There is a lot of pressure on the Occupy movement to state its demands and select leaders to present them and negotiate with whomever there is to negotiate. The talking heads who inhabit the inner beltway in DC just can't come to grips with exactly what it is that is being protested and demanded. I have that problem also but I think I am beginning to get a glimmer of what the deal is. The causative factor is largely the same things that set off the Tea Party movement a couple of years ago. That movement, however, focuses its solutions in a different direction. The Tea Party is intent on changing the players in the game by electing people to Congress and lesser offices who strictly adhere to its philosophy which is as varied as the ideals of the Occupy movement.
The Tea Party has not established a formal leadership which has sometimes hindered it but, in general, has allowed it to exist in varied forms without coming into contradiction with itself. The Occupy movement is, for now, following that pattern but the solutions it seeks is not the same as the Tea Party movement.
I want to say up front, before I dig into this that, as an economic system, capitalism is superior to the alternatives. To paraphrase Churchill, it is the worst in the world except for all the rest. However, capitalism does not exist as a one size fits all economic philosophy and therein lies the rub. To comprehend completely the goals of the Occupiers and the complaints of the Tea Party one has to examine a couple of things about capitalism itself.
When we think about what capitalism is I think it is the version in which goods are produced and sold. Workers sell their time in order to purchase goods which creates demand. Demand moves up the food chain along with the money that the workers spent until it reaches the manufacturer at which time the manufacturer must decide how much product to make to satisfy demand without negatively affecting profits. In this model capitalism is self-moderating and regulates itself it a brutal but effective way.
The problem is that this is not the model we have for capitalism today. Ask yourself, “what happens when the manufacturer wants to increase profits but demand does not exist?” In the former model the answer is obvious but now we find that another answer is to artificially increase demand. Demand is increased by making larger the size of the market (globalization) or by creating credit for the consumer to use. This model will only succeed if the markets continue to increase and consumers consume more. Population growth will allow for some market expansion but not enough to create a market for the stockholder equity in the manufacturer that will promise exponential growth in equity. This market cannot effectively regulate itself but instead will create possibility for large failures and market uncertainty. Ron Paul calls this “Crony Capitalism” and it is able to exist only because of influence peddling and lobbying for rules that will create a favorable business climate. Examples would be lobbying for specific regulations from Congress or tax loopholes that will favor certain businesses. Now we no longer are allowing for the worker to receive enough wages to continue creating demand at a level at which the stock price continues to grow. We have created a mechanism in which a disproportionate fraction of the wealth is concentrated in the top tiers of financiers to reward ever increasing stock equity rather than as a salary for effectively managing a company.
With the demand for ever increasing stock equity comes not only the trading of the stocks but also the new market for derivatives which are contrivances by which the natural forces of risk management are thwarted. Effective lobbying has created tax loopholes so that profits are not taxed at regular income levels and, also, the capital requirements are decreased providing financial institutions with more money that can be leveraged. The problem here is that when risk management fails there is not enough capital on hand to cover the losses. This is not a true consumer driven capitalistic system. It is skewed to favor those at the helms of those giant financial corporations, the bondholders and the stockholders.
Additionally it makes our lawmakers responsive to the funders of their campaigns rather than the American voter.
This figure tells the tale. Some 40% of our Gross Domestic Product (some say 60%) is driven by the financial industry. This industry just creates money and credit. While critical in today’s global economy is carries far too much influence and has the capability of crashing the entire system. The profits on these transactions is not taxed at the same rate or in the same way as are regular profits. All of this has the effect of allowing a concentration of wealth and power in the very peak of the 1% of the population. This removes that wealth from middle class access. “Oh, but they will reinvest it and create more jobs if we just leave them alone!” That is patently not true.
So, I will join you in cheering for capitalism but I want it to be the capitalism that does not depend on favorable legislation and buddies in Congress to succeed. I want it to be the kind that rewards labor with fair pay and establishes a level playing field for all citizens. There are industries that are critical to our national security that may require assistance to survive in a genuine capitalistic economy. These should be the only exceptions to the basic rules of capitalism. If a business cannot operate in the black it needs to fail. If a business can become too big to fail then it should not be allowed to grow that large.
The last leg of this is a military that is used to protect the property rights of giant international corporations. Property rights are critical to our society but not when securing them by the use of military force is detrimental to the country at large. This type of military operation is the other means of skewing the forces of capitalism by decreasing resources available to our citizens and by creating political climates in which a business may not be able to succeed otherwise. This cost is borne by the American taxpayer and it has created an enormous industry in war materiel and paramilitary security.
This is what the Occupy movement is about. Not just changing the players in the same old game but changing the game itself. If the game is crooked then the players don't matter. There are a few general demands the Occupy movement has but not so many because the answers are so very intricate and will require reexamining the way we have done business for over a century. This is what Occupy wants and , if I understand it, it is what the Tea Party wants also.
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