It’s the Economy Stupid! The Five Myths of Capitalism – Part 1 of 5

money

There are many theories about what drives progress and change in the world.  Some say Ideology changes the world.  Some say Technology is the main driver of change.  Karl Marx, one of the most famous or infamous men in history, (depending on your beliefs) argued that Economics is the main driver of change in the world.  Much of Marx’s theory is summed up by the term Historical Materialism which can be defined as:

“A theory of history which states that a society’s economic organization fundamentally determines its social institutions and the way that people live and benefit from the means of production in that society.”

marxism-capitalism-1-638Most of what people learn about Marx is far removed from his actual ideas.  Given that Capitalism has been diametrically opposed to the very name of Karl Marx, it is not surprising that he is routinely disparaged.  Even at the University level, it is rare to find anyone studying Marx very deeply.   Many educators and instructors describe Marx’s economic theories as “Totally Discredited.”  Few people in America have any good words for Karl Marx.  Any politician in the USA who might suggest that Marx ever said one good thing or had one good idea would court instant political death.  Marx is the devil in our Capitalistic system.

the economyMarx did of course hate capitalism.  He saw Capitalism as a system that exploited workers and allowed the greedy to benefit at the expense of those less fortunate or less aggressive.

“Capitalism: Teach a man to fish, but the fish he catches aren’t his. They belong to the person paying him to fish, and if he’s lucky, he might get paid enough to buy a few fish for himself.”  — Karl Marx

10665231_470379489743928_2447670465163187643_nThe antipathy directed towards Marx and his critique of Capitalism has discouraged any real in-depth understanding of the limits and myths of Capitalism by most Americans.  Capitalism resides in America on the same level as Mom, God, and Apple Pie.  Woe to anyone who would dare to attack Capitalism.  In the United States, Capitalism is as hallowed an institution as Christianity.  In fact, most Christians think that Capitalism and religion go hand in hand, which to a large extent they sadly do.  Unfortunately, not all Capitalism is the same.  In America, we have a home-grown version that is more appropriately called Corporate Capitalism.  What is the difference you might ask?  Well it gets even more complicated since economists define four types of Capitalism.  These are:  oligarchic capitalism, state-guided capitalism, big-firm capitalism, entrepreneurial capitalism.  The type of Capitalism that I am going to talk about is known as Big Firm Capitalism or Corporate Capitalism.  It has been defined as:

“Corporate capitalism is characterized by the dominance of hierarchical and bureaucratic corporations… A large proportion of the economy of the United States and its labor market falls within corporate control.  In the developed world, corporations dominate the marketplace, comprising 50% or more of all businesses.  Those businesses which are not corporations contain the same bureaucratic structure of corporations, but there is usually a sole owner or group of owners who are liable to bankruptcy and criminal charges relating to their business. Corporations have limited liability and remain less regulated and accountable than sole proprietorships.” — Wikipedia

Before we proceed further, you need to understand one thing.  I am not against corporations per se.  We gain many benefits from corporations.  Corporations are a large part of the foundation of our economy which from strictly a monetary perspective has been phenomenally successful.  The USA has perhaps the most successful economy in history.  I have no problems with the monetary contributions of corporations.

globalization

The problems arise however, in that there are Myths of Corporate Capitalism which serve to hide the negative impacts that corporations have on our country and the rest of the world.  Today, corporations are global entities and their excesses are felt not just in this country but all over the globe.  I believe that unless these excesses are reined in by intelligent oversight and a rewriting of corporate law, they will destroy this country.  Each of these excesses is a Deadly Disease that by itself could do the destruction.  Together these five excesses are leading America away from the vision of our founding fathers.  Life, liberty, and the pursuit of happiness were based on the belief in a democratic system of government that was of the people, by the people and for the people.  We are increasingly standing by while our country becomes a government of the corporation, by the corporation and for the corporation.

The Five Myths of Corporate Capitalism that are destroying America:

  1. Corporations are people

supreme court decisionOver the past 40 years, the Supreme Court has radically expanded constitutional rights for corporations.  The original charters for corporations written in the late 19th century, allowed corporations powers never before seen in companies.  The abuse of these powers soon led to a considerable amount of legislation designed to reign in some of the most egregious of these abuses.  Laws such as the Sherman Anti-Trust Act passed in 1890 to stop monopoly practices and the Clayton Antitrust Act passed in 1914 to stop unethical business practices were somewhat successful at ameliorating corporate abuses.  Unfortunately, corporations were still left with considerable power to thwart the goals of democracy and good government.

