The Nobel Prize-winning economist Paul
Krugman continues his “series on the rise of American oligarchy” this
week by discussing “the decades-long dismantling of the system of progressive
taxation.” Krugman defines oligarchy “as the extreme concentration of wealth
and political power in the hands of a small number of people—not the 1 percent,
but the .01 percent or even the .0001 percent, the 300 billionaires who
made 19
percent of all reported federal political donations in the 2024
election.” He argues that widespread tax avoidance, and accordingly the
plummeting of effective tax rates, is largely responsible for giving us a
system of oligarchy.
Krugman admits that where he once saw the absurd inequalities of the present day as primarily the consequences of technological change and the market economy, “looking into the math” changed his mind, and it became clear to him that “much of the rise of the modern American oligarchy has been driven by deliberate policy.”
The math Krugman is focused on is the tax
gap and thus the effective tax rate. The problem for Krugman’s hypothesis is
that the United States was already firmly an oligarchy when the tax gap was
much smaller and the effective tax rate much higher. Oligarchy is not first and
foremost a product of the system of taxation, and it never has been. It is
rather a product of the pre-distribution of wealth through state-created
special economic privileges.
Though the American “free market” is riddled with these political privileges, they are not well understood or formally quantified. Indeed, they are all but ignored by the economics profession and popular commentary. If we’re trying to address inequalities of both wealth and power—inseparable in practice—through more progressive taxation, then we have already conceded the game, leaving the pervasive legal privileges that create the problem untouched.
The mainstream conversation on politics and economics (which
some of us prefer to discuss as political economy, precisely
because the two are historically and materially inseparable) should work to
reestablish careful distinctions between redistribution and pre-distribution.
What economists must begin is the project of formalizing the study of state-granted privilege and quantifying these special giveaways to corporations and the ultra-rich—not only tax credits and other favorable tax treatment, but intellectual property rights, land transfers and eminent domain, professional licensure and barriers to market, arbitrary limitations on civil and criminal liability, and the countless other features of corporate capitalism that have nothing to do with “market forces” or economic freedom in itself.
If we began to quantify these in a serious and rigorous way, we would
quickly see that capitalism is a system rife with welfare for the infinitesimal
billionaire ruling class. It is a system that shifts enormous quantities of
wealth upward by systematically restricting opportunities for the popular
masses as it creates special prerogatives for our corporate overlords.
Today’s U.S. government is a system of arbitrary administrative rule under the permanent control of interlocking elites in the major corporations and government agencies; this system of discretion under “expert” rulemaking is much easier for oligarchs to manipulate than the one contemplated by the Constitution’s three-part structure, under which the people’s representatives are charged with making law.
If elected officials
don’t actually make the rules or shape public policy toward a level playing
field, the common good, and equality of rights under the law, then it matters
little or at all who wins any given election. Oligarchy is much easier to
create and maintain when it is thus insulated from popular political pressure.
Capitalism is not a free market economy with some minor noise and deviations; regarding the math—the massive gaps of wealth and income and the actual, observable relations of domination and exploitation—capitalism is a continuation of feudalism and mercantilism in a different form, one under which there is intense competition between workers, but strong anti-competitive protections for capital.
There is a reason that no
liberal of the nineteenth century saw their philosophy as a defense of the
capitalist or the capitalist system. Free trade and equal rights were once
understood explicitly as a blow against elite, organized, government-aligned
economic interests.
Properly understanding and quantifying the pre-distribution of wealth would require that we shift our analytical paradigm: rather than looking only at after-the-fact inequalities of income and wealth, we should also examine the structural rents built into our political and economic system before any taxes are taken.
Pre-distribution in this context
could be measured by the difference between inequality (and the various inputs,
for example, wages, prices, profit margins, revenues, and capital accumulation
processes more generally) under current conditions as opposed to a
counter-factual situation of actually competitive markets without special
privilege and with widely distributed property.
In the final analysis, Krugman is correct about at least one thing, that what we are witnessing today is the consequence of public policy choices, not any supposedly neutral market forces or technological changes. Even the notion of a natural or pre-political economic system is a profound misunderstanding of historical and social realities.
