(Part one of a series)
Businesspeople have apparently become phenomenally stupid in recent years. Maybe they were always stupid, but I doubt it. I suppose I can’t blame them; we've been led by some seriously disturbed wingnuts for most of the last 30 years, and they’ve warped the system to the point that it no longer resembles capitalism.
You see, to make money in a truly capitalist system, you’re supposed to earn it; you’re not entitled to become rich just because you want to.
But our system no longer works the way it used to. I’m 51 years old, so I’m not ancient, but I can remember a time when going to the supermarket was a destination our family took once every couple of weeks. Of course, the supermarket was locally owned and carried mostly local and regional items. When we needed some groceries in the interim, we would go to Lane’s; a little grocery nestled in the basement of the Lanes’ home on Elm Road. If we wanted shoes repaired – you know, back in the days when people did that -- we would take them to the guy who worked in a little shop across from the old Hollywood Theater; his shop, as well, was in the basement of his home. The Hollywood Theater was a little local movie house with one screen, and it was packed every weekend. It was owned by an old lady who looked similar to Elvira Gulch, who lived in an apartment above the theater.
All of those places are gone these days; victims not of a booming economy, but rather a phony economy, in which capitalism’s main purpose – to create a marketplace in which everyone can make a living – has been perverted by the right and changed into a lottery system of sorts. The goal used to be entrepreneurialism, whereby wealth was created on a mostly-equitable basis through hard work, and in which almost every dollar was earned. Now, because of the snake-oil salesmen on the right, wealth is an entitlement for a very few, who don’t actually earn it, but just happen to get lucky and get rich.
I call what we have now “lottery capitalism.” Now, everyone pays to be a part of the system, but the system only rewards those who are lucky; hard work has little or nothing to do with anything. The problem with lottery capitalism is, in order for one person to win the million-dollar jackpot, a whole lot more people have to lose, and a whole lot more “winners” have to settle for a $2 payout. Whereas our system used to accommodate a constant flow of wealth throughout the entire economy, now it’s rigged in such a way that very few control most of the wealth, and a lesser amount of actual wealth actually flows through the system. For the vast majority of people, wealth has been stagnant; any increases in income have been more than offset by an inflation rate we now accept as “normal” or even “low,” despite the fact that it’s actually quite debilitating.
Our economy used to reward hard work; now we reward luck. Money used to be earned; now it’s won. Capitalism is supposed to be a system in which a person with money manufactures goods and/or provides services for payment. Through this system, the provider hopes to make a profit and thereby make a decent living. In addition to those players, there are also investors, who put money into a company in order to help it grow and make it more profitable. In return for that investment, they hope to see a return that helps them make a good living. In other words, capitalism entails a relationship between risk and reward. An investor risks money, and the reward is a dividend if the investment turns a profit.
The word you don’t see above is “rich.” The goal of a legitimate capitalist system isn’t to make everyone rich; that's impossible. The goal is to create an economy that floats as many boats as possible, and to encourage innovations that make society better. There used to be a chance that anyone with talent and an idea could eventually become rich. But we’ve scrapped that idea in recent years in favor of one in which those who happened to be rich when the right took over got to keep their money, and everyone else must rely entirely on luck in order to get rich. I mean, folks, we idolize rich people who have never made a goddamn thing in their lives. In our lottery capitalist system, some of the richest individuals and companies in our economy do nothing more than buy and sell stock and other companies.They're good people, but can we be honest here? What have people like Warren Buffett and George Soros actually contributed to the economy to make them worth billions? They buy and sell other companies; they buy and sell stock; they don't actually make anything.
Those who make money in a legitimate capitalist system get their wealth based on what they are able to earn through hard work and sweat. That’s a key word in real capitalism; earn. In capitalism, you earn what you get out of it. The problem is, the word “earn” has been bastardized in recent years. People buy and sell shares of a company based not the actual value of the company the stock represents, but rather, based on how much they think they can re-sell the stock for later. Most of the rich no longer “earn” their money, in the classic sense of the term; instead, they “win” it. They buy stock for $15 a share not because they believe in the company, but based on their belief that they will be able to sell that share of stock to somene else down the road.