From the early 20th Century onwards, corporations continued to use their power to bribe, cajole, and persuade policy makers to give them privileges that once again extended their power. They have since more than made up for the power that they lost in the early part of the 20th century.

“Today, the biggest companies have upwards of 100 lobbyists representing them, allowing them to be everywhere, all the time.  For every dollar spent on lobbying by labor unions and public-interest groups together, large corporations and their associations now spend $34.  Of the 100 organizations that spend the most on lobbying, 95 consistently represent business.”  — “How Corporate Lobbyists Conquered American Democracy” — The Atlantic, Lee Drutman, April 20, 2015.  

corporate powerCorporate interests easily dominate the interests of the common person.  The common person has nowhere near the financial clout of corporations.  In 2010, the Supreme Court passed the Citizens United Decision which gave corporations unlimited power to finance and support political candidates running for office as well as to lobby on behalf of any laws that they wanted.  This decision basically upheld the idea that corporations had a right to free speech much like any citizen of the USA and that campaign spending was simply a manifestation of free speech.  Corporations are now being treated as living breathing people despite the fact that corporations can live forever, and corporations are not organic entities.  They are not born, and they do not die like any other creature on the face of the earth.

lobbyists

Corporations already had almost unlimited power to influence and coerce politicians to do their will.  The Citizens United Decision took all the brakes out of the system.  You have often heard the parody of the Golden Rule “He who has the gold makes the rules.”  This trope is now a fact of life in America.  Many people no longer bother voting because they believe that voting is a waste of time.  Everyone knows that politicians need an exorbitant amount of money to support their campaign and that once elected they immediately start building their money up for their reelection.   They get the lion’s share of this money from big business interests and associations that support big business interests such as the National Rifle Association (NRA).

AP_ArentPeople_Meme-300x300

According to campaign finance reports filed with the Federal Election Commission that cover activity from January 1, 2019 through June 30, 2019, congressional candidates collected $389 million and disbursed $172.2 million, political parties received $353.7 million and spent $279.9 million, and political action committees (PACs) raised $958.2 million and spent $818.7 million in the six-month period.  If you total these figures up for money raised in just the first six months of 2019, it equals $1.701 billion dollars.  If there were 100 people in the US Senate and 435 people in the US House of Representatives, this equals approximately $3,179,400 dollars for every one of those politicians in office.  Of course, some will get more, and some will get less, but the majority of this money will be spent helping to support the reelection of each and every one of these honorable men and women.

corporations-rule-ic-5-26-2017

Here is a little experiment to show you what this campaign funding could buy.  Consider that the Federal Minimum Wage in the United States as of 2020 is $10 dollars per hour.  A person on minimum wage working full time earns approximately $21,000 dollars a year.  According to the Bureau of Labor Statistics, 1. 8 million Americans work full-time at or below the minimum wage.  If you double the average election campaign fund to equal a full year of collecting money you will get approximately $6.2 million dollars.  Now divide this campaign fund by the average yearly minimum wage of $21 thousand dollars and you get 295.  In other words, one year of campaign funding (an average) would fund a person now working on minimum wage for 295 years.   If you earn the national average of $86,000 dollars a year, it could support you for 72 years.

To say that something is wrong here is an understatement.  We have a sort of self-perpetuating money machine here.  Every year corporations get greedier and seek more profits.  According to Corporate Law that is their primary reason for existence.  Numerous pundits and corporate sympathizers extol the virtue of greed.

Workers Should Be Very Thankful That Corporations Are So Greedy” by Jeffrey Dorfman

greed is goodOne of the most popular movies in the eighties was Wall Street.  In the movie, Michael Douglas gave a “Greed is Good” speech which was actually applauded by audiences all over the United States.  Some corporations have been sued by stockholders for not being greedy enough.

Every year budding politicians need more and more money to get elected.  Corporations are money banks for anyone desiring to run for office.  Corporations provide the funds that politicians need to wage a successful election campaign.  Once elected, elected officials are then beholden to the major corporations and lobbyists whose help they will need to raise the money to get reelected.

