Part Three - Wealth Redistribution in a Recession

Lest we forget, a primer on capitalism.

MeanMesa takes a longer look at a suspiciously obscured reality.  This is the third of series of postings on illicit wealth redistribution in a free market system.

Illicit Wealth Redistribution Causes a Recession

There are more theories and explanations defining every aspect of the current recession than Carter has liver pills.  However, amid all this intensive analysis, it becomes surprisingly convenient to miss some of the most glaring "big picture" issues involved.

A recession in our domestic economy, put bluntly, derives from a crisis in value.  This suggests that things which should have had a certain value, wind up having less value.  An economic recession or depression occurs when redistributed wealth becomes so concentrated in the top earners that these folks become willing to allow the currency value to suffer just so long as the impact is centered on the less wealthy more than it is on them.

The intrinsic wealth always originates at the bottom.  When the cash becomes overly concentrated at the top, the plutocrats can absorb the descending currency values, and are willing to do so, confident that the "lower classes," after suffering for a while, will slowly replenish the pool.

The political considerations must be artfully scheduled to reap the maximum benefit from this situation.  When the economy has just begun to falter, the economic conditions at the bottom of the wealth scale -- for a time -- continue more or less as they have always done previously.  While the "lower class" economy is slowly coasting to a stop, the "highest class" will move to protect their existing economic inequalities.

For example, this was exactly the case with the autocrat's TARP policy.  Just as the airline stewardess tells the mothers to place the oxygen masks on themselves before the infant in their arms, the richest Americans had to rush to the protection of their illicitly redistributed wealth, extracting vast sums of Treasury dollars from the system, before the calamity had a chance to reach "main street" and become a material political event.

From this point, the economic phenomenon becomes much more complex at once.  However, we must stick closely to the idea that a "free market" system, operating more or less normally, constantly shifts position (value) on all sorts of monetary matters to adjust itself back to a functional state.

A recession or a depression represents the case when this "corrective adjustment" cannot "take its course."  The burden of maintaining a "free market" economy continues, but the value of maintaining one falters.  Fleeting, superficial causes are legion, but fundamentals are, perhaps, even more interesting.

The largest result of the process is immediately clear.  The "cash registers" of businesses are empty.  Worse, the pockets of consumers normally relied upon for  a daily "cash flow" are also empty.  The monetary system grinds to a halt.  Of course, illicit wealth redistribution does not.

The figures make the situation disturbingly obvious.

The annual US national income has, traditionally, flowed to the top 1% of income earners.  Prior to this latest recession, the "take" for the top income earners amounted to 62% of all the money racing through our economy.  After the eight year long "looting" festival of the late autocrat, that figure advanced 3% to 65%.

Middle class conditions were not so good at 62%, but the "line was crossed" when this figure was increased.  That 3% increase was, essentially, "the straw which broke the camel's back." 

Income Inequality before "breaking the camel's back" - (data source)

MeanMesa Note:  Although the data presented here ends two or three years behind the present, the trends shown have continued, in many cases, further accelerating in the intervening time.

The dollars which previously flowed as a "self-correcting river" through our economy have found their way into still pools at the side of that flow, better said, at the top of that flow.  If these statistics were "teleported" through time to some sleepy, poverty ridden village of Dark Ages Europe, they would be perfectly accurate.

The wealth of the prevailing noble despots, validated by the "Divine Right of Kings" idea popular at the time, might have been considered quite desirable, that is, sitting hungry in a hovel somewhere in the realm, a certain pride and security might have derived from having a rich local aristocrat as the owner of everything -- too often, "everything" including the local economy and the  people of your village.

In our Medieval example, the "wealth redistribution" would have been accomplished centuries beforehand.  Further, given acceptable conditions of life during this time, it would not have been illicit wealth distribution.  It would have, instead, been simple "the way things were."

Considering this wide spread (at least until the popular revolutions began a few centuries later) acceptance becomes less confounding when we also examine the economies which were functioning under such a dire case of wealth inequality.  The Dark Ages in Europe, even when conveniently separated from their most egregious attributes, were marked by local economies which frankly sucked.


Everyone besides those noble families at the very pinnacle of wealth, suffered horribly, but they did so without any perturbing comparison of what "better times" might have been.  There had never, ever been "better times" for most of them.  As mentioned before, that came later.

The Journey Forward from the Dark Ages (image source)

The vast inequality of wealth during Medieval times was, in some sense, tolerable to its victims because it was consistent with the contemporary culture and economy.  The fundamental idea was simple.  If the economy was to operated under these extreme conditions, a price would be paid.  Productivity, let alone, innovation, would stumble along at a dismal level century after century.

The stories around the fireplace in a Medieval village hovel would be accounts of the "road that the Duke's father built through the village" during the times when one's grandfather was alive.  Worse, that road would have been subsidized for the good of the Duke, not the good of the village, even though the local residents would have been expected to build it for free once given the stones.

The ascent of popular economies from this dismal level was not an easy one, but it gradually fell into place over a period of transformational decades if not centuries.  Now, however, we face the opposite issue, that is, the economy's descent back toward this state.  A descent being imposed with a perilous speed in places such as Michigan and Wisconsin, not to mention the executive hedge fund offices on Wall Street and in the commodities futures markets.


As the economy is being relentlessly and thoroughly "hollowed out" by the illicit wealth extraction process, the revenues to operate the social-cultural-economy dwindle.  Bridges are not maintained, larger and larger classes in public schools are placing buckets under roof leaks when it rains and local budgets begin to collapse.  Every aspect of the services being paid for by citizens' tax dollars is slowly degraded while the funds which used to previously support all of this are redistributed to opportunistic cronies and campaign contributors in arcane "profit entities" which have suddenly become indispensable to "local" economic well being.



That, for the oligarchs, fortunate "opportunistic" environment has, in the past, always relied on back room deals in the halls of Congress and insider trading cocktail gatherings, but now -- especially after the last election -- these schemes can march boldly out into the light of day, protected by the administrative power of elected Governors and State Houses.  These social miscreants have concluded that, operating under the cover of overly sympathetic public opinion manipulation, the times have finally made it quite safe to execute their felonies out in the open where all their victims can see them clearly.


Don't be confused by the false ideology presented to justify all of this.  Instead, accept it for what it is.  The oligarch class is now prepared for its bold move to re-Medievalize the US social culture. The election in 2012 will either stop this tactic in its tracks or solidify it for the short remainder of US history.