Frankenstein Capitalism (Yahoo Finance article)

[shira]

I ran across this article on Yahoo Finance just now. Seems pretty spot-on to this liberal.

I've included an edited excerpt below, but the whole article is worth a read.

Happy Halloween! America’s been having fun dissecting and transplanting body parts onto Adam Smith theories since 1776, molding a Frankenstein monster into an economy for narcissist billionaires. It worked for a while. Now its a serial killer on a rampage, turning against the soul of the nation that gave it birth, into a coliseum for political, economic and cultural zombies tearing each other apart.

America’s Frankenstein economy is in line with Daron Acemoglu and James Robinson predictions in “Why Nations Fail: The Origins of Power, Prosperity, and Poverty”: Nations grow. Wealth concentrates at the top. The elite manipulate to protect their wealth. They close doors that got them to the top. Economies collapse. Nations fail.

This Halloween that same pattern is accelerating across America as wealth rapidly concentrates at the top, GDP growth keeps declining. This time, however, the door is also closing on entrenched zombie capitalists as the inequality gap widens. They are losing the battle to control government, threatening insiders, setting up revolutions. Here are seven signs of this classic pattern:

1. Frankenstein economics is a mausoleum for trickle-down capitalism

This theory that policies that help the rich get richer will “ultimately help everybody,” has been with us a long time. Foreign Policy says it was coined by the great urban philosopher Will Rogers when he commented on Herbert Hoover’s 1928 tax cuts: “The money was all appropriated for the top in the hopes that it would trickle down to the needy,” but the president didn’t “know that money trickles up.”

Since the presidency of Ronald Reagan, zombie capitalists have turned trickle-up into a flood. Forbes Global Billionaires list rocketed from 322 in 2000 to 1,826 in 2015. By 2099 Credit Suisse predicts 11 trillionaires. But for the rest of the world, capitalism is a cancer: A billion live on less than two dollars a day. And as global population explodes to 10 billion by 2050, the widening inequality gap will trigger revolutions, pandemics, starvation, an overheated planet. Trillionaires? Or GDP below 1% by 2099?

2. Frankenstein economy is now America’s new Invisible Hand

Adam Smith was a moral philosopher, believed the Invisible Hand of a divine power would act to the benefit of all. Unfortunately, today’s capitalists took away control of the Invisible Hand, transformed it into a blood-sucking vampire, into “mutant capitalism” as Jack Bogle calls it, an egocentric materialism with no moral compass that justifies America’s obsession with celebrity power and personal wealth.

Nobel Economist Joseph Stiglitz warned of this new “Frankenstein economy” mythology. Lacking any scientific proof of their own ideologies, insiders use computer technology, math and physics to justify their ideological biases, dismissing the economic impact of climate change, research on the predictably irrational, often evil behavior of all humans.

As a result, today’s capitalists often become climate deniers, ignore social issues, focusing instead on justifying the self-serving behavior of billionaires maximizing profits, accumulating massive wealth, dangerously widening the inequality gap. They pretend their myth-based economy works, even as they drain our GDP’s soul of blood.

5. Frankenstein capitalism has a conservative GOP political bias

Stiglitz warns that today’s zombies all have a definite conservative bias on political issues. Economic courses taught at Harvard, for example, use a textbook written by a former member of President Bush’s Council of Economic Advisors that pushes “a particular ideological view that markets work perfectly.”

Moreover, they tend to see environmental issues as liberal myths, and back GOP politicians committed to climate-science denialism. And yet, politically biased economic theories, whether conservative or liberal, are dangerous to America’s future. Future leaders need to be flexible, open to compromise, making decisions on broader public policies, not, for example, locked on some rigid version of Adam Smith’s theories. Time to bury that corpse.


7. Frankenstein economy trapped between uncompromising ideologies

Today the “Atlas Shrugged” ideology of Ayn Rand is the core of Frankenstein economics, having replaced Adam Smith’s original capitalism. It is now in a war to the death with liberalism. This extremism is now the conventional wisdom of conservative politicians: “When I say ‘capitalism,’ I mean a pure, uncontrolled, unregulated laissez-faire capitalism.” It is “the only system that can make freedom, individuality, and the pursuit of values possible.” Compromise is impossible.

Today Rand’s ideology is not only deeply embedded in conservative economic thought, it has emerged as a conspiracy of a Super Rich elite and the political right, in a dangerous spiral repetition of the historical patterns Acemoglu and Robinson warn we are closing the door to America’s future, setting up the collapse of our economy and our nation’s failure.

Happy Halloween, the good news is that this war will soon come to a predictably irrational end: By the 2020 presidential election when Clinton is reelected. By then the GOP will have been looking at 16 long years out of the presidency.

