According to the 2006 census there are about a 150 million working adults in the USA. From thence flows the true wealth of this nation. Of this human capital there is plenty to go around, enough to meet the needs of the average citizen of this country. If our free market systems functioned as well as expected we would likely witness a population that consisted of:
1) many individuals who did extremely well for themselves (the rich and super rich)
2) a majority that had all of their basic needs met (we'll call them the middle class)
3) a minority that did not do so well for whatever reason (those at the lower end of the economic ladder)
While the free market system has numerous problems it remains the best economic system we have today especially when compared to other systems like pure Socialism or Marxism. Still, major imbalances have developed leading to the extreme conditions -- the loss of jobs, income, and wealth --that we are battling today.
In our national economy the structural imbalances are related to the distribution of wealth. This begs the question of who gets to decide how this pie is carved up? The answer is closely tied to a long running tug of war - one that pits the few vs. the many. No system is perfect and there are always going to be injustices. Our concern is when those with economic power show a sustained and unhealthy disinterest in the consequences of their actions on the many. The actions of the few are not always self-serving - take for example the drafting of our constitution which was done by a few elite members of American society but brought political and economic freedoms to millions of people. The same cannot be said of the financial industry which today is being manipulated by a few who have no regard for how their decisions might affect the many. It is not that those who run the financial industry suddenly lost their way and got greedy. Rather, many of the current problems are related to the global economy and the ability of a select few individuals to create new ways of manipulating the financial markets, ways that have outpaced our government’s ability to regulate those markets for the larger common good. It is clear that in the age of democracy any system that allows the few to benefit at the expense of the many will not last very long.
How do the few manage to exploit the many? Take the example of hedge funds, which are now often used to speculate on risky and unpredictable assets such as foreign currency or future prices of goods. In order for the hedge fund managers to make their millions, they need money and lots of it. So they take in deposits from your pension funds and insurance companies - the hard earned dollars that you were counting on for your retirement years. The managers' commission depends on the amount of money available to place on their risky bets. No one would complain if the managers were risking only their own money, but that would be a miniscule amount compared to the deposits from these pension funds. This is how the many (the middle class) are helping a few (on Wall Street) get filthy rich.
Excessive greed is not the only problem with our financial industry. There has been a fundamental shift in how wealth is created. Speculation, not production, is the path to real wealth in today’s financial industry. Instead of investing in businesses that provide tangible goods and services Wall Street is obsessed with creating wealth by betting on futures, currencies, and other devices that do very little to make our society a better place.
What happens when Wall Street gambles and loses? They look to the government (we the people) to bail them out. Financial industry executives argue that their companies are so integral to our economy that if they went belly up our entire civilization would be ruined. Thus, if we the people don’t give them more money to cover their losses (and it was our money they lost in the first place) then the financial sector will cease to exist and our standard of living will sharply decline.
This ‘profits over people’ mentality has manifested itself on several fronts - all symptoms of a larger malaise:
2) Impoverishing the middle class
"The share of income to the 99% of people declined from 1976 onward. At the same time the means of making money changed from labor production to money manipulation (producer economy to finanicialized economy) adding to the reduction in share of income. "
3) Economic bubbles that made everything unaffordable and destroyed the notion of "a living wage"
4) Short term thinking leading to loss of jobs
What make free markets our best economic option is the ability of individuals to use their human capital to create a better life for themselves and their families. Even at their best free markets are susceptible to periods of expansion and contraction (boom and bust), but the potential for growth is unlimited. Unless the markets are altered and manipulated in ways that benefit only a few. We believe that there are serious imbalances in our current social and economic systems that are undermining the ability of the many to enjoy and profit by their human capital. For example the last few decades gave rise to a "credit based" economy where people enjoyed abundant prosperity but it was made possible only by the availability of easy money from banks that were "allowed" to create credit to the tune of multiples of the deposits in their vaults.
In a democratic republic such as ours our elected representatives are supposed to work on restoring balance in our systems. Unfortunately the few who have managed to sequester a lot of the wealth in this country are exerting undue influence on these elected officials furthering their own wealth and leaving at peril of the well-being of the rest of the country.
Affairs are coming to a head when we see special interests trying to silence the voices that are seeking justice and fairness in our society.
It is time for the majority in this country to step forward and take control. So what must be done to restore balance? At least two items on my list:
1. Put in place sufficient regulations and oversight so that we move closer to a real free market - one that is not rigged to favor a few at the expense of the many.
2. Figure out the best way to grow the economy with real products and services, and the best way to finance this growth.
One of the best ways to roll out this prescription is to make sure that all our national politico-economic decisions are measured against this one yardstick: What is the bottom line impact to the middle class and the majority of the citizens of this country? If the effect is positive we should support it, otherwise we should fight it.
Take some time below to say why you agree or disagree with this post, and also submit fresh ideas that can help us establish truly free market systems.