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.

Part One - Wealth Redistribution in Peace Time

Lest we forget, a primer on capitalism.

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

During times of settled peace, money tends to accumulate at the top.  Economies bump along, creating wealth, but the distribution of that wealth seems to always migrate in a certain, familiar pattern.

At first, at least in our "free market system," a dynamic waltz occurs between inventors, innovators and efficiency hawks on one side and all manner of value seeking consumers on the other.  In the interim phase, assets which can host these new developments are owned by those who can reap the economic benefits of such forward progress.

But, as conditions ossify, the value and potential of risk investment in the traditional forms of innovation slip in comparison to the advantages possible through the manipulation of the system.  In the early stages of this phase, representational government steps in to protect the values of the currency, rectify deviations from the "innovation creates value model,"  sustain its own prerogatives of control and constantly re-establish the country's economic "normal balance," that is, safe guarding the dynamic opportunities of innovation.

 It is, however, exactly at this point that the counter responding effect of economic "checks and balances" can begin to falter.  In our present US economy, this "faltering" actually occurred some years ago.  Absent the counter response feature, our powerful bipartisan government has slipped constantly farther away from the equilibrating "pivot point" of what we would traditionally consider an effective, healthy economy.

Healthy Redistribution and Illicit Redistribution?

Societies since even before the ancient Sumerians have functioned on some form of commerce.  Ours is no exception.  (Note: We used the term "societies" rather than "economies.")  Although there are enough text books on the subject to fill an oil fired rived barge, we can comfortably cite a quiet, fundamental commonality extending through all of this variation.

Values are defined by social culture.  Economies -- as in our topic here, "wealth distribution" -- derives from temporarily unbalanced values made increasingly subjective -- and potentially profitable -- by the separation between each party to the transaction.  When products are repurchased by their "former" owners or not traded at all, nothing happens.

A 30 cent cartridge is worth ten dollars in the midst of a revolution or an invasion.  A smelly rhinoceros horn is valuable enough to risk a gun fight with forest rangers five thousand miles from its final market.  Values are values.

Redistribution of wealth is the basic outcome resulting from such commerce.  Transactions are made where both parties exchange items at a corresponding market value, and each side "gains" value because his new possession is more valuable to him than his old one.

Whether staple commodities of wheat and water, new technology, rifle cartridges or rhino horns, markets, along with their resulting wealth distribution, value the same things:  innovation, invention and efficiency, the features of trading which result in healthy, "free market" wealth redistribution.  Even though such a striking over simplification may seem a bit "meat handed" given the complexity of a modern economy, the fundamentals remain essentially the same.

The "monetization" of what we might consider otherwise to be the nobly direct "bazaar market" of previous cultures introduces an interim system.  What we see now is that the "money" phase of transactions between humans will almost inevitably host a modern, unsavory appetite to control markets and prices -- if not values -- unless counter balanced by widely accepted basic regulation -- that is, rules.

Examples of such rules are emerging now as our domestic economy is staggering back to its feet following the handiwork which precipitated the current Great Republican Recession.  Resistance to the rules imposed by the victims has been energetic indeed.  These most contemporary looters missed the lecture which covered the question of when to stop.

Or, at least, when to pause until the coffers of "normally" distributed wealth might be replenished.

Redistribution in Peace Time

Here we can characterize "peace time" as periods when economic activity proceeds in a manner primarily based on commerce.  Priorities and values in such an environment are based on the value of predictability and progress.  However, individuals and corporations which have accumulated wealth beyond what is necessary for their continuing operation are confronted with three "invitations" to further increase their prosperity.

The first is the obvious advantage of already owning the mechanisms which make further -- profitable -- innovation possible.  This type of assets includes laboratories, research and development facilities and even established market structures already prepared to advance the sale of new products.

The second is the expectation of growth by investment which will generate interest or market possibilities outside their corporate bounds, that is, the purchase and ownership of other economic entities with the potential of profits from their own, now financed, innovation.

The third possibility returns to the issue of the control of the market.  Unhappily, this last temptation is notable thanks to the fact that the "return on investment" is significantly greater than the first two choices -- and, generally far less risky.  Market and supply manipulation by means other than those of the open market take many forms.  We see now that these may be imposed in subtle ways until the politics "permitting" them has been groomed sufficiently for more bolder styles.

Who's Got the Money? (image source)

The health care debates were an excellent example of this boldness.  The propagandistic preparation of the field was so effective that what could have otherwise been a troublesome, popular "self-interest"

Other examples are plentiful.  They include managed inflation, soiled national monetary policies, commodities made artificially scarce and all sorts of non-competitive business agreements -- most with the equivalent of peace time "no bid" goods and services procurement by the Federal Government.  The normal commercial features of innovation begin a slow, constant slide into economic features of manipulation.

Accompanying this slide, the actual value of the currency is also degraded as less value is purchased for more dollars.   For example, when MeanMesa first began purchasing gasoline, the price was 16 cents a gallon, the marketing corporations were facing a top marginal tax rate in the 80% range and the oil corporations were still some of the most profitable enterprises in the world.  Rather than troddling through a long list of tedious details, simply consider the changes which must have taken place to make this modern "business" condition possible.