Plus by 2020, the grim realities of global warming will force Big Oil and the worldwide fossil-fuel industry to wake up and accept the need for controlling global warming. And finally, that will break the conspiracy trapping GOP politicians like Donald Trump, Sen. Ted Cruz, Sen. Marco Rubio, and even Sen. James Inhofe in the mythic greed of climate-science denialism.

 

[Brian Stirling]

While I agree with much of what he says he gives a pass on the left leaning billionaires. There are a good many left leaning billionaires and they play a good game of pretending to care but in the end they lobby for and get the same benefits that right leaning billionaires get and cause the same negative impact on the middle class.

I do note with interest the several mentions of revolution ... it's my belief that we've come too far and are too entrenched in the current system to simply stop and reverse course. If that was ever to have happened it would have by now. Sadly, we, and much of the rest of the world, will need to rise up and reclaim our nations -- the wealthy will not give it up willingly!


Brian

 

[realibrad]

Was the article supposed to be a criticism of capitalism, or how people have set up a system to benefit the top and claimed it "is" capitalism?

 

[shira]

While I agree with much of what he says he gives a pass on the left leaning billionaires. There are a good many left leaning billionaires and they play a good game of pretending to care but in the end they lobby for and get the same benefits that right leaning billionaires get and cause the same negative impact on the middle class.

I do note with interest the several mentions of revolution ... it's my belief that we've come too far and are too entrenched in the current system to simply stop and reverse course. If that was ever to have happened it would have by now. Sadly, we, and much of the rest of the world, will need to rise up and reclaim our nations -- the wealthy will not give it up willingly!


Brian

I myself have wondered what happens if (when) the quality of life drops too low for too large a percentage of the population. I fear that unless controls are put in place that strictly prevent disproportionate influence on our lawmakers by the rich and powerful, America may reach a state where revolution becomes a reality.

 

[glenn1]

I myself have wondered what happens if (when) the quality of life drops too low for too large a percentage of the population. I fear that unless controls are put in place that strictly prevent disproportionate influence on our lawmakers by the rich and powerful, America may reach a state where revolution becomes a reality.

Bad idea, your side would be crushed like a bug and the ultra-wealthy would be entrenched perhaps irrevocably.

 

[realibrad]

I myself have wondered what happens if (when) the quality of life drops too low for too large a percentage of the population. I fear that unless controls are put in place that strictly prevent disproportionate influence on our lawmakers by the rich and powerful, America may reach a state where revolution becomes a reality.

I would not say the quality of life has dropped, but not grown as quickly as those at the top.

 

[Brian Stirling]

I would not say the quality of life has dropped, but not grown as quickly as those at the top.

Well when many that were once middle class are now poor it would be hard to say they didn't drop. Many of the communities that had factories close as that work was outsourced to China etc have seen many in that community fall into poverty.

If you draw a best fit trend line through the data on manufacturing jobs in the USA you find that if that trend continues as it has for the past 40 years that in another 40 years or about 2055, there will be no more manufacturing jobs in the USA -- none!


Brian

 

[DrDoug]

I would not say the quality of life has dropped, but not grown as quickly as those at the top.

You would say that and you would be wrong. The economies of too many cities and states have been devastated by the closure and offshoring of complete factories, leaving those people with few choices but to stay and eke out some kind of existence or move somewhere else and hope for better results. People want good paying jobs so they can live well and buy nice shit for themselves. Business wants the cheapest employee and so pays them accordingly or outsources their work. Then they bring their product back to the US of A and wonder why some people don't have any money to buy it...lol!

When it comes to robust and healthy economic activity, it's trickle up. But it's awful damned hard to spend money they want us to when they are taking all they can for themselves in the first place, isn't it?

 

[alcoholbob]

Well when many that were once middle class are now poor it would be hard to say they didn't drop. Many of the communities that had factories close as that work was outsourced to China etc have seen many in that community fall into poverty.

If you draw a best fit trend line through the data on manufacturing jobs in the USA you find that if that trend continues as it has for the past 40 years that in another 40 years or about 2055, there will be no more manufacturing jobs in the USA -- none!


Brian

I highly doubt OPEC will still be selling oil in only dollars by 2055, if they are even supplying the majority of energy globally by then in the world. I also doubt the Chinese RMB will be pegged to the dollar by then. Very likely manufacturing will return to the US at some point but it will first require the dollar to no longer be the reserve currency, and that will require a significant recession in the U.S. That will be one the Fed will have no control of, besides throwing gasoline into the fire.

 

[x26]

I ran across this article on Yahoo Finance just now. Seems pretty spot-on to this liberal.

I've included an edited excerpt below, but the whole article is worth a read.