But they’re not alone; wealth is no longer based on what is produced for society; it’s based on a person’s or a company’s ability to move money from one pocket to another, and make it look as if they have more than they do.
Think about what we have right now.
We have health insurance companies. Health insurance companies actually make huge sums of money paying our medical bills for us using our money. Read that one again, and explain why that concept isn't absurd. How is that really a service? In what way does such a thing fall under a “capitalist” structure? And they don’t just skim 5% off the top to pay expenses. No, they have to make a profit. And according to our bastardized lottery capitalist structure, that profit has to increase every year. In order to maximize profit, insurance companies must maximize premiums while they do whatever they can to NOT pay your medical bills. In other words, you give them a large sum of money every month and give them the responsibility to pay you medical bills, but to make a profit, they have to figure out a way to keep an increasing portion of your money every year. In what way is this not absurd?
Yet, we accept this madness as normal under lottery capitalism. We would never accept this sort of thing in a legitimate capitalist enterprise. Imagine you gave your local pizza shop $15 for a large three topping pizza, and they only gave you two toppings to maximize their profits? Or better yet, what if they just decided to deny you your pizza becauseyou’re too fat, and handed you a salad instead? Would you be crowing about the "greatest pizza company in the world"? So, why are insurance companies allowed to do exactly that? Where is the government in all of this? They're arguing over ways to fix the system without doing major harm to companies that have no business existing as a for-profit business in the first place.
Then there is the farce known as securities markets. The basic premise for these markets in a capitalist system is sound; people with some extra money invest in businesses. Those businesses, in turn, use the extra money to expand that business, produce more and even increase their profits. But with lottery capitalism, securities markets have been transformed into something resembling a casino. Remember the tech bubble? How was that anything but a lottery? Computer geeks would start a company with nothing more than a laptop and an idea for selling something, and then issue an IPO. Speculators would then buy up the stock in that company, based solely on their potential to find a sucker who would be willing to pay $200 for a share of a company that was giving away its product for free. People were buying stock in companies with nothing to sell, and no way of ever turning a profit, and they continue to do so.
The reason gasoline prices topped $4 a few years ago was because speculators drove the price up based on the same principle, if you can call it a principle. There was no rational basis for the price of a barrel of oil to increase to $150 a barrel. There were no actual shortages and there was no problem with supply. However, gamblers were allowed to “buy” oil at a high price with no money down and resell them at will. Imagine; you don’t have to have any cash to “buy” a million barrels of oil for $150 a barrel, and that the oil won't be delivered for at least 90 days. You can then turn around and sell those same million "future" barrels of oil for $120 each,cash, to someone who will then turn around and resell them for $130 a barrel, and so on. Is that capitalism? A few people at the top get rich buying nothing and you, dear driver, get screwed. Those of us on the bottom rung of the ladder in a lottery capitalist system always get screwed.
Which leads us to banks and mortgage brokers. As long as no one was watching – and make no mistake; the government wasn’t watching anything for eight years – banks were more than willing to use the money you deposited to gamble, even as they screwed you with increased fees. Come on, folks; do you really think it costs the bank upwards of $30 when you’re overdrawn $5? Oh, wait! It’s a penalty! That’s right; they’re charging you that much as a warning to you, to not let it happen again. They encourage you to use your credit card for everything, then when you're a week late with a $20 payment, they sock you with $50 in fees and raise your interest rate to 30%. There are people out there who charged $1000 worth of goods and services, and are now required to pay $3000 to settle up their account. There are people who were overcharged for their home because the bank screwed up and was irresponsible in their dealings with mortgage brokers, and are now being forced into economic ruin, while their bank gets bailed out.
Well, here’s a question no one ever asks, even though it’s a key question; if you’re to be penalized $30 for writing a check that overdraws your account by $20, and $2000 for falling behind on credit card payments, and forced into economic ruin because you can't or won't make payments on a $400,000 mortgage on a $200,000 home. why are bank executives getting bonuses for their irresponsibility in handling what is essentially your money?