Manufacturing Depressions (image source)

The beneficial technology of oil production has, indeed, improved, but has it improved 350% in value or just 350% in price?  If the answer is that it has not increased 350% in value, how did the price become what it is today?  Through a self-correcting "peace time" free market or through illicit manipulation?

This is the  nature of "passive" illicit wealth redistribution.  Call them what you may, petroleum consumers, tax payers or simply citizens who have purchased something which arrived in a truck have steadily and patiently paid a higher and higher price which exceeded the "free market" increase in value more and more in a quiet, "small change," illicit wealth redistribution made possible by market manipulation.

The glaring examples are legion -- everything from pharmaceuticals to a head of lettuce.  Costs have been manipulated into a state where value has become disconnected from price and where the synthetic difference has been disguised as profit rather than what it is -- extortion.  Further, the carefully crafted, constantly accelerating speed of the process has been disguised as economic growth.

Americans pay a price for access to a free market and, normally, expect corresponding benefits.  However, when -- usually through either manipulation or propaganda --- we are prohibited from purchasing products and services which should theoretically be available, we must immediately suspect that, at the root, we have been prey to illicit wealth redistribution.

We would like to purchase rational health care we see available on the market in other places. We would like to purchase rational power generation systems which are clearly available, too. We would like to cast our ballots in credible elections where they are counted by our neighbors instead of suspicious voting machines. We would like to purchase network media services -- especially news --  from objective sources.  The list is already far too long and getting longer.

The Chaos Raging Just Beneath the Surface of US Economy

MeanMesa, rolling along comfortably on the memories of decades of the US economy's "ups and downs," is experiencing an eerie, other worldly inability to calm down amid our domestic economic situation.  Further, this unsettled sensation doesn't derive from a solitary study we've accidentally encountered somewhere.

Instead, it's a feeling based more on the sensation one might experience while watching the surf withdraw moments before a gigantic tsunami.  If there are any discernible intuitions which might validate this mental phenomenon, they are far more like the cock roaches rushing from under an over turned box or the weeds which seemed to sprout everywhere after the first spring rain.

Creepy?  It's better if it is, actually, creepy.  For what it's worth, that "creepy" comes from having experienced too much history here.

Plenty of Americans -- especially the ones who actually care enough about the country to keep track of what's happening -- are well aware of the calamitous wealth redistribution which has been under way since the days of Reagan.  Yet, as if these citizens had been hypnotized, the normally anticipated revolutionary fervor remains mysteriously dormant.

Now, MeanMesa could ramble on about all of this for a few thousand words, trying to incorporate into the fray a tid bit from here and a tid bit from there, finally making some meat handed attempt to consolidate all the loose facts into some kind of comprehensible argument.  However, rather than subject our wonderful visitors to such a "dental visit," MeanMesa will happily present the following, high class, well organized information block.

What follow comes from two great sources, both hosted on the Mother Jones site's Plutocracy Now page.

Take a look at the whole Mother Jones  article: 

Plutocracy Now: What Wisconsin Is Really About

Link here.

And, to see the charts and graphs,

It's the Inequality, Stupid

Link here.

The Vampire Economy

 

A Harvard business prof and a behavioral economist recently asked more than 5,000 Americans how they thought wealth is distributed in the United States. Most thought that it’s more balanced than it actually is. Asked to choose their ideal distribution of wealth, 92% picked one that was even more equitable.

The super rich have grabbed the bulk of the past three decades' gains.

Why Washington is closer to Wall Street than Main Street.

Who's Winning? 

For a healthy (wealthy) few, it's getting better all the time.  Americans clearly have a profound misconception about the seriousness of this.  As the wealthiest among us rage forward to accumulate more and more of the nation's economic "blood flow" into their "McDuck Money Bins," much of which comes directly or indirectly from Congressional corruption -- our tax money -- under the cover of their carefully purchased neo-con Senators and House members, we see our own dreams swirling down the drain to the plutocrats' cess pool with them.

Further, even though the possibility is an appealing one, all of this cannot be solved in a single, glorious bout of conspiracy revelations or a tidy, "start to finish" court case of some kind.  The initial steps for this crime amounted to changing the law to make it not criminal at all.  Following this first, now ancient outrage, additional work was patiently plied onto the sandwich to create consequences even more grave.

A decades long "dumbing down" process was immediately begun to remove any possible remaining "teeth" normally found in an electorate.  Civics classes were prohibited.  Text books became wrestling arenas for throw back Texas ideology.  Graduation rates plummeted.  Worse, the old incentives for being smart and clever disappeared with the jobs which used to accompany such effort.

The acquisition of the domestic media further aggravated the decline.  Hate and fear became the corporate profit centers for a few anti-democratic oligarchs  who were able to purchase the alphabet networks, psychopathic crooks such as the heavily soiled Australian fascist Rupert Murdoch and his equally detestable Saudi Wahhabist Prince and corporate bedmate.  The "up is down" business model exploded among a cynical, uninformed, uneducated and uninterested population from there.

What can be done?

