Unbridled Policy Benefits in the United States; how the poor get poorer and the rich get richer, using examples from David Cay Johnson’s Free Lunch

Let’s face it; times are not great in the United States. Unemployment is high (regardless of numbers), average wages are slipping, and the value of the dollar is a shadow of its once powerful self. However, the rich seem to be accumulating wealth at astounding rates. What are they doing that the other 95% of the population is floundering at. Could it be that the wealthy truly deserve their fortunes due to hard work and commitment? Conversely, could an outside force be unfairly distributing wealth to a select few and sticking us, the common man, with the bill? Spoiler Alert! The correct answer is the second option. However, to truly understand how wealth is stolen from under our noses and promptly distributed to the coffers of the capitalist class, one has to understand the economic and political system in place to assure its continuation in the Unites States.

Political Power and Capital

Since Adam Smith wrote on the ideas of his “system of natural liberty” or Capitalism (as we know it today) in The Wealth of Nations, governments have had to make decisions on issues stemming from surplus labor and the capital accumulation it produces.[i] In theory, capitalism is the most free and democratic economic theory, as all can choose to participate and trade their respective surplus. However when that surplus is converted into a monetary form and in thus a private property, the good is alienated from its basic natural state. In thus creating inequality among all, where those with more property yield a healthy majority of the communal power.

Karl Marx’s Das Kapital argued that personal property in itself is the most unnatural concept, holding humanity back from a true casteless society where all benefit from production’s yield.[ii] However, as is obvious, the United States was founded on many of the ideals of Adam Smith’s “capitalism” and continues to practice it to this day. The system has survived almost 250 years because of the ways political power is created and exercised in the U.S. legislative system. Political Power in its basic form is created when a group of people uses its collective means to shape legislation benefiting itself. In a representative government like the United States, the group would be called a constituency and the beneficial legislation a policy benefit. 

The wealthy hold the key to unlocking a majority of the political power in the U.S., cold hard cash; this can be realized in multiple ways. First off, the rich are the only ones who can participate in elected government, as the entry costs are exceedingly high. The capitalist class can afford to temporarily stop their endeavors to hold office, as well as have the means to carry out an expensive election campaign. In addition, society views the capitalist as a proven leader who is highly skilled in management and has a track record of success, which is commonly not the case (see Outliers).[iii] Finally, the capitalist class can use their aggregate wealth to push legislation, through the use of lobbyists or collective bargaining with their wealth as leverage.

To observe this today, one can look to the industry of Washington Lobbyists. Between 2000 and 2006 the number of registered lobbyists doubled to 35,000. Estimates say that federal lobbying is a $2.5 billion industry.[iv] As chronicled by both Free Lunch…  and the eye-opening (and highly recommended) 2010 documentary, Casino Jack and the United States of Money, a picture of what lobbyists really do to change policy is evident.[v] Now incarcerated lobbyist, Jack Abramoff, created a large multinational organization, whose object was to push policy by any means necessary. Corruption was vividly exercised using incentives; for example: awarding politicians with tickets to his personal “Skybox” at Washington sporting events, free meals at his high end restaurant Signatures, or chartered golf getaways to St. Andrews in Scotland. In return, Abramoff received payments upwards of $45 million from casinos and repressive garment manufacturers for successful passed legislation.

Tax benefits and handouts; the welfare state for the wealthy

            The wealthy have found brilliant ways to redirect capital from the government to help enlarge their own wealth. Usually this comes from tax benefits and/ or direct aid.  Using their unsurpassed political power, corporations will use jobs and economic growth as leverage to weasel out of paying property and sales taxes.

            In Johnston’s Free lunch, an example of this struck close to home. When the Cabela’s Corporation wanted to open an expansive retail store in the North East, the company used arguments for potential job and tourism growth, to leverage state and local subsidies. These would cover over half of the construction costs of the property and eliminate its need to pay sales and property tax for the life of the location.[vi] Upfront the cost to the host municipality, Hamburg Pennsylvania, would be upwards of $32 million. This amount was more than the total yearly budget of the town, translating to a total tax burden on each citizen (including dependents) of around $8,000. Cabelas estimated 6 million visitors would pass through the doors of the location on a yearly basis. This was said to increase revenue and jobs for surrounding hotels and restaurants. Later studies done after construction estimate that in the best of years Cabelas only managed 2.7 million visitors. However the location drove many local stores out of business and created minimal jobs, that only played barely above minimum wage. Cabelas had a trick up their sleeve; as there was no requirement for an audit trail or proven success metric within the contract, the municipality and its citizens ended up having to back the bill even when an “inferior good” was provided.