What has Obama and the other Democrats done to stop this the last 6 years??

 

[Brian Stirling]

What has Obama and the other Democrats done to stop this the last 6 years??

TPA?


Brian

 

[realibrad]

Well when many that were once middle class are now poor it would be hard to say they didn't drop. Many of the communities that had factories close as that work was outsourced to China etc have seen many in that community fall into poverty.

If you draw a best fit trend line through the data on manufacturing jobs in the USA you find that if that trend continues as it has for the past 40 years that in another 40 years or about 2055, there will be no more manufacturing jobs in the USA -- none!


Brian

The standard of living has not dropped for for the poor or middle class. That is a fact.

 

[Fanatical Meat]

TPA?


Brian

If this isn't sarcasm

Ha
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Ha

 

[trenchfoot]

As the OP has mentioned, the key to all of this trend is how the rich have corrupted our politicians into their control.

Make no mistake about it. If the middle class and poor of our nation cannot take back control of the government, the only other recourse is a very nasty one.

The working class of the nation will have to ignore the stench of propaganda that divides them, ignore the divisive policies that the wealthy uses to keep the middle class and the poor fighting against each other. They must unite for a common cause: their own desire for a better quality of life for themselves and their children.

We had it once for a short period after WWII, it's not impossible to have it again.

Methinks the French Revolution may be a model that still has it's uses.

 

[Moonbeam]

We create what we fear. Our self hate combined with the particulars of our culture create particular emotional needs. We are a culture that worships wealth, privilege, glamor and fame, media attention instead of real self love. We will do nothing to stop the privilege and power of the wealthy to continue to self aggrandize their wealth and position because we lust to join them and are trained to believe that we can. This I Me Me Mine culture will have to be brought down by the Wrath of God, that is to say, the empty bellies of the poor. We will become a nation of poverty because it is what we fear, exactly what our self hate will tell us we deserve.

There is no subject more important than this one, in my opinion, and it is the subject that we should be focused on fixing as a nation, but you will find that only a small percentage of intelligent people have the slightest idea of what is going on. The masses of people are too busy pursuing their self involved dreams to care.

Bernie Sanders, for example should be polling at 90%. He has understood this issue for years and years and years and look what he's called, a redistributor of poverty. He will only destroy your chance to be rich. Don't we really deserve what is coming? I think that's the point and I think the masses who have been put to sleep just can't wait. Chaos and madness are preferable to self haters than ennui.

 

[Atreus21]

As the OP has mentioned, the key to all of this trend is how the rich have corrupted our politicians into their control.

The best defense against this is a freer market. When the government becomes an active economic player, you can bet their monopoly on the use of force will be an attractive commodity on which to bid.

It's a sure recipe for corruption.

 

[Brian Stirling]

The standard of living has not dropped for for the poor or middle class. That is a fact.

OK, so the guy that lost his middle class factory job and is now either unemployed or working a lower paying job hasn't had his economic situation take a turn for the worse?


Brian

 

[Jaskalas]

The best defense against this is a freer market.

Or we return to the American economic model of the great prosperity (1950s-1970s)

 

[Brian Stirling]

If this isn't sarcasm

Ha
Ha
Ha
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Ha
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Ha
Ha
Ha

Yes, sarcasm it was...


Brian

 

[realibrad]

OK, so the guy that lost his middle class factory job and is now either unemployed or working a lower paying job hasn't had his economic situation take a turn for the worse?


Brian

So, your argument is that the middle class as a whole has not dropped in living standards, but a few have. That would mean that if the average were to stay flat (it has not) then for every guy who lost his job, the rest would have had to seen their wealth grow.

Say for every five people, 1 guy lost his job.
100% of their income x4 divided by 5 is 80. That means that the group is now on average making 80% of what they once were. For the average to still be 100%, they rest of the group must now be making 125% of what they once were.

I don't think you are saying that 1 in 5 have lost their jobs, but no matter how you cut it, if the average of the middle class has not dropped, then the people who did not lose their jobs must have grown.

Now, how we measure wealth is also an issue. The way you will find most doing it is very misleading.

The median house has gotten more expensive. To many, that would mean inflation or real wages not keeping up. In reality, the median house is far bigger and filled with far more crap. It would be like saying that the median car of 20 years ago is the same as the median car today except price. The car of today has far more in it because people are buying more expensive stuff.

If you were to look at the average house 20 years ago, and then look the price of that house vs the median income, people are more wealthy.

 

[alcoholbob]

OK, so the guy that lost his middle class factory job and is now either unemployed or working a lower paying job hasn't had his economic situation take a turn for the worse?


Brian

That guy is now on welfare most likely, or working as a walmart greeter while getting government assistance.

