new political alliances could remedy economic inequality. None of that has happened. Corporations exercise more control over the lives of Americans than the combined authority of all our governments. Even health care could not become available to all except by agreeing that it would continue to be administered through insurance companies – a result insisted on as a way of preserving “freedom”. Even the language of liberty has become so corrupted that intelligent discourse is difficult achieve.
A Closing Note
Re-visiting the Civil War and Reconstruction prompted me to remember some of the things I talked about with my daughters when they (and I) were young. Here is a short sample of Stephen Vincent Benet’s “John Brown’s Body”.
“Bury the South together with this man,
Bury the bygone South.
Bury the minstrel with the honey-mouth,
Bury the broadsword virtues of the clan,
Bury the unmachined, the planters’ pride,
The courtesy and the bitter arrogance,
The pistol-hearted horsemen who could ride
Like jolly centaurs under the hot stars.
Bury the whip, bury the branding-bars,
Bury the unjust thing
That some tamed into mercy, being wise,
But could not starve the tiger from its eyes
Or make it feed where beasts of mercy feed.
Bury the fiddle-music and the dance,
The sick magnolias of the false romance
And all the chivalry that went to seed
Before its ripening.”
“And with these things, bury the purple dream
Of the America we have not been,
The tropic empire, seeking the warm sea,
The last foray of aristocracy
Based not on dollars or initiative
Or any blood for what that blood was worth
But on a certain code, a manner of birth,
A certain manner of knowing how to live,
The pastoral rebellion of the earth
Against machines, against the Age of Steam,
The Hamiltonian extremes against the Franklin mean,
The genius of the land
Against the metal hand,
The great, slave-driven bark,
Full-oared upon the dark,
With gilded figurehead,
With fetters for the crew
And spices for the few,
The passion that is dead,
The pomp we never knew,
Bury this, too.”
November 11, 2012 § Leave a comment
There is an old complaint about lawyers: Frustrated clients often complain that they want to find a one-armed lawyer so they will not hear “On the other hand”. Randy Miller, Business Manager for the Teamster Local in Houston in the 50’s and 60’s, used to argue that labor lawyers’ function was not to advise clients how to stay out of trouble, but to get them out of trouble. Chris Dixie never agreed, but I remember a bar-room conversation between him and a friend: Chris made some statement about criminal law. His friend said, “Mr. Dixie, I thought you were a labor lawyer, not a criminal lawyer.” Chris replied, “Hell, when I started practicing labor law, it was criminal law.”
Well, this is about “On the other hand”.
First, let me explain something about the way I see things. Beginning in my twenties, while I was in college, I consciously and sub-consciously (as I now look backward) rejected absolutes and doctrines and philosophies that offered purity and certainty. I am not referring to the way I perceived the world, but to the way I perceived myself. This self-perception was not an event, but a life-long process.
I was attracted to the ideas of Carl G. Jung, who taught that every person is an amalgam of good and evil -angel and demon – light and shadow. He believed that acknowledging and claiming the shadow was essential to a balanced and mentally healthy personality. I was drawn to the Taoist ideas of Lao Tse and the I Ching, a book of changes translated by Richard Wilhelm, for which Jung wrote a long introduction. Taoists teach that reality is always a result of opposites, but not opposites in conflict with each other, but continually changing opposites tending toward each other.
Now, I want to be honest about this. These are slippery and morally dangerous concepts. They are capable of being used to excuse and rationalize trashy behavior, a convenience that, at times in my life, I have employed fully in stupid and self-destructive ways. I think I have survived those episodes in a two-step process: First, I stopped drinking alcohol. [This didn’t happen until I was 55 years old. I’m a slow learner.] Second, I had to spend several thousand hours painfully reviewing and reexamining the rationalizations that caused me and several others much pain and harm.
But, having made some progress, I still have to pause sometimes and remind myself that my judgments are always subject to review and reconsideration.
The reason for all this prelude is that my attack on the loophole solution to re-balancing our tax system drew spirited blow-back from people whose opinions I respect. I am not persuaded, but their ideas deserve consideration, especially because the loophole solution is probably most likely to be the one we get, whether we like it or not.
The great advantage of closing loopholes designed specifically to benefit the wealthiest 1% is that it would target those who have benefited most from the unfair taxation policies of the last decade or so. An increase in the top rate, on the other hand, would hit many who have not benefited from the loopholes and who have attained their level of wealth through personal effort and determination. For example, compare Barack Obama and George Romney. Is it fair for Obama and Romney to have identical increases in their taxes as a result of the current effort? Obama’s wealth results from two books and a lifetime of effort. Romney’s wealth results from cleverly taking advantage of every tax crack and crevice known to taxation experts and schemers. Should their wealth be treated the same by the tax code?
