Wednesday June 20, 2012

 

 

 

This Is Not Capitalism

by Michael Chapdelaine

04/06/09

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Photo credit: Petr Kratochvil

During a recent discussion with a supporter of Barack Obama regarding the direction of America, I was particularly struck by his defensive contention, “I believe the economic system in the US is still… undeniably capitalism.” It demonstrates something simple yet remarkable: if there is such certainty that this is capitalism, then many Americans perhaps don’t know the meaning of the word. For if they do know, they are turning the qualifications for the economic system on its proverbial head. It is either a misuse or an abuse of terminology.

Such ignorance, or deliberate distortion, is opening the door for acceptance of frequent haranguing that America’s current condition of economic distress is resultant of the “failure of capitalism.” The “failure of capitalism” necessarily invites a state-controlled economy; hence, Government moves – by the present Obama and the preceding Bush administration – to pull the nation out from the depths of depression. Some advocates of the ongoing “rescue” have and will contend that this intervention fits well within a capitalist, free-market system or even that it will save capitalism.

These are, at best, fanciful notions. The economic system America has been operating under for years has not been capitalism. The market is far from free and fair. The problem goes beyond greed.

Quick lesson: capitalism requires capital. Capital, for the unknowing, is an accumulation of private wealth – like one’s personal savings. Businesses or corporations can build capital by setting aside profits. Profits are had by offering a good or service for which there is a healthy market at a price above cost. This is the reward for the endeavor.

In a free market, subject to the attendant ups and downs, businesses that have accumulated wealth (also known as capital) can reinvest it and possibly (a risk properly remains) see a return on that investment (if it was a smart, well-timed move).

Banks that make loans from their stores of capital can risk it by making loans – like an individual going in to ask for a loan with the intent to start a business. Good loans to qualified borrowers return profit from the interest. If the bank makes a bad loan (loss of the loan amount and no interest gained; bad business decision), the failure is supposed to be their (private, not public) burden.

American automotive manufacturers, for instance, might have reinvested in developing alternative energy vehicles cognizant of dwindling fossil fuels. They did not. Instead, the Big Three (Ford, General Motors, and Chrysler) committed themselves to the short-term fad of gas guzzling, sport-utility vehicles. Of course, their problems also come from crippling commitments to their union employees made during the post-World War II boom years and a Federal Government dedicated to eviscerating American manufacturing and industrial capacity.

The economic system America has been operating under for years is not based around capital. The law is applied unequally in the incestuous corporate-military-industrial-media complex; this is the obscene reality behind what is touted as regulatory absence. The market is heavily regulated; but, there are two sets of rules.

For this reason, the now infamous swindler Bernie Madoff initially found himself under house arrest for stealing billions while, on day-to-day basis, inner-city youths get promptly thrown in the municipal or county jail for petty theft. It is the reason Madoff has been the only man to go to prison, i.e., the fall guy, in an operation that had to have involved dozens, if not hundreds, of others. The same reason the Securities and Exchange Commission (SEC) acts like they were taken by surprise by the whole affair. The reason popular media is remiss in independently investigating the matter with rigor and bringing all the misdeeds to widespread public attention.

It would be much more accurate to label this system “creditism” as investments (and purchases and purchases as an investment) are ever more commonly done on credit, where there is an absence of capital. This accumulates debt, not wealth. Government is creating and spreading the illusion of wealth with their facilitation and complicity. Losses are made public (e.g., the bailout of financial institutions). Ineptitude and inefficiency is not punished and discouraged, rather it is rewarded and encouraged. Importantly, development and economic growth is out of proportion to real wealth and is wildly speculative, e.g., the housing bubble.

The economic system America operates under is rigged with government criminally complicit at various levels. Municipalities, for example, raise taxes to “invest” ever-larger public funds on Wall Street and receive ever-larger kickbacks. The insolvent mega-banks, for example, receiving government-dispersed funds have used taxpayer money for everything from executive bonuses to the takeover of smaller, solvent banks. Successful businesses and the prices of goods and services are not being determined by a competitive, fair, and free market; they are being determined via legislative misdeed and regulatory selectivity.

In a completely free market, there is no such thing as “too big to fail”. In a well-regulated market, if an institution is too big to fail, then they are too big and would properly be broken up.

In this government-manipulated creditist system, “too big to fail” means the general public is robbed to maintain the elite’s financial and economic dominance. This is not capitalism.

The Federal Government is full of downright corrupt agents of the banking industry and other select corporate interests, let alone the ranks of inept and ignorant functionaries and bureaucrats. The scoundrel all-star team has assembled under the Obama banner as recruited from members of the Clinton and Bush administrations. Cheerleaders for Obama and his ilk would have us believe that those who have consciously or incompetently led America to this sorry place out of the sun are supposed to deliver the United States a genuine recovery and bright future.

If we accept that, then the biggest criminals in America have successfully pulled off their heist.

 

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