Instead of
focusing on the system of taxes and redistribution, what happens after the
benefits to capital have already done their job, we desperately need to start seriously
examining the structure of the political and legal system that aggrandizes and
protects capital at the expense of society at large.
-CounterPunch: David S. D’Amato is an attorney,
businessman, and independent researcher. He is a Policy Advisor to the Future
of Freedom Foundation and a regular opinion contributor to The Hill. His
writing has appeared in Forbes, Newsweek, Investor’s Business Daily, RealClearPolitics,
The Washington Examiner, and many other publications, both popular and
scholarly. His work has been cited by the ACLU and Human Rights Watch, among
others.
Tuesday, August 16, 2011
Global Free Market: A Perspective and Admonition by Glen Brown
Free market principles, supported by neo-conservatism or neo-liberalism and perpetuated by a “corporatists’ crusade,” are aligned with the policies of the “Chicago School” ideologues, the World Trade Organization and the International Monetary Fund. These doctrines perpetrate a blitzkrieg deconstruction of the middle class, privatization of public ownership and industry (downsizing and parceling out public companies and services to private interests), government deregulation and cuts to spending (thus, stimulating deep economic recessions) and cutbacks or the elimination of the public sphere and all social funding – hence, turning the working class into the “disposable poor” – to loosen control of the flow of money and to produce “freer trade” in the global market marked by an intransigent belief that “it should be left to correct itself.” Global free market theory has surfed “the waves of fear and disorientation” while advancing an ideology of “unfettered capitalism,” leaving inequality and degradation in its wake (Naomi Klein, award-winning journalist, fellow at the London School of Economics, author and filmmaker).
The free-market theory caters to self-interested desires and profit to the detriment of other peoples’ lives, all the while promising “freedom and prosperity.” Free market plutocratic advocates believe the rich and poor should be taxed at the same flat rate, despite creating a vast inequity; that, for example, public education, health care, retirement pensions, national parks (and most any function intrinsic to essential governing) become privatized; they believe in the elimination of Social Security, Medicare and Medicaid; they believe environmental protections should be deregulated and climate change denied; they believe any publicly-owned companies, services and their assets should be auctioned off to private investors and systematically dismantled; they believe labor unions should be eliminated and that universities and colleges can easily be held hostage with exorbitant donations in exchange for indoctrination of right-wing ideologies and the firing of any dissenting professors; they believe the U.S. tax code should be reformed advantageously for the wealthy, privileged elite; and besides allocating vast amounts of wealth and resources from public to private ownership, they believe in the transfer of private debts to the public sector.
The free market economic theory was developed by Milton Friedman in the 1950's at the University of Chicago. It has come to underlie the basis for the exploitation of ecological, economic, political, and/or social catastrophes, documented in such places as Chile, Argentina, Brazil, Uruguay, Southern Cone, Poland, Falkland Islands, Bolivia, China, South Africa, Russia, Thailand, Malaysia, South Korea, Philippines, Indonesia, former Yugoslavia, “New Orleans,” Canada, Iraq, Sri Lanka… (Klein) – all attempted transformations through invasion, occupation, and deconstruction, in other words, the ransacking of a country’s natural resources, its culture and industries, and thus forcing austerity on masses of people, while further dispossessing the poor. (Resultant violence, theft, and torture are often “thriving industries” in the world of global free market philosophy).
Whether inadvertently or not, Friedman’s theory results in a concentration of wealth and the creation of a plutocracy through unregulated corporate profits at the expense of eradicating the middle and lower classes’ rights to earn a decent income, public pension and the opportunity to acquire any semblance of dignity or satisfaction of basic human needs. This is also referred to as the “busting of unions, the slashing of payrolls and the shredding of employee benefits, without any attempt by government to constrain or reverse these practices…” (Robert Reich, Professor of Public Policy at the University of California at Berkeley and former secretary of labor in the Clinton administration).