Also, consider the fact that state and local taxes vary widely between states and municipalities. An increase in the top federal income tax rate will affect equally those with high and low state and local taxes. Does that raise a fairness issue? The scalpel versus the meat-ax solution would mitigate this problem.
The specific facts about these issues are not yet public or, at least, not known to me. I assume that, during the next few weeks, we will have an avalanche of data to absorb concerning the relative results of these solutions. That may require us to re-assess our present preferences.
For now, although I acknowledge the above-stated arguments, I still believe that allowing the Bush tax cuts for the top rate to expire will be the best solution. I don’t trust the Congress to revise the tax code’s complexity in ways that will balance the kind of cuts in safety-net programs that Republicans will demand. The term “loopholes” fails to describe the kind of carefully crafted corporate welfare that has been stealthily inserted into the tax code. When that welfare is threatened, lobbyists will descend on Washington like locusts and threats to political careers will resemble the kind of “offer you cannot refuse” fictionalized in The Godfather.
Even more important, I don’t believe the loophole solution can be explained to the average American family like the top rate increase can. The top rate increase is simple and easily grasped, even by working people who have no time or inclination to become taxation mavins. I am hopeful that President Obama will make full use of his ability to stay in touch with the American voters who just re-hired him. If he does, I think he can negotiate from strength rather than weakness.
I have already heard from John Boehner and Lindsey Graham that “The President should lead by adopting Simpson-Bowles.” This apparently will be their version of a compromise. I have a proposal about that: The Simpson-Bowles recommendations should be re-analyzed according to a new set of facts.
Instead of analyzing them according to projections of dollars “saved” and available to pay down the deficit, they should be analyzed according to how many people will die as a result of inadequate health care; how many young people will be denied a college education as a result of cuts in grants for that purpose; how many children will go to bed hungry as a result of cuts in food stamp money; how many elderly people who do physically demanding work will be required to continue that work after they reach the age of 67. There are other consequences that I cannot think of now, but this suggests the idea. This information should become part of the public discussion about changes in so-called “entitlements”. Let those who insist on the cuts take responsibility for the human as well as the financial consequences.
On another note: I have looked at the present tax brackets. The top rate of 35% does not apply until adjusted gross income exceeds $388,250 for taxpayers filing jointly. Why is President Obama talking about people making “more than $250,000”? If allowing the Bush tax cuts for the wealthiest Americans would raise the top rate from 35% to 36.9% only on taxpayers filing jointly with adjusted gross incomes of over $388,250, why not say that. That would at least avoid opposition from most people making between $250,000 and $388,250, a $138,250 tranche. There may be something I’m missing here. If anyone reading this knows the answer, I’d appreciate it. Just leave me a comment.
October 31, 2012 § Leave a comment
Here is an editorial from the July 27, 1935 issue of Saturday Evening Post, attacking FDR because he was not a “business man”.
THE SATURDAY EVENING POST
FOUNDED AD: 1728
PUBLSHED EVERY SATURDAY BY
W CURTIS PUBUSHINC COMPANY
PHILADELPHIA, PENNSYLVANIA, U.S.A.
GEORGE HORACE LORIMER. EDITOR
PHILADELPHIA. JULY 27, 1935
IF THE President’s “soak-the-rich” tax proposals
had been made for the purpose of balancing the
budget; if they had reached down to the lower income
brackets, so that everyone in proportion to his
means bore his share of the tax burden; and if they
had been accompanied by an expressed determination
to redeem his campaign pledges of drastic economies,
there could have been no just criticism of
these purposes. It is, therefore, with sincere regret
that we must conclude, on the evidence of both his
message and his “must” attitude toward Congress,
that his primary concern is with his political fortunes,
aa they are threatened on the left, and not
with the fortunes of America, as a whole.
The left should not be discouraged, even if they
feel that the proposed taxes will not soak the rich
enough. The objective, to adopt the President’s
football figure, the goal posts toward which the
Administration snake dance, with its wobbling from
right to left, has been heading from the first, should
now be perfectly plain to the gentlemen of the left,
as well as to those who, seeing, still could cot believe.
The New Dealers seem determined to uproot the
twin posts of constitutional government and the property
rights of the individual. And if they are leveled,
the crossbar of democracy, those other rights of the
individual, will fall to the ground and we shall find
ourselves members of a collectivist society.