Corporations are more than happy to support candidates who will pass bills that help them to make more profits.  Other bills they like are designed to ensure that they can pay less taxes, have fewer environmental regulations, fewer safety and health regulations, pay lower wages, decrease employee pensions and benefits, defeat unions and avoid onerous consumer liability claims.  Any politician who is willing to support the former goals can find numerous corporate lobbyists willing to donate money to help them get elected.  The Citizens United Decision guarantees that corporations can give as much money as they want without breaking any laws.  After all, it is free speech.

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“Warren Buffett worth nearly $80 billion dollars points to the Forbes 400, which lists the wealthiest Americans.  ‘Between the first computation in 1982 and today, the wealth of the 400 increased 29-fold — from $93 billion to $2.7 trillion — while many millions of hardworking citizens remained stuck on an economic treadmill.  During this period, the tsunami of wealth didn’t trickle down.  It surged upward’.”  — Entrepreneurs, January 24th, 2018

In Part 2, I am going to cover the second myth of Corporate Capitalism.  The Myth that laissez faire will somehow result in corporations being self-regulating entities for the common good.

“According to a survey from the Pew Research Center last year, 60 percent of American adults think that three decades from now, the U.S. will be less powerful than it is today. Almost two-thirds say it will be even more divided politically. Fifty-nine percent think the environment will be degraded. Nearly three-quarters say that the gap between the haves and have-nots will be wider. A plurality expects the average family’s standard of living to have declined. Most of us, presumably, have recently become acutely aware of the danger of global plagues.”  — The Atlantic, Kate Julian, April 17, 2020

I think you will enjoy my five part series. I write for the understanding of the average person and not necessarily the economist or the Ph.D. However, if you want a more rigorous and thoroughly detailed analysis of the problems with the Capitalist system. See the following study by the Roosevelt Institute.

https://rooseveltinstitute.org/publications/new-rules-for-the-21st-century-corporate-power-public-power-future-american-economy/#:~:text=In%20New%20Rules%20for%20the,thinking%20about%20the%20role%20of

4 Comments (+add yours?)

  1. Jane Fritz
    Apr 18, 2020 @ 11:36:52

    Yup! 😥

    Reply

    • Dr. John Persico Jr.
      Apr 18, 2020 @ 13:59:17

      Hi Jane, how are you doing in your part of the world?

      Reply

      • Jane Fritz
        Apr 18, 2020 @ 19:45:51

        Hunkered down, but as retired folk in a northern clime we’re pretty practiced at keeping engaged while staying home. How about you? More time for blogging! John, it’s been a very bad 3 years, but the ineptitude of Trump’s administration during this pandemic makes one fear for the future of the US. Truly. And there are no winners in this scenario except for China and Russia. Little old Canada seems like a bastion of common sense and human decency. Our little province is doing very well so far; 118 cases, 80 have recovered, and no deaths. Not so great in the bigger provinces, but reassuring bipartisan leadership and a coordinated effort with the feds. Thanks for asking.

        Reply

  2. Dr. John Persico Jr.
    Apr 21, 2020 @ 11:42:33

    Hi Jane, Thanks for your thoughts. I have not felt that the past 3 years were bad overall for me. I miss some of the more challenging work I used to do and keep hoping that some of my business contacts will result in more work, but outside of that, my health and Karen’s has been very good and we have enough money to live on if we watch over it frugally. I teach part-time as a substitute for extra money and Karen works part-time doing medical 1cd-10 coding so we have not had to go into our rather meager retirements funds. We are trying to save them for truly rainy nay shitty days in our lives. I worked in Canada for many years with INCO, Dominion Bridge, WestCan Bulk, Gardewine and British Columbia Paper Products. I always like the attitudes of Canadians versus USA. Seemed like there was a great deal more sensible people in Canada. However, I do like our restaurants better. 🙂 Anyway, I am glad you are doing well and hope your province stays low. You certainly have better leadership and more respectable than our current jerk. It is embarrassing to think of the person we have elected as leading anything never mind an entire country. I thought it was a bad dream when I woke up the next morning to his Presidency. And the bad dream continues. — John

    Reply

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