The method employed by “corporatist crusaders” includes unilaterally imposing the free-market ideology and its creed that freedom without government regulation (or unlimited, avaricious profit for a few people) will create the greatest benefits for everyone. Historically, it has been exercised with such corruptive force that it generates “economic genocide” (Klein). Often times, this is accomplished by manufacturing a “pseudo crisis” to be later used as leverage for such opportunism. This “crisis” is then transmitted vigorously through the media and funded by big banks and corporations. Moreover, the method has also been known to employ the “divide and conquer” strategy (to break unions) and hyperinflation to forward the free market crusade.
It is said that the free-market economy is built upon “planned misery” for the masses, where the majority of the population is excluded from reaping any benefits despite promises for “freedom” and “shared wealth.” The notorious effects of global free market principles at work are the elimination of subsidies, layoffs or the loss of millions of jobs, especially in the public sector, and decreased or frozen wages while the corporate elite continue to procure exorbitant financial gains through the demolition of the public sector, the consistent outsourcing of jobs and inundation of cheap imports, tax loopholes, untaxed off-shore bank accounts (a “theft ex post facto”) and from laws, that David Cay Johnston, Pulitzer Prize-winning journalist and Syracuse University law and business schools’ lecturer, says “continue to enrich the wealthy few at the expense of the many through auctions that are called markets but act instead like bid-rigging systems approved by government.”
We have witnessed legislators who pass corporate-sponsored reform bills that support privatization and deregulation (the slow destruction of labor unions, public jobs and pensions) in order to garner money for their re-election bids. We should ask: might there be a conflict of interest when it comes to some policy changes for politicians who have moved from the corporate world into public office and whose motive for service is market-based profit and/or self-interest?
The results of wealth being transferred to “disaster capitalists” while hundreds of thousands of people are subject to human rights’ abuses, mass poverty, repression, and other forms of political, economic, psychological and physical terrorism – “policies of dispossession” – are fully substantiated and documented. As many of us are aware, free market strategies have capitalized on national emergencies to meet objectives by initiating a “manufactured” debt crisis or through price and currency “shocks” crafted by a volatile and deregulated economy.
The global free market economy has proliferated unchecked corruption manifested in lucrative private contracts, tax cuts, and redistribution of public wealth to existing (or now defunct) profit-driven billionaires, corporations and banks such as the Koch Brothers, Halliburton, Blackwater, Lockheed Martin, FEMA, Fluor, Shaw, Bechtel, CH2M Hill, New Bridge Strategies, Ash Britt, Service Corporation International, Entergy, CACI, Booz Allen Hamilton, Koch Industries, Searle Pharmaceuticals, Monsanto, Wal-Mart, Intel, Caterpillar, Microsoft, IBM, Exxon Mobil, Shell, BP, Chevron, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Merrill Lynch, Washington Mutual, Arthur Andersen, AIG, Fannie Mae, Freddie Mac, Bear Stearns, Lehman Brothers, Enron, WorldCom, Adelphia, Global Crossing, Tyco, Sunbeam, ImClone, to name just a few.
Behind the entire plutocratic “corporatist crusade” are also wealthy, influential “think tanks” such as the Charles Koch Foundation, Cato Institute (Koch founded), the Heritage Foundation, Americans for Prosperity, American Enterprise Institute, Freedom Works, Hoover Institution, the Carlyle Group, Milken Institute, Mercatus Center (at George Mason University), Club for Growth, the Heartland Institute, the Tax Foundation, the Reason Foundation, Citizens for a Sound Economy, the State Policy Network, the Leadership Institute, the Competitive Enterprise Institute, the Illinois Policy Institute, the Civic Committee of the Commercial Club of Chicago, the Civic Federation, et al.
-Glen Brown
Sources:
Johnston, David Cay. Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). New York: Penguin Books, 2007.
Klein, Naomi. The Shock Doctrine: the Rise of Disaster Capitalism. New York: Picador, 2007.
Reich, Robert B. Aftershock: the Next Economy & America’s Future. New York: Vintage Books, 2010.