Anyone with ordinary sense who has followed the
windings of this tortuous dance, one step to the
right and two to the left, can only conclude that
Professor Tugwell and the President are twins in
their determination to roll up their sleeves and make
over America. And what a mess they are making of
their making over !
That brings us to a consideration of our two billionaires:
President Roosevelt and Henry Ford—
President Roosevelt because he is the only man in
the world who has billions to spend as he sees fit,
and Henry Ford, a newspaper-reputed billionaire,
though his actual fortune is probably less than half a
billion. Rockefeller, or any one of a hundred other
men, would do as well for purposes of comparison,
but we have chosen Ford because he ie the best advertised
rich industrialist in the world.
Henry Ford started life as a humble mechanic,
without any special social or educational advantages.
but as he progressed step by atep, hia education
progressed along sound, if not academic, lines, and
he acquired an intimate knowledge of social problems
by personal contacts with both the higher and
the lower strata of society. No college, no professor
and no theorist formed his philosophy of life. No
banker, no trust, no financial skulduggery helped to
found and increase his fortune. He built it step by
step with his hands and his brains, and in building it
he was a member of many classes of society, and
gained an insight into their needs. His matured belief
is that to give work with good pay and an opportunity
to rise according to ability is the first and
soundest thing that can be done for any man. In
carrying out that idea he has been on firm ground.
From our own observation, his is the philosophy of
almost every successful businessman, but their objective
is always to make work, not ” made work.” It
is one of the strong points of the American System
that the men at the head of a business, starting with
tbeir bare hands, almost always create an industry
out of an idea’ and their willingness to stake their
lives on it; or if they have had some advantages, they
have been thrown into the hopper and have climbed
out because of special abilities. Men who inherit a
business, and without foundation training try to run
it, almost always make a mess of it.
As the rich industrialists made their wealth, only a
small part of it was spent on themselves. The major
part of it went into the creation of new wealth, more
jobs and more opportunities for others. Of course,
there are many exceptions—men who have achieved
wealth in devious ways and by sweating labor; men
who have disregarded the obligations and duties of
their position and spent wastefully and selfishly
on vain and vainglorious show, but they are not
representative of the American System, and their
number is steadily decreasing.
President Roosevelt is not, of course, a billionaire
m his own right, but he is by decree of Congress,
Born to inherited wealth, he was educated in select
schools, at Harvard and by travel. In his youth his
was the environment of the rich, and the rich with
social position. He tried business; practiced law;
went into politics and graduated to the position of
an Assistant Secretary of the Navy and a vicepresidential
candidate on the badly defeated Cox
and Roosevelt ticket. It was due to the persuasion
of Al Smith that he ran for governor of New York,
was elected and, under the tutelage of Louis Howe
and his Tammany friend, Jim Farley, became a
presidential candidate. ‘
President Roosevelt is wise politically, but qot
economically. His real experience is largely political.
His environment and inherited position cheated him
out of an opportunity to engage as a private in the
battle of business and to win his stars on the field as
a constructive economist. He is aa theoretical as any
of his professors. His whole course as President shows
that he is willing and ready to tackle almost any
experiment that listens well in the telling, regardless
of the counsels of experience. That, of course, is the
defect of his early environment and later training,
for he never was a real cog in the machine that
makes the economic wheels go round. That, too, is
the defect of his closest advisers.
Young men with brains—and there are many of
them in the field of inherited wealth—if they have
dormant ambition gradually tire of a round of
dinners, balls, hunts, Newport in summer and Palm
Beach in winter, with travel de luxe over and around
the world. Their names and pictures in the Bociety
column no longer give them a thrill and a sense of
importance. They yearn to move over to the news
columns. The deference that is paid to inherited
wealth and social position in America gives them a
sense of superiority and a feeling that they are thoroughly
qualified to iron out all other human inequalities
while keeping their own status on a higher
level, and to mold the rest of us in accordance with
their own impractical social theories. These young
men and women, with many professors and young
radical lawyers, have naturally floeked to the New
As we have already said, the President is not a
billionaire in his own right, but materially he is as
fortunately and as pleasantly placed as the richest.
Aside from his salary of seventy-five thousand dollars
a year, he occupies rent-free the most desirable
house in the United States, with greenhouses and
pleasant grounds, and by all accounts he is determined
to occupy it until 1941, at least. When he
wants to travel, there is a special train at his command;
when he wants to go to sea, there is a Navy
ship at his disposal or the luxurious Astor yacht.
