Tuesday, December 14, 2010

A Fundamental Disconnect between "We the People" and Them the Banks

Today I'd like to talk about the plutocracy. The very rich and very powerful moneyed interests that have taken our government from "We the people" to "We the wealthy and powerful" ...

A fundamental part of this problem is the pervasiveness and power of corporations in our economy and our political process. The recent Citizens United Supreme Court ruling opened up nearly limitless campaign spending for corporations and this all goes back to corporate personhood, which, like most policy changes, was based on what seemed like a good idea at the time. The original idea was that if a corporation were not a person, they could not be sued by individuals. So that's a good thing, right? The trouble is the unintended consequences. That corporate personhood has now been extended to freedom of speech. But corporations, particularly successful corporations, have far more resources to get their free speech out into the public arena. I can't afford TV spots or radio ads or product placement. Most of us can't.

We were warned.

By Thomas Jefferson, "I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to bid defiance to our laws."

And even Adam Smith, though corporations as they existed even in Jefferson's time were much different than what Smith experienced. He only saw the corruption and grasp for power of joint-stock companies like the East India Trading Company. And that was enough to warn us against them. Of course, that's now what anyone learns in school about him.

Bill Moyers' recent speech at Boston University elucidates the issues here much better than I could hope to do.

Noam Chomsky, of course, has written extensively about it, but I found this piece particularly interesting. He lays out the historical development of corporations and at least partly explores why corporations maybe didn't need to be granted the same rights as individuals, but that the courts and lawyers made sure it happened.

You could argue that none of this really matters. We've always had wealthy people manipulating the government to their own advantage. And I'd totally agree with that. The trouble I have with corporations exerting this same power is that corporations do not have the same incentives as individuals. Even someone as insanely rich as Vanderbilt or Rockefeller or Gates still has to live in a community. They are still influenced positively or negatively by changes in their community. And as such they have a non-financial incentive to provide benefit to that community. That's why these giants of industry are also such philanthropists - giving back to the community to build a university or a hospital or an art museum.

But how often do you see corporations taking their profits and making enormous contributions to the common good? It's startlingly rare. There is no incentive to do so for a corporation. In fact, a corporation has a disincentive to reduce its bottom line. A wealthy person doesn't mind parting with some wealth for a good cause - they know they have more money than they could ever spend. A wealthy corporation doesn't think that way. The profits earned today become shareholder dividends tomorrow and help keep the corporation solvent in hard times. But it's all about money. Anything else is secondary. Any corporate investment in a community is largely for its own good. To build a stronger workforce, to improve infrastructure, etc.

But what is money? Money is simply convenient way to transfer value. My effort, or "work" has a value. Likewise, your "work" has a value. But I can't directly trade my work for your work unless your work is exactly the kind of work I need and my work is exactly the kind of work you need. That's what makes bartering inefficient. You spend too much time looking for someone with which to trade work. Rather, we use money to simplify this process. I am paid by someone who values my work. I pay someone whose work I value. And they pay you for your work.

So why did money become so damned important? Why is this now the measure of a man? A measure of a person's value? It's absurd, but we're so caught up in spending our lives trying to earn a living we forget largely what makes a human being.

And through corporate personhood we've taken this all a step further. Now there are entities, or "persons", whose entire purpose on earth is to make money. Not to provide comfort to a sick relative. Not to create a work of art. Not to play in a band. Not to cook a meal for friends. Not to read a book. Not to swim in the ocean. Not to do anything that makes us human ... just to make money. And these "persons" have become the most powerful in our society.

It's destructive and it's unsustainable. And it's only getting worse.

What brought on this particular blog entry today was reading that Representative Spencer Bachus (AL-R), the incoming Chairman of the House Financial Services Committee was quoted as saying, "In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks." This is the man set to lead the House Committee for regulation of financial services. We're just over 2 years since this same financial services industry destroyed our economy. And now we're seating a guy who thinks the purpose of the government is to serve the banks.

I'm disgusted. And you should be too.


  1. Spencer Bachus. Sounds like a name to remember. Should we form a pool to bet which bank he'll be on the board of after he leaves office?

    It's interesting to observe how our financial regulatory positions are merely a claiming race.

  2. The conservative argument I've heard argued on the topic says:
    Corporations supply jobs. It's the governments responsibility to serve corporations for that reason.

  3. Good point about the unintended consequences and the peril to allow unlimited corporate donations. But zero liaison or full government control? that's unrealistic, and, look to countries that made entrepreneurship and foreign investment impossible, against the people.

    The health of the economy can not be separated
    from the welfare of the people. Today's US is the biggest economy of the world, contributing to more than a quarter of the world's economic output with only 5% of the world's population. Let's not fool ourselves: American companies have been the most innovative, productive, and competitive, which attracts the best talents and trade partners.

    Modern corporations, like individuals, seek opportunities for exponential growth, breaking out from the linear growth model. The revenue from manufacturing cars and computers is roughly proportional to the size of the capital inputs--the larger the plants, the larger the output, the bigger the company (assuming demand>supply). But web-services, software and design-driven corporations can profit exponentially. That's how the world has evolved. My home country Taiwan seeks to go from semiconductor chip makers to chip designers. Profit seeking? Yes. Is it evil? I'm not sure. The idea is the same for individuals: dancers seek to become choreographers, musicians seek to become composers, salesperson to become business owners.

    Condemning greed and profit-seeking, questioning why corporations want to become bigger is as productive as preaching abstinence as HIV control. Money is not everything, but money is not nothing.

    The US financial industry is a crazy mess. And to allow their power tramps all political processes is corruption. But investing in the success of American businesses is not, the government has to ensure a healthy and responsible business environment--this clearly needs more wisdom to make the free market philosophy work for the people. The nonfarm private sector employ about 120 million americans, half of them in large corporations and half in small businesses (<500 employees). The critical problem as Mr. Elite points out, is how the government gets to the point of serving the interests of a small number of corporate interests and became the enemy of the people.

    The lack of regulation has nurtured the vibrant California wine business--as supposed to the heavy regulations on techniques/blending in France. European-style heavy regulations clearly doesn't work for Americans, but free market has failed the country. Countries like Switzerland and Luxembourg, on the other hand, have long histories of banking-heavy economy--but the whole population benefits from it. What's the lesson to learn?