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.

New Mexico After the Republican Recession Ends

It seems to be time to take a bit more mature view of what New Mexico's future looks like for the next few years.  Naturally, all of the carefully crafted quips about major changes in the complexion of our state government have us all a little unsettled.  Yet, moments of nervous expectations often prove to also be fertile moments for some serious planning -- hopefully, planning based on some realistic parameters.

MeanMesa's prognosis?

The next five years in this state are going to suck.

Naturally, electing a Republican woman whose greatest claim to fame has been politically lubricated with Texas oil money and a Republican lobbyist who has his own history of, well, acting very much like all the other Republican looters could make things even worse, but regardless of who takes the office in the Round House, we are looking a several years of bleak winter.

It's no secret that New Mexico's state operating budget has been the result of a rather amateurish approach all along.  However, we now find ourselves mired at the "hangover" stage of the national economic collapse.  Already on shaky ground, the state's oil and gas revenues are in chaos.  Bobbing in the well crafted Wall Street maelstrom, our equally amateurish investment program looks more like the last moments of the Lusitania. 

Although popular with New Mexicans, the progressive profile of the Richardson administration was not too cleverly designed to remain durable for these far less prosperous times. Now, not even counting the daily revelations of admittedly pedestrian mismanagement, an amazing capacity for all sorts of horrible contracts and irritating cases of outright corruption, we are facing cuts all through the legions of teachers, firemen, policemen and other essential bureaucrats.

Regardless of which administration will be running the state government, our "weather forecast" is not too sunny -- a series of long winters, each followed by  chilly, reluctant springs, summer droughts  and disappointing autumn harvests. Too many New Mexicans are still trapped in the memory of better days which no form of known economic recovery can possibly resurrect. That torment, frustration and suffering will have to continue unabated until all those complaints and comparisons to the past have finally been purged by the steady, new reality inescapably unfolding for a long number of days and nights ahead of us.

You know, like a toothache. A really bad one.

MeanMesa suspects that the current economic collapse may not be as close to passing as the "unbridled optimists" in the national media fraud might like for us to think.  That "unbridled optimism," by the way, was never actually intended to  transport us toward a more positive outlook on things.  Quite the contrary, the "optimism" we are hearing all about us right now is intended to help us forget.

To gleefully volunteer to try it again.

The prospect of a wide spread memory lapse promises to be the most lucrative IPO (Initial Public Offering) for all those little neo-con minds scuttling around wondering what else they can steal.  If voters can just be persuaded to cooperate with our famous American "marble in a mayonaise jar" memory retention, it won't matter how horrible things got from this last mischief of theirs -- we simply won't remember.

Still, with MeanMesa's traditional, Candide-like, "plucky" inclination to always see the good in things, maybe we can brighten our day with a couple of thoughts for the future.

Granted, conditions both for New Mexico and for the nation as a whole -- viewed even in their best light -- are only going to return to some ghostly similarity  of what we have previously been used to in our pubescent acceptance of being an economic giant and a global super power.  Our plutocrat masters have, at the last possible moment, quietly converted those  past "glory days" of rapacious international military and trade colonialism into Swiss bank accounts and Paraguayan villas.

At this chilling juncture New Mexicans must now insist that our state government take steps to fortify the local economy making it less susceptible to the next collapse.  So, what type of realistic planning can New Mexico consider for those  -- somewhat -- happier days after we struggle back to our feet economically?  MeanMesa has posted these proposals before, but here are a few of them again.

State Health Care

The state's obligations for its part of the largest -- and most expensive -- components of the safety net must be reconfigured.  Yes, the  Senate neo-cons sabotaged  single payer in health care reform, but a refreshing glimmer of light remained.  Buried in the health care reform bill was a serious investment ($10 Billion) in regional health clinics designed to provide a very significant amount of "non-hospital" types of health care and preventative health maintenance facilities.

New Mexico will receive some of these.  What we must do is to make certain that our state is actively participating in this program -- expanding it in every possible way.  More than any other opportunity presently in the mix, this move can "recession proof" many of our obligations -- obligations which, right now, are so large that they are crippling our efforts on all sorts of other fronts -- education, infrastructure and economic development.

A State Bank

Looking over the most common calamities this recession imposed on states, there is a very interesting exception.  Across the nation, the "tip of the spear" had everything to do with a "capital vacuum" which emerged when Wall Street began its latest tantrum.  Risk increased and lending decreased.

So much so that many otherwise viable small businesses (Regular small businesses -- not the Republican version.  They made Bechtel into a small business -- even though that corporation has tens of thousands of employees.) simply began to "die on the vine" because they were unable to borrow operating money.

The exception, North Dakota, didn't experience this economic insult.  Why?  Because North Dakota has a state bank which was able to detach itself from Wall Street's vengeance.  In that state, more or less normal lending continued through the economic collapse.  Businesses continued to function more or less normally.  Unemployment and foreclosures didn't skyrocket.

We can -- and should -- do the same thing here.

Sophisticating State Government

In conversations with people who have recently moved to New Mexico, have you ever heard this?

"The New Mexico state government functions incredibly well compared to where I was before I moved here.  It's just incredible!  I never thought a state government could run this well!  It's efficient and thoughtful. Wow! What a wonderful accomplishment!"

Probably not.

In our past, New Mexicans were comfortable with an unsophisticated state government.  They expected as much.  However, that was then.  This is now.  The sophistication level of the state government has remained too much in its own past tradition.  It is no longer in synch with the sophistication level of New Mexicans.


Almost daily we see major parts of our state government caught up not just in corrupt practices, but worse.  Far too many of the things our state tries to do  -- even while on its best behavior and with its best intentions -- collapse into ridiculous, over priced, under designed and poorly executed conundrums -- embarrassments.

MeanMesa sees this problem as one with deficiencies from the distant past -- at least in the distant past of too many state employees.  State employees, just like most Americans after the Republicans converted public education into a campaign tool, have never studied civics.  They have a profound lack of understanding with respect to the responsibilities of good citizenship.

The results are predictable.  Bad decisions are made.  Confusions about "doing the right thing" emerge, not particularly from some sinister conspiracy, but rather from a lack of a fundamental understanding of the responsibilities of governance, a lack of a working knowledge of the ideas in our state constitution.

Rather than post a litany of complaints, let's go right to a possible solution.

A little something needs to be added to the list of our state's subsidized education efforts.  MeanMesa can only speculate about the exact details of this solution, but a two week class on civic responsibility and state administration, one emphasizing the idea that state employees can reasonably be expected to independently augment their own performance at state jobs, might make a huge, cost effective difference.

Build the "campus" somewhere in a place which needs a little economic stimulation.  Include a dormitory where future state workers can actually get to know each other -- even across major differences in job disciplines.  The total class size needn't exceed a couple dozen at a time.

But make graduation from this little school a pre-requisite to becoming a state employee.

The plan isn't nearly as "catchy" as expensive out-of-state conferences at fancy hotels in Hawaii, but it might start providing the next crop of state employees who are much better prepared to run our government far more successfully and a vital cadre of employees who actually know each other and are prepared to work together.

Conclusion

None of these proposals is even a possibility while we remain paralyzed in the "zero budget" which has been imposed by the economic collapse.  However, issues such as these are, in MeanMesa's opinion, entirely relevant questions to  pose to candidates at town hall meetings.

Whether a state government or an individual, living in an endless psychology of "survival mode" never bodes well for the future.  Planning and organization, coupled with a little optimism, will always work out to much better results.