The median family income in 1963 was $6,200 ($9,700 for college educated families), with the average house going for $18,200 which would make it 2.93 years income. Today the average family income is $53,657, with the average house selling at $221,900, making it 4.13 years income.

Now people say it's not so bad, the price is only 40% higher, and sure many houses are in fact bigger than they were in the 1960s. Although even if you compare apples to apples the price is much higher for housing per square foot in relation to the incomes of the working class. Also we are giving a total freebie here since the purchasing power of college educated families have absolutely declined, since we are comparing 1960s working class to today's college educated middle class.

Also most women did not work in 1963, and more women are employed than men in the U.S today. So this is effectively two paychecks instead of one. Since women are in the workforce, this means people are bidding up cost of child care services, which reduce the amount of disposable income people have.

Also remember back in the 1960s-1970s was pre-welfare state, most single women were in fact working. Not in the "official" workplace but they often take jobs as nanny's and help take care of the children of married folks. In fact there used to be a room built in most houses up until the 1980s for the nanny to live in. Back then a working family could give room and board to a single woman in her 20s in exchange for helping to take care of the kids. Today because of the government subsidies provided to single women it has bid up the cost of nanny's--most nanny's require at least $50,000 a year income. So a working family can't really afford a nanny anymore, and that has created yet another distortion, demand for illegal labor from Mexico as even wealthy families don't really want to pay such a large salary.

 

[HamburgerBoy]

Meanwhile, outsourcing and international trade have drastically improved the income and quality of life for many in Asia. I'm curious how the author of that article proposes to help the billion people living on less than $2 a day. If we tax our rich more, prevent off-shoring, and raise tariffs, I guess Africa will suddenly become wealthy?

 

[blankslate]

What has Obama and the other Democrats done to stop this the last 6 years??

Much of what they attempted was clubbed to death by Republicans like baby seals in the arctic....


....

 

[Brian Stirling]

So, your argument is that the middle class as a whole has not dropped in living standards, but a few have. That would mean that if the average were to stay flat (it has not) then for every guy who lost his job, the rest would have had to seen their wealth grow.

Say for every five people, 1 guy lost his job.
100% of their income x4 divided by 5 is 80. That means that the group is now on average making 80% of what they once were. For the average to still be 100%, they rest of the group must now be making 125% of what they once were.

I don't think you are saying that 1 in 5 have lost their jobs, but no matter how you cut it, if the average of the middle class has not dropped, then the people who did not lose their jobs must have grown.

Now, how we measure wealth is also an issue. The way you will find most doing it is very misleading.

The median house has gotten more expensive. To many, that would mean inflation or real wages not keeping up. In reality, the median house is far bigger and filled with far more crap. It would be like saying that the median car of 20 years ago is the same as the median car today except price. The car of today has far more in it because people are buying more expensive stuff.

If you were to look at the average house 20 years ago, and then look the price of that house vs the median income, people are more wealthy.

From 1967 to 2014 the lowest 5th median HOUSEHOLD income increased by a factor of 7.3. Inflation over that time reduced the value of money by a factor of 6.09. The net effect is that in that time period the HOUSEHOLD income rose less than 20%. At the beginning of this period very few moms worked outside the home and at the end most moms did work outside the home. Also, during this period the number of hours moms worked outside the home increased enormously. So, the number of workers nearly doubled but the income only rose by 20%.

The effect on the second 5th was even worse as the net increase was just over 15%, but once again that's with the benefit of two earners not one.

The effect on the third 5th was better, but at 25% increase the effect is still negative owing to the shift from one to two breadwinners.

The effect on the fourth 5th was better still, but at 46% it's still negative given the shift from one to two workers.

The effect on the top fifth was best of all at 79% and it's at this point where we may actually be about break even when taking into account the one versus two workers.


So, your claim that folks are better off is flat horseshit!


CORRECTION:

My calculations using the inflation was off. I'd used the increase in inflation and not the relative cost. My calculations above were based on an increase of 608.8 percent, but the effect was to increase the cost of something that was $100 in 1967 to $708.8 in 2014. So, adjusting to correct that error we see the following:

Bottom 5th saw a net increase in that period of not 20% but just 3%.

The fourth 5th was -1%

Third 5th = 7.7%

Fourth 5th = 25%

Fifth 5th = 54%

The top 5% = 67%

And again, that's household income not individual income which had to decline for at least the bottom 80% and likely the bottom 90%.


Brian

 

[HamburgerBoy]

What's your point about two earners? Opening up the economy to women naturally is going to cut into the ability for men to find work. Of course individual wages are going to drop, but if household wages stay steady or rise to compensate, your beef should be with feminism.