Wednesday, September 19, 2012

Crony Capitalism--The Anti-Jobs Program


     Rootstrikers understand how special interest money has corrupted our government. But how many understand how it has corrupted and deprived most citizens of the living standard they would otherwise enjoy?

     A recent article by Steven Pearlstein in the Washington Post dated August 31, 2012, explains how capitalism (with a helping hand from government) has lost its way. A healthy capitalistic system builds, recycles, and redistributes wealth constantly. By its very nature, wealth must be widely distributed or the system breaks down. Clearly, we are headed in the opposite direction (the goal of special interests).

     If wealth is defined as that which can be set aside for the future purchase of goods and services, we can make a distinction between good and worthwhile investments, like education and medical research, and others that will return more wealth. Increased wealth made available for increased investments--not to mention more jobs.

     Crony capitalists block this process by bribing Congress or the Administration for favorable treatment such as tax loopholes, favorable regulation, or protection from competitors. In every case the crony capitalist expects to gain more than he paid in (as much as seven times the amount paid). This ‘return’ is extracted from customers and taxpayers who get no value for their money. A true capitalist would use the money in a way that would be a net gain for the economy; the simplest being to reduce prices resulting in more volume and jobs.

     There are numerous other ways in which special interests pay big money to keep things as they are, wasting our nation’s resources—think of all those prison guards keeping non-violent, black drug users in jail. And how about the lawyers and accountants living off our 8,000 page tax code?

     Studies indicate a clear connection (cause and effect) between corruption and lower GDP, higher income disparity, and increased poverty. The burden of corruption falls most heavily on those least able to afford it and, in our current debt situation, none of us can afford it.

     Our politicians stay up nights trying to think of ways to extract more wealth from the private sector, without reducing jobs, and of ways to ‘stimulate’  the private sector. We are deluged with ‘good’ ideas of how to fix Congress and our economy. In my view, unless we remove the blockage—the root problem—we can’t fix anything. Just email this message to twenty friends and we are on our way.

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