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Thursday, June 5, 2014

The Purchase of Our Republic - the Who & How Much

Wednesday, June 04, 2014

The massive consolidation of wealth, combined with the removal of any limits on money in campaigns, has allowed for the purchase of our government.

Today I am publishing a comprehensive and important guest essay, The Purchase of Our Republic, by longtime correspondent Y. Falkson.

Americans know that something is wrong, deeply wrong. They see signs of the problem everywhere: income inequality, growing concentration and power of mega corporations, political donations/corruption, the absence of jobs with decent salaries, the explosion of the US prison population, healthcare costs, student loan debt, homelessness, etc. etc.

However, the true causes and benefactors behind these problems are purposely hidden from view. What Americans see is Kabuki Theater of a functioning form of capitalism and democracy, but beyond this veneer our country has devolved into the exact opposite.

Those who benefit from this crony capitalist state go to extreme lengths to paper over the reality and convince Americans that the system works, the American Dream is still a reality and that American democracy is in fact democratic.

Below I hope to begin to outline some of the underlying dynamics and trends that have evolved in recent decades and led us so far from what we once were. As fun as it would be, the answer is not some evil conspiracy by the Illuminati, but rather the unfortunate result of three long term and mutually reinforcing components that have been attacking the fundamental roots of the structure of our Republic.

The first is the increased concentration of corporate and private wealth. Both of which are quickly yelled down in the media as anti-free market and class war hysteria.

The second is the use of this wealth to capture all three branches of government in order to ensure the continued extraction of capital from the many and to the few.The rich might have climbed the ladder because they earned it, but they have then purchased government to pull up the ladder behind them.

The consequence of the first two components is a democracy in name only that represents the very few.

1. Faux Capitalism = Wealth Consolidation / Income Inequality

Corporate Wealth:


While there is no true beginning to the story, we can start with the incredible build up and concentration of wealth among corporations in recent decades.
 The USA now boasts a cartel-like set of corporate titans in almost every industry. It goes beyond, but certainly includes, our Too Biggerer To Fail banks, merged from what was 37 banks in 1995 into a Frankenstein’s monster like 5 (Citigroup, JP Morgan-Chase, Bank of America, Wells Fargo and Goldman Sachs).

In agriculture, Monsanto alone controls over 85% of all corn and soy bean crops, four companies control 83% of the beef market, 66% of the hog market and 58% of the chicken market. So while shopping at the grocery store might appear to be the manifestation of capitalism at its finest, it doesn’t take much digging to look behind the curtain to see how little competition truly exists.

When the average American goes to pick up some groceries, they are shopping at Walmart and buying something from P&G that is mostly made of Monsanto corn. Is that true choice?

The same story plays out with our news and media (and other industries) where we have gone from 50 companies in 1983 to the big 6 which control over 90% of all media. Is choosing to watch one of 30 news channels, all of which are owned by News Corp (Rupert Murdoch) a real choice? This is not capitalism and they are not competing, not in the true sense of the word.

Along with this consolidation of corporations in recent decades, their senior leaders have taken up a larger and larger piece of the pie at the expense of their employees. In particular, the ratio of CEO-to-worker pay has increased 1,000 percent since 1950. Unsurprisingly, Walmart is both the largest employer in the country and the worst CEO pay offender with a ratio of over 1000:1. This is at a time where worker productivity has increased significantly, something that historically correlated with increased pay. But no more. It’s a new twist on the old Soviet saying “we pretend to work and they pretend to pay us”, but now it’s closer to “we do all of the work and they pretend to pay us”.

illusion of choice 

Private Wealth:

As a consequence of the royal tribute we pay to the C-suite class these days, we have likely surpassed the pre-Depression Roaring Twenties in terms of inequality.

This, amazingly, has only accelerated since the crisis in 2008 in thanks to bailouts, Quantitative Easing and other gifts from Congress and the Fed. The wealthy 1% and in particular the .01% have now grown their fortunes to levels that tax comprehension and even their ability to spend it (the decisions by a few billionaires such as Bill Gates to essentially donate his fortune is a tacit acknowledgement that our current system over provides wealth to a select few).

So what is an incredibly wealthy capitalist CEO of a mega-corporation do once they control their industry and have essentially limitless wealth? Well in a competitive market, the only way to go from the top is down and the only thing that can make that happen is competition. Consequently, competition must be avoided whenever possible.

To squash or prevent competition, the oligopolies and oligarchs target their resources on the one place that can make competition illegal, our government.Something to keep in mind the next time you see a corporate billionaire grandstanding about the importance of “Free Markets” when their strategy is quite the opposite.

As this capture of the government has taken place we have essentially shifted from capitalism and to crony capitalism. So we now have industries that have mastered the art of faking capitalism by turning our government into one that fakes democracy.

This government takeover took time, but the purchase of all 3 branches of government has almost been completed by 2014. You don’t have to take my word for it, luckily that has now been empirically proven in an analysis of over 20 years of government policy where the clear conclusion was that policy makers respond solely to those in the top 90th percentile and essentially ignore the large majority of Americans.

Testing Theories of American Politics: Elites, Interest Groups and Average Citizens

Wealth Inequality in America (6:23 video) 

2. Wealthy Purchase of Government Institutions / Elections

Purchase of the Executive Branch:

Let’s take a step back and take a glimpse at how the government was purchased, beginning with the executive branch. In 1980, Reagan’s election cost less than $300 million. When Bush beat Kerry in 2004, it cost almost 3x times as much, almost $900 Million. 4 years later, the 2008 election cost a record $1.3 Billion. It was in this election where Obama hammered the final nail in the coffin for government funded for elections.

Obama, more so than any other candidate in recent decades had the widespread support of millions of small donors, but in the end I guess it wasn’t enough. So when Obama “leaned to the green”, it forever set the precedent that you can’t win without the backing of our nation’s oligarchs. Consequently, the money has only gushed in since as the cost of Obama’s reelection in 2012 skyrocketed to an unfathomable $7 billion.

Needless to say this is slightly above the rate of inflation. Our Presidents are now preselected exclusively by a tiny fraction of Americans can have the money to fund what has become necessary for a legitimate run.

Summary: Candidates spend years courting the super-rich to build up a multi-billion dollar war chest. Only those who succeed can actually run a campaign that an average American will be aware of. Then Americans get to choose one of the pre-selected “candidates”. No wonder voter turnout is so low…

Executive branch, check!

– Note that media corporations benefit doubly as they can use their cash to fund elections, but are also the beneficiary of all that money as it is used for campaign spending.

Purchase of the Legislative Branch:   Read more…