Utopian Dreams Begin to Fade

When Big Money Stops Talking

It's ironic that the standard, classical Marxist indictment of capitalists is that money rigs the political system and political power in favour of the monied.  The classes are at war, and capitalists will always exploit their position at the expense of the working stiff.

We should remember that whilst ubiquitous class warfare is an ideological scam--a simplistic view of history's dynamics--that is not to say that capitalists are never perverse when it comes to their interests.  We need to remember Adam Smith's timely warning: put a dozen industrialists and capitalists in a room and within minutes they will be engaged in conspiring against the free market.  They will be looking to control supply and demand so as to maximise their own collective interests and profits as a group. Smith's answer to this problem of human self-centeredneess was to resist the desire (and conspiracy) to control the system to the advantage of their class by maintaining an open, free, competitive market.  Competition is the best regulator of capitalist greed and perversions.

It was always understood that in the matter of Brexit, there would be "winners and losers".  For some businesses, it would mean commercial hardship and the need for adjustments.  But for others there would be new commercial advantages to be exploited.  It seems now that some of the biggest monied donors (that is, owners and deployers of capital) to the Conservative UK government are pushing back against Brexit.  It does not accord with their own monied interests.

This boils down to a classic case of who ultimately controls the UK government and its actions: the crony capitalists, or the voters.

Benign Versus Malignant Inequality

Stealing From the Poor

Rich people steal from poor people.  No, it's not that rich people creep up behind poor people and snatch their handbags.  It's rather that the supply of "wealth" is finite, and when rich people have too much of it, they prevent poor people from getting more wealth.  Therefore, rich people indirectly steal from poor people.  The solution is readily to hand.  Confiscate the wealth of rich people, and redistribute it (after Government costs and expenses) to poor people.

So runs the received wisdom of the Commentariat and chattering classes.  If only things were so simple.  A recent article in the Washington Post documents research published in the Journal of Comparative Economics.  Some argue that the uber-wealthy actually end up benefiting all of society; others run the "rich people steal from poor people line."

You might be used to hearing criticisms of inequality, but economists actually debate this point. Some argue that inequality can propel growth: They say that since the rich are able to save the most, they can actually afford to finance more business activity, or that the kinds of taxes and redistributive programs that are typically used to spread out wealth are inefficient.

Other economists argue that inequality is a drag on growth. They say it prevents the poor from acquiring the collateral necessary to take out loans to start businesses, or get the education and training necessary for a dynamic economy. Others say inequality leads to political instability that can be economically damaging.

The new research, however, argues that how the poor became rich makes a significant difference.According to Bagchi, one takeaway of the research is that developing countries should limit how much businesses have to interact with the state to get things done — those interactions rarely turn out well for average people. The other lesson is that it's not just inequality, but the source of inequality that really matters.

Business People Dangerous When It Comes to Politics

Banal Business Naivete

Stephen Franks
February 14th, 2015

Few business people are good at democratic politics. They expect what works in business to work in democracy. They’re frustrated by the messy necessity to maintain a working consensus, by multiple conflicting objectives, and by the unreliability of delegates.

They think that if only the right people were in charge, the best structures and systems would be like those in business, where everyone accepts single prevailing decisions from nominated rulers, and he who pays, rules.
Business people who get embroiled in politics commonly hate it so much they eject before they flame out. Those who survive and learn may be small in number but they are among the best we have, and we owe them a lot for their patience.

Many good business people are equally hopeless in assessing policy. I could not count the number of times I’ve heard the idiocy that the Resource Management Act ("RMA") is a good law, with nothing seriously wrong with it except how it is administered by council people who are stupid or wrongly motivated. These business defenders have no idea that they’ve just explained exactly why the RMA is  so badly conceived and written as to besmirch the rule of law.

