Most people in the USA are woefully inept when it comes to understanding the basics of economic theory. The resulting problem is that the public believes everything they hear from politicians and the media. If the public is uninformed about economics, the media and politicians are even worse. The difference is that politicians use their lack of knowledge to further their own political ambitions. The media use the same lack of knowledge to drive advertising and to make money for their outlets.
By far, the greatest malignancy comes from the fact that the public lack of economic understanding leads to support for war efforts throughout the world. American foreign economic policy is often based on greed and fear. We use our military might to support regimes, despots and wars that will keep our economic system dominant. We assume that the global marketplace is one of win-lose or zero-sum economics. We do not believe that a win-win is possible with all nations. Instead, we play zero-sum games with any countries that we think might threaten our economic dominance.
Former German Chancellor Angela Merkel argued President-elect Trump does not believe in “any win-win situation,” and it makes international collaboration difficult. — The Hill, 11/26/24
Economics can be divided into two branches. One is called macroeconomics. Macroeconomics is concerned with large-scale or general economic factors, such as interest rates and national productivity. Placing tariffs or trade restrictions on other countries could be considered a macroeconomic decision. The other branch is called microeconomics. Microeconomics considers the behavior of decision takers within the economy, such as individuals, households and firms. How much a given industry or company pays its workers versus how much it pays its senior executives could be considered a microeconomic policy.
I want to first talk about microeconomics and one of its major fallacies or myths. In Part 2, I will discuss the problems of a macroeconomics policy myth based on a greedy Military Industrial Complex. This microeconomics fallacy is the so-called Trickle-Down Theory. This is the myth fostered by those with money or power that if you trust them to make as much money as possible, some of it will “trickle” down to you. You might as well wait for the Tooth Fairy, the Easter Bunny or Santa Claus.
A more accurate and predictable economic theory is that the “rich get richer, and the poor get poorer.” Philanthropic efforts in the USA have done little or nothing to alleviate poverty. Rich people would rather donate to the Metropolitan Opera than they would to a neighborhood poverty reduction program. The prestige is greater by donating to the opera and the tax deductions are just as good.
“While philanthropy has contributed to alleviating poverty by providing direct assistance like food, shelter, and healthcare, its impact is often considered to be limited when compared to broader systemic changes like government policies, as philanthropy primarily acts as a supplementary tool in tackling the root causes of poverty; therefore, it can provide relief but may not achieve large-scale poverty eradication on its own.” — Google AI
We can easily prove that Trickle Down theory does not work. A little logic if you will. Let us suppose that money trickled down in a company from wealthy entrepreneurs like Elon Musk to the worker bees. If this were true, than over time, the wages between workers and senior executives should (while still being large) not be huge. However, consider the following:
“According to recent data, the average CEO earns significantly more than a typical worker, with the pay ratio often exceeding 300 to 1, meaning a CEO makes roughly 300 times more than the average employee; for example, in 2023, the average CEO pay was estimated to be around 290 times that of a typical worker, compared to a ratio of 21 to 1 in 1965.” — Google Generative AI
Some economists have claimed to find evidence to support assertions that the Trickle-Down theory actually does work. But my friend, ask yourself these questions:
- Would you trust that all economists are unbiased and willing to tell the truth about their employers?
- If Trickle Down economics worked, than how come the gap in pay between the higher and lower workers has continued to grow over the past 50 years rather than shrink?
- Finally, economists be damned. Do you really think rich people give one rat’s ass about your pay and whether or not there is “income inequality?” How many millionaires do you know who donated their estates to poor people?
I do not believe in communism, but neither am I so callused as to believe that “poor people don’t deserve the money because they will just waste it.” What I have observed in my 78 years on this earth is that some people get a head start in life and end up much higher on the ladder than those who start off without a ladder. It has never been and never will be an equal playing field. Talent and brains are not equally distributed. Neither is health and longevity. Money will never be equally distributed. But these premises aside do not mean that a society should be structured simply to help the rich get richer at the expense of the poor people who provide the labor for them.
Today, we have a Roman Circus of means to help keep poor people poor and make the rich even richer. One of the most notorious of these means is the availability of legalized gambling. Gambling is one of the most egregious means of insuring that people who are poor will stay poor. The odds on winning at some popular gambling activities are as follows:
- Top prize on a poker machine (playing maximum lines): up to 1 in 7,000,000
- The trifecta in a 13-horse race: 1 in 1,716
- 1st division in Gold Lotto (one game): 1 in 8,145,060
- 1st division in Powerball (one game): 1 in 134,490,400
- The top prize on a $5 Crossword Instant Scratch-Its game: 1 in 1,700,000.