With salary, house, allowances and perquisites, he
probably has what amounts to better than three
hundred thousand dollars a year. This is as it should
be. No one want-s the President to be stinted or to
live beneath the dignity of the office, but his is not
exactly a share-the-wealth background.
Then, as Mr. Garrett has pointed out in a recent
article, he has not one billion, but many billions
to spend and employ in the way that he thinks
best. No one doubts that he expects to spend for
what he believes to be the common good, though
a little personal political increment must necessarily
accrue to one who can dictate the place, time and
manner of such enormous expenditures.
We doubt whether any man in the country is big
enough or experienced enough to employ and expend
this vast sum wisely. If we may judge from
past utterances and the present tax program of the
President and his advisers, they would not trust
any other man in the United States to spend even a
small fraction of this sum. As a matter of fact,
both the sum and the grant of power vested in it
are fantastic and quite beyond the grasp of the
average man, including the average member of
Congress. But let nobody imagine that he will
escape lightly. Even more than the rich, the poor
and the middle-class will be ground between the
upper and the nether millstones of higher prices and
heavier, though indirect, taxation. The essential
difference between our two billionaires is that Henry
Ford creates and adds to the wealth of America,
and President Roosevelt taxes and takes from it.
This is not a nation of peasants and parasites.
There is still a lot of independence and fight left in it.
Farmers may temporarily be tempted by easy money,
but it is hard money for the rest of the country that
is taxed on its bread and meat for their benefit; labor
may be dazzled by the prospect of always-mounting
wages and the domination of industry, but neither
means anything when there is little work and less
industry; business may be beguiled by fair promises,
but when every face-to-face smile is followed by a
kick from behind, fair words soon lose their meaning.
The truth is that not only have we an unbalanced
budget but we have thoroughly unbalanced legisla-
tion, even to achieve the clearly avowed, and some
not so clearly stated, ends of the Administration.
Those who have sharp ears can already hear the
distant popping of the first minor Administration
experiments, punctuated from time to time by a
major explosion, though, so far as possible, the sound
of these blowups is being carefully muffled and the
effects discounted by new bombshells.
The real making over of America will come when
the country as a whole wakes up to what has been
done to it in the name of reform and the more abundant
life by the President and his subservient, though
not quite so subservient as it was, . Congress s0oner
or later, the return to sanity, to common sense and
to the possible, must come, and the foundations on
which America grew to its foremost position will he
rebuilt. They will be stronger foundations, bouud
together by a finer and cleaner cement, instead of
the jerry-built courses that are now being laid in a
professed attempt to build to high heaven.
The amazing thing about this diatribe is that it is so cookie-cutter similar to the Chamber of Commerce/Tea Party line today. The dismissal of college-educated people; the “built it with his bare hands” rhetoric; the equation of taxation with theft; . l. . it’s all there. These guys never change their tune. And even more amazing: Even when they are almost literally standing in the ashes of the latest financial or economic disaster brought on by those “built it with their bare hands” heroes, a substantial percentage of the listeners lap it up.
During the “Roaring Twenties”, the Wall Street geniuses flew the entire American economy into a total collapse and, in 1935, when FDR and the Democrats were desperately trying to resurrect the barely breathing corpse, this jackass was denouncing him for his lack of business skills. Sound familiar?
I have a theory about why this keeps happening: No one ever goes to jail for doing it. Lying, cheating and defrauding seems to be acceptable behavior so that we can retain our “freedom”. It would be too “divisive”, even “class warfare” if the perpetrators of these dishonest schemes paid for their crimes. Bernie Madoff went to jail because he caused a lot of losses among some wealthy “investors”; but the guys at AIG, who made gazillons of dollars peddling phony credit insurance (mis-labeled credit-default-swaps, as a result of a deliberate loophole in the applicable regulations), not only paid no penalty; they were bailed out with taxpayer money. So why not keep doing it? The brokers on Wall Street who sold billions of dollars worth of mortgage-backed derivatives, knowing full well that they were falsely stamped “AAA”; not to mention the dishonest evaluation companies who supplied the stamps –all those guys walked away with their fat bonuses and swanky vacation homes in the Greek Isles and the South of France. So why shouldn’t they keep doing it?
We need to stop this nonsense the only way it can be stopped: Perp walks and prison cells, and I don’t mean minimum security country clubs. Those guys need to get to know the non-violent black kids in prison for possession of a handful of grass or a crack pipe.
I know. It aint gonna happen. But it should.