The Occupy Wall Street Movement and the Coming Demise of Crony Capitalism
In 1978, to the laughter of many and the derision of a few, I wrote a book called, “The Downfall of Capitalism and Communism,” which predicted that Soviet communism would vanish around the end of the century, whereas crony or monopoly capitalism would create the worst-ever concentration of wealth in its history, so much so that a social revolution would start its demise around 2010. My forecasts derived from the law of social cycles, which was pioneered by my late teacher and mentor, P. R. Sarkar. Lo and behold, Soviet communism disappeared right before your eyes during the 1990s, and now, just a year after 2010, middle-class America, spearheaded by a movement increasingly known as “Occupy Wall Street (OWS),” is beginning to revolt against Wall Street greed and crony capitalism. Will the revolt succeed? It surely will, because the pre-conditions for its success are all there.
The first question is this: Why does rising wealth disparity create poverty? My answer is that it causes overproduction and hence unemployment and destitution. It is all a matter of supply and demand. Inequality goes up when official economic policy does not allow wages to catch up with the ever-growing labor productivity, so that profits soar and rising productivity increasingly raises the incomes and bonuses of business executives. I have detailed this process in an earlier article . Then money sits idly in the vaults of bankers and big-business CEOs and restrains consumer demand, leading to overproduction and hence layoffs. The toxic combination of mounting layoffs and absent job creation raises poverty, which, according to official figures, is now the highest in 50 years.
The next question is: how has the government either restrained wages relative to productivity or made the rich richer and the poor poorer? It is easy to see that almost all official economic measures adopted since 1981 and contained in the following list have devastated the middle class. The list includes:
1. The Reagan income tax cut of 1981 that benefited the rich, but made it necessary to sharply raise all other federal taxes, paid mostly by the poor and the middle class, to finance that tax cut.
2. Unenforced antitrust laws, leading to mergers among large and profitable firms, but killing high-paying jobs in numerous industries.
3. Permitting the oil industry mergers in the 1990s that are now preventing oil prices from falling in the middle of the worst slump since the 1930s.
4. Permitting relentless mergers among pharmaceuticals and health insurance companies, so that America, far more than any other nation, now spends almost 15 percent of its gross domestic product (GDP) on health care that is mediocre by European and Japanese standards.
5. Unchecked use of outsourcing that kills high-paying jobs in manufacturing and services.
6. Ignoring the growth of the trade deficit that has destroyed our manufacturing base.
7. The 1999 repeal of the Glass-Steagall Act under President Clinton that led to reckless lending by banks and an unprecedented housing bubble, which collapsed in 2007 to trigger the ongoing slump.
8. The Bush tax cuts and bailouts that further benefited the rich while nearly doubling the government debt.
9. And finally, the decimation of the real minimum wage by President Reagan and other Republicans. (In 1981 the hourly minimum wage bought $8 worth of goods compared to $6 by the end of Reagan’ presidency in 1988, and to mere $5.15 in 2006 under Bush.)
Looking at this nine-point list, is there any government program that a big business CEO would hate? Stated another way, is there any measure that has helped the middle class? I can’t think of any. Thus, over the past three decades whatever the government did, ostensibly to help the people, actually ended up hurting them. Mergers, outsourcing and free trade raise productivity, but also lower wages, whereas the other provisions of the above list directly enrich the wealthy. The nine-point list is really a list of exploitation.
Read the entire article at Ravi Batra in Truthout