(Preamble: The professional economics community is looking at the present economic perturbation as a case of food poisoning — an accident of the process. They are describing the progress of the poison in the body and its metabolic effects. No doubt it is important to understand these processes in order to speculate on a remediation, but I am more interested in whether the poisoning was intentional and who might have either ‘done it’ or let it happen. And if intentional, for what form of gain.)
Economics is about those processes and designs that distribute resources. It is also about the accumulation of, movement of and motivations created by value added in exchange. And it is also about the protecting and the unprotecting of any resource or accumulation.
Economics has a natural history comprising 3 major stages: (1) distributing the personal excess from hunting and gathering among family/group members, fully commingled with the natural economy of an ecosystem; (2) exchanging locally abundant resources among related, extended groups on a break-even model; (3) trading “valuable” resources among potential enemies on an a trade-advantage model.
The first maximizes the benefits of a resource, strengthens group ties and increases the health and wealth of the whole group. The second makes available to a coalition of family groups the benefits of a larger region and creates ties of mutuality among larger groups of people covering larger geographic regions. The third makes trading a substitute activity to taking, creates the abstract notion of value added and creates new forms of relationship among human groups that because of distance and difference would be potential enemies, i.e., competitors at the margins of their physical and cultural territories. It is based on a balance between the power to protect ‘our’ wealth and the power to unprotect the wealth of others. Our present economic models, from communism to capitalism, are all forms of this last; capitalism is just taking economic steroids.
Human biology and consciousness order have properties that give design to how we do everything, and so give properties to our economic behavior. The functions of mathematical economics are attempts to describe how these behaviors work so that they can be predicted, but most economists have made the natural mistake of thinking that economics is somehow separate from the human substrate the way gravity is independent of the exact nature of the matter of its origin, only a product of the total mass. Economics is not like that, it is completely a product of human design – at least it was until some decisions began to be made by computerized algorithms. All that is needed to undo much of the mathematical work is a change in attitude or expectation in a population, thus the great energy devoted to controlling these very things.
While the predictions of economic models have been often unreliable, there are some general ways of looking at economic behavior that will continue to make sense so long as we operate on the principle of maximizing the accumulation of added value, i.e., the principle of trading with enmity.
After teeth brushing and putting on clean underwear most of our present lives are devoted to protecting our wealth and unprotecting the wealth of others (actually teeth brushing falls into both categories). My boss has a volume of wealth. I do the things he asks to pry loose some agreed on amount, that is, my actions unprotect his wealth for a moment. My labor, in turn, as been unprotected to a measured degree. He protects his wealth by not letting me just go his pile and take some; rather he has devised a system so that exact amounts can be delivered to me and others. I look for ways to unprotect as much as I can in the normal course of my activities (who knows how many pencils he has bought me) and my boss looks for ways to both protect his own and to unprotect mine. Every action in our economic lives and, many actions in parts of our days that we do not specifically recognize as economic, can be put clearly into two lists; actions that protect our wealth and actions that unprotect the wealth of others.
Our present economic fright is so transparently the result of a group of wealthy people trying to get more by creating and discovering a way to unprotect the little bits of wealth held by millions of average people! There are two basic ways to do that: control and offer a product that a great many people can be convinced that they need (Microsoft, food) or use the taxing system to get the many to pay your debts when you default on paying back money that you “borrow” (S&L defaults in the 1980s). Microsoft requires a product, infrastructure and a lot of work. “Mismanaging” vast sums, skimming off millions and then getting the tax system to bill the people requires the right contacts and political power. Mismanagement and stealing is by far the easier and the spare millions can purchase a lot of help.
Of the 300 million people in the US there are only a few tens of thousands who really understand the opportunities of the money system, really know how to unprotect wealth on a large scale; and of those who know how only a few have the connections to do it. The wealthy are very good at protecting theirs; it is a lot of work to unprotect their wealth and seldom worth it except for the random freelancer. The masses have a lot of wealth, but it is in tiny chunks. The infrastructure to unprotect and gather from them has to be huge (thus the neoconservative growth of government). Therefore, it is necessary to use the banking system and the government’s taxing powers to do the job right.
Oh yes, and where are those people who know how the money system works? They are drawn disproportionally to the banking/investment infrastructure. And where is the power and opportunity to develop political connections that can help protect these people and make available the tools to unprotect the wealth of others? Right there in the same banking, investment and regulatory community.
The way it looks to me is that we have a case of a 7-11 bandit; you know, some petty thieves specialize in convenience store robberies, unprotecting wealth with a cheap revolver. Some mega-crime families might very well specialize in banking/tax system robberies: getting a lot of money moving, ‘losing” a bunch of it on paper and getting the ‘government’ to cover the losses. The last big heist was when GHWB was vice president and president and now this one when GWB is president. The boy is good! Out did his dad in the destruction of Iraq and now has out done him with a banking scandal.
I’m not suggesting that the Bush boys put a bandana around their faces and used a Saturday night special (although Neil is still a mystery), but I am saying that the forces to unprotect wealth are like the water behind a dam; when you make a crack it just flows right on through. When the power of government taxation is made available by allowing, even pushing for, institutions that are too big to fail and oversight is so weakened that the regulators (sic) and the thieves can plan heists together, then the responsibility is that of accessory before the fact; a crime as serious as that of the actual perpetrators. A man was just executed in Texas on such a charge.
Was this an accident of the financial system? Not bloody likely. If you think that there is not a group of people with their funnels all built and ready to collect the shakings of the money tree into their coffers, then you probably are still looking to buy stock in Lehman brothers. Could this have been a swindle that got out of hand? Possible, but not likely; I think the plastic was put down wide enough to catch all the dead bodies.
The normal protections for the wealth of the middle class was lock-picked by the banking/investment system and the complicit taxing infrastructure is being used to collect the booty. In the 80s and early 90s taxpayers paid 125 billion to have money stolen from them (estimates of the true total cost are as high as 1.4 trillion dollars). This time we will pay a thousand billion (we cannot even speculate on true total cost) for the privilege of being robbed. The rhetoric of “saving the economy” is just so much boilerplate to cover a huge transfer of wealth to the economic elite made possible by Bush administration policies. And you count on it: every “correction” of the system will be analyzed for its potential use to further unprotect the wealth of all possible targets.
That is the way unprotecting wealth works. All wealth (capital, labor, debt, real estate, invention), any place that money moves or wealth is stored, can be skimmed from, secreted away, nibbled at, relabeled and otherwise have its protections momentarily weakened or removed. Smashing the window of a car unprotects the purse inside, getting a no-bid open ended contract without enforced performance conditions is still a smash and grab job, albeit more complex.
The argument that government needs to be run like a business does not remind us that the business of business is unprotecting the wealth of the consuming public. It is in the mindset of those in business: “How to I get a potential clientele to trade their wealth for my product or service?” Innovation, niche hunting, “marketing”, planned obsolescence, deceptive pricing and sizing, deceptive advertising, finessing safety and environmental regulation and many more actions, “good” and bad, are devoted to the primary event, when the wallet opens and the wealth is exposed. When business and government combine, business naturally sees the potential of government functions and powers for unprotecting the wealth of the masses. This has a name. It is fascism in democracy’s clothing.