Monday, February 27, 2017

Classic Economics doesn’t work anymore because a few big players are on the verge of taking control of the markets.  Now, they are planning to take over your government.

The theory of classic economics is that markets work best when they work on their own without influence from the government.  As something goes askew in the market, they correct themselves.  As an example, if too much consolidation of capital takes place, small independent startup companies move in and either take a share of the market or create their own. 

This is the natural way of redistributing income and assets, keeping everything in balance. 

That assumes a set of conditions that allow the markets to respond fluidly and make adjustments necessary to keep things in balance.  One of the conditions is that there are many small players in the market all acting independently.  With many small independent players, no one player can control the entire market. 

Now three things are happening. 

Monopolistic size players, the top 1% of the United States population, are holding a larger share of the private assets and taking a greater share of earnings since the country was created. (2)  In 2007 they held about 35% of the nation’s private assets. (3)  Some sources say the percent held by the top 1% is even greater. (4)  At the current course, the top 1% will own about half of all private assets in just a few years. (3)  Additionally, the top 1% are banking about 25% of all earnings in American, compared to only 9% 25 years ago. (3)  As model of good capitalism, taking 9% of the total earnings doesn’t place the wealthiest people in a controlling position.  At 35%, they are now closing in on controlling the market.

The natural balancing force for the market is showing signs of failure due to the controlling factors of the top 1%.  As stated before, new business startups help keep the accumulation of wealth in check.  As markets grow, new businesses develop.  They begin to pull some of the share of the market away from the larger business. This creates a natural sharing and redistribution of the wealth.

But, if startup growth slows, the large players will continue to grow because of the lack of balance.  To illustrate this point, there has been a thirty-year decline of startup growth.  (This has been happening through Republican and Democrat administrations.)  In 2010 there were about 2.3 million jobs created in the U.S. by startup companies.  For a population of about 308 million, that is about 7.4 jobs per thousand people.  That sounds good until you compared to 1986 when 3 million jobs were created for a population of 240 million.  That equates to 12.5 jobs per thousand people.  That is a drop of about 60% of jobs per thousand people over the decades.

Less startups are creating less jobs for more people.  That is not enough to balance the markets and keep wealth evenly divided.

Finally, the top 1% have created their own “Collective Defense Monopoly” [author’s term] and are now “investing” in the political process to preserve their position.  Jane Mayer, author of Dark Money, states that many of the wealthiest individuals in America are working directly with the Koch brothers and many of their lobby groups to pressure congress and now President Trump to develop legislation that will preserve their wealth and power.  The “investors” have a war chest of approaching $1 billion dollars (or more) to help their cause. (3)  The New York Times reports that Koch spent over $800 million on this last election alone.

Is it getting a return on investment?  It put Trump in the White House and took control of both the House and the Senate.  Additionally, of President Trump’s advisors and cabinet positions are filled with people working closely with the Koch brothers and their many organizations. (A follow up blog that is being researched right now will detail the people working with Trump originate from the Koch brothers and the organizations they support.)

To fight this there are some practical things that can be done.  We as consumers must seek out small businesses in every corner of the market and purchase products and services created locally by small businesses. This will begin to build the assets of small businesses, encourage startups to entire the market and keep dollars in communities that are now being decimated by large corporations.

But, on the government level, we must also develop business policies and systems that create a balance of power in the markets just like America has in government.  We praise at every turn the American system of government that have three branches.  Each branch checks the power of the others and prevents one from dominating.  Then why do we decry the creation of the same kind of controlling forces in business?  We need checks and balances that prevent one business, or in this case, a collective, from dominating the market.  The Dodd Frank act was one way of adding some checks and balances.  But, it is being cancelled by Trump’s executive orders. 

Finally, there needs to be a way to prevent money from dominating politics.  The Koch brothers and their friends through their “Collective Defense Monopoly” raised more than a billion dollars to influence the outcome of the last election. (3) (7) This group of investors only has about 300 members. (7)  That means that each member invested over $3,000,000 each. 

The total money raised for the election for 2016 is estimated to have been about 6.9 billion. (7)  The billion dollars the Collective Defense raised represents 16% of the total money spent on the election.  In perspective, the total population of the United States is about 323,000,000.  That means on average each person in the country spent only $21. 
The Supreme Court has ruled that money is speech.  But speech, in elections, is not free.  It costs money to get the attention of candidates.

How much attention can $21 get compared to $3,000,000?  That isn’t one person, one vote.

(1) Population growth in the United States last 100 years -
(2) U.S. Income Inequality: It’s Worse Today Than It Was In 1774 -
(3) Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right – Jane Mayer, 
(4) How Unequal We Are: The Top 5 Facts You Should Know About The Wealthiest One Percent Of Americans        -
(5)  The 30-Year Decline of American Entrepreneurship - The Atlantic -
(6)  Cost of the election from Open Secrets - 
How much did Koch spend on 2016 elections -