And now we have added sports betting to the number of ways that people can lose their hard owned cash. The people making money want to keep you betting more and more. The payoffs are random, which encourages people to think that they will win. In psychology, it is called the “Gambler’s Fallacy.” This is an incorrect belief that a random event is more or less likely to occur based on previous outcomes. For instance, if heads comes up three times in a row on a coin toss, most people will bet that tails will come up on a fourth throw. The odds are still fifty-fifty on any throw if it is a fair coin. Consider the following facts:
“About 13.5% of gamblers go home from a casino having made any money. This statistic comes from a study of 4,222 gamblers, and only 7 of them won more than $150. Conversely, 217 of them lost over $5000 at casino games. Also, note that those who play more often have lower chances of winning.”
My wife and I occasionally go to a casino. We may invest twenty dollars between us and then have a buffet dinner. It is fun but we never bet more than twenty dollars total. We know that we will walk out losers 98 percent of the time. However, I have seen high school kids in some of my classes huddled together placing sports bets. Would society not be better off showing them how to start a business and providing incentives for doing so rather than slick advertising designed to make them think that they can get rich betting on sports teams?
“The world’s 50 highest-paid athletes hauled in an estimated $3.88 billion over the last 12 months before taxes and agents’ fees, up 13% from last year’s record mark of $3.44 billion. Roughly 76%, or $2.94 billion, came from on-field earnings (salaries, bonuses and prize money) partly because of the Middle Eastern money continuing to flow into sports.” — Forbes ,MAY 16, 2024
Marx once said that religion was the opiate of the masses. By this he meant that people were drugged into thinking that religion would bring them to a paradise where all their dreams could come true. It would take death and being a true believer to get them to this paradise, but it was a sure thing. Today, gambling and sports have become the opiate of the masses. People dream of winning the lottery and getting rich. Others dream of making it big in sports and becoming the next Michael Jordan. People think their kids have a high probability of going on to a lucrative career in sports if they can only get a paid tuition to a major NCAA college.
The facts my friends do not support that your kids will be anywhere near getting into a major league sports team.
- 59% of high school football and basketball players believe they will get a college scholarship
- 98 out of 100 high school athletes never play collegiate sports of any kind at any level.
- Less than one out of every 100 high school athletes receive a scholarship of any kind to a Division I school.
- Only 1 in 16,000 high school athletes attains a professional career in sports.
But why bust anyone’s bubble? Aren’t we all entitled to our dreams? What would life be without goals and hopes that exceed our grasp? Who wants to tell their children that they cannot go for it?
I have been a parent like many of you. I wanted the best for my daughter. But I was under no illusions about the reality of the workplace world. Too many poor people are unrealistic when it comes to understanding the economics of the workplace. This leads to poor decision making and the ability of huckster politicians and greedy organizations to take advantage of them. The rich in America see the poor as a resource of suckers born every day. “Caveat Emptor” means let the buyer beware. Many of my MBA students subscribed to this belief when I was teaching at Metro State University. I could argue against it all day, but the majority of what MBA students learn in college is that money is good, greed is good and that we deserve all we can beg, borrow or steal.
“No less a business expert than Dr. W. E. Deming was critical of traditional MBA programs, arguing that they often focused too heavily on short-term profit goals and not enough on long-term quality improvement, neglecting essential statistical tools and systemic understanding needed for true organizational change; he believed they often taught practices that were detrimental to continuous improvement within companies.” — Google AI
Rana Foroohar writing in Evonomics states that “MBAs are everywhere, yet the industries where you find fewer of them tend to be the most successful. America’s shining technology and innovation hub—Silicon Valley—is relatively light on MBAs and heavy on engineers. MBAs had almost nothing to do with the two major developments in the American business landscape over the last forty years: the Japanese-style quality revolution in manufacturing and the digital revolution.” — Want to Kill Your Economy? Have MBA Programs Churn out Takers Not Makers
Keep your dreams for tomorrow but base them on reality. Do not trust what people asking you for your money or your vote try to sell you. The only way to keep your money in your pocket is to keep informed and to pay little attention to the lies, disinformation and misinformation spread by politicians and the media.
In Part 2, I want to address the truth regarding our contempt towards Russia and China and the real reasons underlying our mistrust and hostility towards them. These reasons are based on simple economic realities that our leaders do not want you to understand. They want you to subscribe to doctrines of fear and hatred that will support the many unjust policies that we propose for our economic “enemies.”
War has been called a continuation of politics by other means. Economic dominance is one side of the coin. Political dominance is the other side. War becomes the means to insure that we are both politically and economically dominant on the world stage. These truths will explain why we continually assail both Russia and China as threats to America. Some of these truths will also explain why we are supporting Israel’s genocide in the Mideast.
Aging Capriciously 