Public Swamps, Politicians, and Their Cronies

The Dangers of Mates Having a Drink Together

Crony capitalism is a despicable thing.  It occurs when government sidles up to businesses to offer favours and rewards not available to competitors if they will do the government's bidding.  It's a "you scratch my back, and I'll scratch yours" situation.  Publicly it's sold as a "win-win" for all.  The reverse also occurs.  Businesses sidle up to government to lobby for contracts and benefices.  The quid pro quo is often support in the form of funds for political campaigns or, worse, money in the back pockets of politicians.

All governments and politicians, of whatever stripe (ideologically left, right, and centre) are susceptible to such corruption.  Power corrupts.  Businessmen and private capital are entirely corruptible when they get close to power.  Politicians are already well down the track, their hubris driving them on.

The only way to resist the invasion of such rodents gnawing at the body politic is to maintain a high wall of separation between politicians and the decision makers who will decide which contracts and tenders will be awarded to whom.

Palin and Crony Capitalism

Facing Off With Smaug and His Treasures

One of the things we have always appreciated about Sarah Palin is her commitment to fighting against corruption and crony capitalism in government and politics.  She fearlessly takes on vested and corrupted interests in her own party, let alone the Democrats. 

Recently, a group of nouveau riche Wall Streeters complained to Republican establishment doyens (otherwise known as Beltway Barnacles) that they found offensive the present Republican Congress's refusal to fund Obama's move to socialise medical care in the United States.  When the Roman Republic became the plaything of wealthy patricians and venal plutocrats, its demise was inevitable.  So will pass the United States.  "We the people" will be replaced by "We the entitled". 

Sarah Palin recently called the them out.  She has a different moral and ethical compass--as revealed in this Breitbart piece. 

Crony Capitalists and Spy Networks

Walking the Corridors of Corruption

One of the inevitable ramifications of the vast trawling US electronic spying programme appears to be playing out in New Zealand.  We are parties to an intelligence sharing agreement with the United States and Canada, Australia and the UK, entitled "Five Eyes".  The information shared includes--probably almost exclusively so--the kinds of electronic data on the activities of citizens now being collected ceaselessly by the United States. 

While the ostensible and immediate reason for the data gathering is to "get terrorists before they get us", what governments can do, they inevitably will do.  Since it is becoming clear that they can now spy comprehensively upon the thoughts, intents, and actions of citizens via electronic media, it is axiomatic that eventually they inevitably will do so--despite the protestations that this was never was, nor is now, the intent.  Power corrupts and absolute power corrupts absolutely.  And there are few manifestation of absolute power more compelling than the panoptican state, where the government sees all and spies constantly and comprehensively on its own citizens.

Capitalism's Ozymandian Moment

Looking Upon Mighty Works and Being Afraid


Jeffrey Sachs is an insider.  He is part of the financial-academic-media-political complex.  But he is also a heretic.  He is a strident opponent of the theft and corruption of the finance sector in the United States.  In addition he  is also a fierce critic of the corruption of Washington and how it has become suborned to the love of money.  Other people's money--being siphoned off into the back pockets of politicians and political insiders. 

In April this year he spoke at a Philadelphia Federal Reserve conference.  In the course of his remarks he had this to say:

Letter From America (About Crony Capitalism)

Palliative Care

Pressie Obama is making a big deal about his government's huge bailout of near-bankrupt General Motors in 2008.  He offers it as indisputable evidence that using tax payers to save a failing company works: jobs are protected, industry is buoyed, and everybody benefits.

The reality is very different from the political spin.  And commercial reality is eventually brutal: it does not fool itself or others forever, unlike politicians.  You can dress mutton up as lamb in politics every day, because you can fool all of the people most of the time.  But markets--that's another story.  While markets may fool themselves and you for a good long time, in the end the truth comes out; reality actually does eventually intrude into the specious narratives, and a cleansing enema takes effect.  Governments, however, think and acts as if they can keep spinning the fairy tale forever. 

So GM is a great example of what big government and big industry can do when yoked together in partnership.  Not according to the share market.