Unhappily, almost nothing can be done immediately.  The "gang rape truth crowd" is well funded, well fortified and well protected at this point.  In fact, these tortured souls have set a new, sickening example of just how wretched mentally deranged greed and recklessness can become.  Incomprehensible avarice and down right meanness has saturated the government with the predictable outcome of national wealth flowing unchecked into the pockets of those with the ambition of becoming our new masters.

Historically, such a cheap scheme would have been thrown out by its victims, but this time, the victims have been craftily groomed into a state of eerie, almost enthusiastic willingness for more of the deception and destruction.

What can be done?  

The question of "What can be done" has become the question of "what is it still possible to do" in the 2012 election.  Many of the non-participatory indulgences of "sending a message" or simply "staying home" are no longer comfortable -- or available -- alternatives.

It's going to take a great deal more effort in our political responsibilities if we intend to keep living here.  We've been served our national foreclosure notice, and we recognize the names of those who have signed the letter.  Our eviction is scheduled for December, 2012.

Be informed.

Be involved.

 

The CIA Profiles World Oligarchy

MeanMesa's on-going penchant for railing about the rise of  the American oligarchy is hardly "late breaking news." Still, some very interesting information surfaced recently on our faceBook account which is important enough to share here on Short Current Essays.

The bumbling MeanMesa communications technology has been unable to provide an operational link directly to the source document, but any visitor who cares to view the original can reach it through this faceBook link to my wall. MeanMesa's thanks to Daniel Secrist who first posted the link.

The sources cited for the information in the chart are interesting.  They range from the CIA Factbook to UNICEF to Kings College, that is, they range pretty convincingly through a robust spectrum of data from both conservative and liberal institutions.  Also of interest is the unique collection of categories for the columns of data presented for each of the countries analyzed in the chart.

Because the actual graphics were not suited for insertion in the blogger format, the chart is regenerated here.  The original column headings had to be abbreviated, but the descriptions provided in the original are provided below.  Please take a look before you try to interpret the chart data.

The following index will explain the labels at the top of the chart.

Wealth

Income inequality (Gini index)  Higher numbers indicate more income inequality.

Unemployment

The unemployment rate - most recent estimates.

Democracy

The Level of Democracy -- (Scale 1 to 10, 10 is most democratic)

Well Being

The Gallup Global Wellbeing Index (percentage thriving, 2010)

Food

Food Insecurity "Have there been times in the past 12 months when you did not have enough money to buy food that you or your family needed."  Percentage answering yes.

Life Times

Life Expectancy at birth.

Prisoners

Prison population per 100,000 citizens.

Math Grades

Student performance - Math Scale Store

Science Grades

Student performance - Science Scale Score

Sources:  

• The CIA's "The World Factbook"
• U.S. unemployment rate from the Bureau of Labor Statistics
• The Economist Intelligence Unit's "Democracy Index 2010"
• Gallup, UNICEF, King's College London's World Prison Brief
• Organization for Economic Cooperation and Development's  Program for International Student Assessment

The overall picture of global oligarchy profiled in these data is unsettling, indeed.  MeanMesa visitors, stalwart pursuers of media source credibility that they are, are not surprised at the dismal state of wealth inequality around the economically developed nations of the planet.  We have watched the relentless moves to concentrate all "extractable" wealth into the pockets of the ruling class for some years already.

Worse, we have watched this process be cleverly redefined in the oligarchic media, always presented as something besides what the facts might suggest.  We now find ourselves in a world populated with "media consumers" who have  actually believed all this "mouth junk"as it has been trotted out under the disguise of the exclusive truth.

Yet, here are the numbers.

Visitors to this blog have previously been presented with the scope of the radical redistribution of national wealth to our latest crop of well-fed billionaires.  We see more examples of the process with every day's "news."  The example are now legion.

Senator Sanders tells us about the top 400 richest Americans with increases to their personal wealth of $630 Bn during the reign of the autocracy [W].  Hartmann routinely reminds us that the top "earners" in the country enjoy over 80% of the annual total while the lowest 80% share less than 10%.  We watch in disgust as Wisconsin Governor Walker, the product of Koch Brother millions channelled through a Citizens United-style "cash laundromat,"  brazenly lurches forward with his plan to destroy organized labor.

All these outrages which are accompanied by dollar signs are only the "easy part" of the campaign to permanently destroy our democracy.  When we penetrate this swamp only a couple of inches deeper, we see that the destructive effects of this well organized effort creates a literal shocking cloud of even more associated bad results.  These are not nice people.

Perhaps the most puzzling of all the aspects of the scheme is the mysterious willingness of these social and economic psychopaths to risk the violent civil unrest which will be the unavoidable progeny of their "class war."  They are already wealthy and powerful beyond measure, yet their avarice seems to compel them "wring out the cloth" even more.  Apparently it has not yet occurred to them that their parasitic model will fall apart when they have finally starved their victim to death.

Spend a few minutes reviewing the information in the chart.  Spend a few more minutes letting these numbers "soak in."  Make your own conclusions about where this out-of-control Juggernaut is heading.  

If you are willing to ride this thing all the way to the inevitable train wreck, just relax.  If you are not, do something.