June 10, 2024
Christopher Hayes, in ‘Twilight of the Elites,” states that only “1% now lay claim to nearly a quarter of the total economic pie. The last time their share was this high was on the eve of the 1929 Stock market crash.” FDR said the country must have a fair distribution of goods and services.
That is no genius. It is a fact, and researchers around have noted it. Since the Reagan administration, the tax laws have changed, allowing excessive salaries to be concentrated at the top. The concentration of income at the top was not an accident; Washington changed the rules so that they could accumulate it. You know, working for their constituents who are not necessarily the voters.
Corporations are individual entities that require a perpetual expanding market. While some may claim to have some social redeeming cause, most are just for profit. This system allows the board of directors to enrich the executives and themselves. They can even loot the corporation. Home Depot shareholders voted against giving the CEO a $500 Million golden parachute. The board of directors gave it to him anyway. While the shareholders can bring suit, the looting occurs over a long period. Even if they are executives, overpaying for labor has made meeting stock model profit expectations more challenging.
I’m not sure anyone ever said in an investor conference, Gosh, that if you had not paid your executives inflated salaries and bonuses, you would have made the extra 2 cents per share that the analysts expected. Therefore, the stock would not have been crushed!
The mantra of the Ayn Rand Raw Capitalist is the 29 Depression would have been over a lot faster without FDR’s new regulation guardrails. Perhaps, but it is hard to imagine as nobody believed in the banks, and FDR brought FDIC. That is their dream story, and they are sticking to it, but it’s hard to swallow. Even if they are correct, we would have returned to a volatile economy with boom and busts and more depressions. We have not had a depression since 1929, and it took 50 years before we had a bank failure. When we did have bank failures, it was partly due to unraveling regulations on banks and insurance companies, such as Glass Stegall. The 2008 mortgage meltdown was not all the government’s fault, as the Ayn Rands would have you believe. Nobody held a gun to Merrill Lynch’s head, forcing them to break the cardinal rule of investing; don’t put more than 10% of your total portfolio into one investment. Especially high-risk derivatives.
The Ayn Rand Raw Capitalists, through the Heritage Foundation, want to return us to a small Government like we had before the Depression when we had only about 200 million people. I think it’s a dream that we could return to the “Purest form of capitalism, free-market or laissez-faire capitalism. Here, private individuals are unrestrained.” Do you want them to be unrestrained, SCOTUS? Do they think if Congress cannot decide on how much pollution is OK, judges should decide rather than scientists? The answer is no. They should not be unrestrained, as they will loot the government and bring us a depression. The last laissez-faire guy in the White House created an $8 trillion deficit. It would not take many more before bankruptcy. Yeah, I know Trump’s tariffs were not laissez-faire.
One market choice that could help before we regulate is bottom-up managed companies, where workers are paid according to their contribution to the company. This is not a socialist idea but more a communist or collective idea. Throughout history, using that word has made it almost a vulgar swear word in America. One reason is that during the Cold War, communist Russia or the Soviet Union discovered that their collective farms did not produce nearly as much as when they gave the farmer a piece of the action by owning the farm.
It only makes sense that a bottom-up company could be very successful, where the workers have a piece of the action. A colleague stated corporations did not care about their employees so the employees no longer care about the corporation. So, perhaps it is time we stop allowing politicians to grovel for votes, making vulgar swear words out of:
- Socialism
- communism
Countries like Russia, Cuba, and China are generally not pure socialist, pure communist, or even pure capitalist. Neither are we nor should we be. Again, FDR said the country needs to have a fair distribution system of goods and services. There will not be, and we will not even get close to fair under any pure form of economics: Some of the best economies in the world are a mixture:
- Socialism
- Communism, or
- Capitalism
Which system you tout better may have more to do with who is doing the touting and their success or failure within the system than the actual merits of the systems themselves. ‘Everything’ is an absolute, but in this case, it’s accurate that not all industries work best under capitalism. We have seen the radical capitalist answer for the city fire department. If you forget to pay the Fire Department, they will watch your house burn down. Like Uncle Joe says, that’s not a joke or hyperbole.
Tom Flash