But I digress. I’ll get back to this in a later installment of this series.
Basically, it’s just become too easy to make money without actually providing goods and services. Worse, companies are being allowed to create markets that do little more than move money from one pocket to another and pretend they’re producing profit. One of the most distressing aspects of lottery capitalism is that the very concept of “making money” is a sign of success. It’s a truly warped economy that rewards companies with no products, while those who actually produce goods and services that produce benefit for the economy find it increasingly more difficult to make ends meet.
It used to be that the people who were paid the most were those who took the most risk – that’s how traditional capitalism is supposed to work. Yet these days, CEOs of companies that lose billions of dollars and get paid millions in bonuses. Who besides the company’s workers are actually taking a risk these days? How can we call this capitalism when the people who actually produce the most economic benefit for a company are tossed aside at the first sign of loss, stakeholders are screwed royally, and the only people who make out are company executives/snake oil salesmen?
Lottery capitalism is no good for anyone. Why hasn’t anyone noticed that the entire economy since the right took over consists of elements that are absolutely unsustainable? If a company makes $4 billion profit one year and “only” makes $3 billion the next year, it’s considered a failure. How is that sustainable over the long haul? Our economy cannot continue to be driven by gamblers.
We have to return to a healthy version of capitalism and move away from lottery capitalism altogether. Our system worked best when large corporations were kept in check and held to a manageable size. It worked best when it was kept simple.
It’s time to return to the entrepreneurial version of capitalism, which is what made this country great in the first place. We should encourage people to start businesses by regulating the marketplace, as the Constitution instructs. Yeah, that’s right; for all of their bullshit talk about being “originalists, the far right seems to have forgotten one of the key responsibilities given to the federal government, and that is to “regulate commerce.” I know this will rub some the wrong way, but the truth is, only the government can keep a market fair, because only the government can represent all of us, and not just a select few. That’s something the founders figured out early on, which is why they built a mandate for regulation into the founding document. It is an absolute truth that if you leave the market to the capitalists without any regulation, eventually those with the most money will eliminate competition, dominate a market and eliminate choice.
And that's what's happened over the last 30-40 years.
Think about what’s happened to our capitalism. If you want to open a retail shop in town, you have two choices, price-wise; you can either compete with Wal-Mart or you can compete with 7-11, neither of which gives a rat’s ass about the people in your community. You’re limited with regard to where you get your products, because most distribution is heavily controlled by another large corporation, who’s signed a deal with a manufacturer to be the sole distributor for a particular product in that area. Even if you deal with the original manufacturer, you are hamstrung by the fact that they will charge you more for a product because you’re unable to buy as much as Wal-Mart. There are many products out there that manufacturers actually forbid you to discount; if you discount them, they will actually stop selling product to you. If you manufacture a unique product that hasn’t been made before, deep-pocketed corporations will hire a factory in China to copy it, flood the market with the knock-offs and put you out of business.
Whereas 30-40 years ago it was possible for a couple to open a store in their basement, sell groceries and make a good living doing so, the current lottery capitalism pretty much precludes that possibility. Why has this been allowed to happen? Why has the government given up on its mandate to regulate commerce, to the point that every single industry is completely controlled by a handful of large players? It happens in industry after industry, and we sit by and watch it and do nothing about it. What the hell is wrong with us? Have you ever really checked the manufacturers in your local supermarket? It may look as if there are hundreds of different food manufacturers lining your store’s shelves, but look more closely; you’d be hard-pressed to count more than a dozen different food conglomerates that manufacture everything. And an increasing number of them make deals with the supermarket chain to monopolize as much shelf space as possible and crowd out any potential competitors. Why is that allowed to happen?
We have to stop this. The only way we get can reclaim a healthy economy is if the government does its job. Government has to go back to regulating commerce, and we have to take back the actual meaning of the “investment” concept.
This is part one of a series. Tomorrow, I will explain why Bono is a dolt and why music piracy is actually a good sign for our economy. On Thursday, I'll explain what's happening in the broadcast industry, and why that has more potential impact on our national security than even the TSA. And more coming after that... stay tuned...