Corporate Socialism

            In a 2003 Washington Post editorial, Ralph Nader spelled out the details of an unwritten policy that ran completely contrary to all the teachings of Adam Smith. He made a correlation between the fiscal policies of government, and the scary “S-word” (socialism), when dealing with big business.  He noticed that legislation favored socialism for the rich yet unfettered capitalism for the poor, under the pretext of “to big to fail.” He coins this, Corporate Socialism, and explains it so, “Corporate socialism- the privatization of profit and the socialization of risks and misconduct.”[vii]  As a reoccurring theme, the capitalist class used their power to assure their success via profit, whether it is from surplus labor or government subsidy. Yet a feeble whisper of the word socialism in Washington would send financial markets in a tailspin, as well as any connected elected official straight from the capitol building to the backwater book circuit. An example of this policy in action is that of the major investment banks in the 2008 market crisis. In the years leading up to the market crash, the banks took in record incomes, riding high off of a seemingly endless stream of real estate related profits. All the while, the banks in question (Lehman Brothers, Citigroup) were using offshore tax shelters to avoid taxes and boost their “bottom line”.[viii] However when the banks were inundated with toxic assets and on the verge of failure, their collective political power enabled the addition of a cache to the Federal T.A.R.P. legislation. This footnote allowed foreign banks with “significant operations” in the United States to be eligible for funds.[ix]

The shockingly unequal power structure of the Unites States is materialized by many of these policy benefits that the rich have created to reward themselves for either success or failure. These benefits usually center on making their respective businesses more profitable. However policy created to actively insure the stability and development of the proletariat stall, as capitalist actors create an illusion of another Red Scare.  The immense clout of the ownership caste will block any attempt to reverse the power structure within governmental policy; this has been the case since the end of President Johnson’s “Great Society” Programs and is rendered commonplace in the post Keynes, pro-Neoliberal era of the last 35 years.

Elimination of power vacuums; perpetuation of capital as the de facto ruling caste 

A basic component of Adam Smith’s capitalism is the division of the working class as an individual or group. Marx coined this group the proletariat; as they produce the labor capital, however do not own the means of production and are in thus alienated from the majority of its surplus (profit). This group within the United States is decreasingly represented for the same reason the capitalist is indoctrinated with power.

Union busting legislation through the later half of the 20^th century revoked many rights of the proletariat to bargain collectively for better working conditions and/ or wage. The assumption or story crafted by the policy makers was that modern regulation and rules set forth by the likes of the Department of Labor and OSHA, eliminated workplace safety and inequality concerns. Leaving unions, in their eyes, as an antiquated idea used purely to extract unfair terms for the workers and reduce corporate profits.[x] However average household wages from 1980 through today, have stagnated for all but the top earning 10% percent of the population, when adjusted for inflation.[xi]

In addition, the once “golden ticket” to the middle class, the college education, has been pushed farther out of the reach of the everyman. This can be attributed to the doubling of tuition when adjusted for inflation in the last 30 years. As well as privatization of student loans, and massive cuts to means tested Pell Grants.[xii] When President Clinton privatized Sallie Mae (the semi-public student loan backer, not unlike Freddie Mac) in 1997, ownership saw a 51% return on equity in five years. To put it into perspective, a traditional lender would not dream of seeing returns of that nature in any normal market. When a congressional hearing was being organized to investigate claims of unfair tactics and gouging, the director, Albert Lord, promptly sold his 2% stake in the enterprise to be set Scott free as a millionaire without repercussions. [xiii]

Conclusions and discourse

As David Johnston has exemplified in his book Free Lunch, the American Political System has an unbelievable bias towards one thing, power. In our current economic system, the only guaranteed shot at said power is by wielding great material wealth. As a keen observation, via the subconscious propaganda of our system, the proletariat sees themselves as temporarily unlucky possible millionaires, who are just waiting for their chance to become a capitalist. However as it is shown, those chances are sometimes even lower than being struck by lighting.[xiv] The only way to escape this fate is for all of the workers to unite, however Marxist theory can have its own flaws in actuality. So using Johnston’s advice, in the short term we must exercise our vote and collective power. As that will be are only way of breaking free of this wealth-imposed persecution. If only it was that easy.

Endnotes

[i] Smith, Adam, and Edwin Cannan. The Wealth of Nations. New York: Modern Library, 2000. Print.

[ii] Marx, Karl. Das Kapital. London: Gateway Editions, 1996. Print.

[iii]  Gladwell, Malcolm. Outliers: the Story of Success. New York: Little, Brown and, 2008. Print.

[iv] Johnston, David. Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). New York: Portfolio, 2007. Print.; pg. 110

[v] Casino Jack and The United States of Money. Dir. Alex Gibney. Perf. Jack Abramoff, Tom DeLay. Magnolia Home Entertainment, 2010. Netflix. 14 Sept. 2010. Web. 28 Mar. 2011. <www.netflix.com>.

[vi] Johnston; pg. 98

[vii] Nader, Ralph. “Corporate Socialism.” The Washington Post [Washington D.C.] 18 July 2002, Final ed., sec. A: 29. Print.

[viii] “When Tax Avoidance Crosses a Line - Newsweek.” Newsweek - National News, World News, Business, Health, Technology, Entertainment, and More - Newsweek. 10 Apr. 2007. Web. 02 Apr. 2011. <http://www.newsweek.com/2007/04/10/tax-avoidance.html>.

[ix] Nothwehr, Erin. “Emergency Economic Stabilization Act of 2008.” The University of Iowa. 2 Dec. 2008. Web. 02 Apr. 2011. <http://www.uiowa.edu/ifdebook/issues/bailouts/eesa.shtml>.

[x] (Purely opinion, take as you will)

[xi] Greenhouse, Stephen. “Real Wages Fail to Match a Rise in Productivity.” The New York Times [New York] 28 Aug. 2006. Web.

[xii] Johnston; pg. 151

[xiii] Johnston; pg. 154

[xiv] Gladwell, 2008

**disclaimer2** I’m a proponent of not being largely politically active on the internet, but here it goes.***

Book Review:

The Idea of Communism

The Idea of Communism is a book containing fifteen essays written by prominent contemporary radical left thinkers.[1] The book itself came about after a successful conference of the same title organized by The Birkbeck Institute for Humanities in 2009. The conference and subsequent book turned into a lively scholarly debate of the future viability of communism and it’s realization in the post cold war / post industrial based world.[2]

            In the introduction the editors, Costas Douzinas and Slavoj Žižek, framed the debates by explaining that all contributors had a generally similar idea of what communism is. These were the main axioms Marx theorized such as the end of classes, abolition of capital through surplus production, universal freedom and equality, and finally the end of politics. However rifts among Marxists, especially after the perceived failures of the major Communist states in modern times, have made progressive thinkers question the viability communism in its current form against the onslaught of neo-liberal capitalism in the modern era. The general issues that have plagued Marxist thinking and realization can be partially traced back to Marx’s lack of defining exactly the steps necessary to turn communism (ideological framework) into Communism (the actualization of a communist world.) The writers tried to debunk the failures of 20^th century socialism and communism, accusing major Marxist States (mainly the U.S.S.R. and China) of using bastardized interpretations of communism.

Contributor Alessandro Russo argued that the Chinese Cultural Movement of the 1960’s is an example of this, in which to bring the Culture of China together, the State placed an end to individual activists and groups such as the “bourgeois houses” of prominent artists and writers[3]. However promoted large “born red”(post revolution) groups like the Red and Scarlet Guards of revolutionized youth.  Events like these are generally a reoccurring theme among already existing Communist entities where communism turns into a disjointed state run caste system; ergo capitalism ends up being flipped upside down rather than disappearing. Sometimes basing their central planning on the theory of “development at all costs,” which in actuality turns the state into one of pure cognitive dissidence.[4]

            Žižek bases his grievances on the generally held assumption that communism is an ideal, that will be realized when the world ends capitalism. Which as according to Marx is only partially correct. Communism will begin as a movement when all peoples join together, in thus erasing any conflict via politics or class struggle and finally ending the disconnection of worker and product through the means of capital accumulation. Žižek points out that communism in its basic state is made to be the opposite of capitalism, vis- à -vis it is bound to fail in the same ways.

The contributors realize this and each try to point the audience to ways communism could be realized and the steps humanity needs to take to get there. Each writer has their own plan, however in my opinion none are all that convincing as a fully realizable and complete strategy. The overarching theme of all of the contributors’ essays is to not shape the communist future with a strong state ruling structure à-la Stalinist Russia. As well as not to ignite just a proletariat ruled state, as this is merely as unjust as our current system. But as Žižek points out, we must “begin from the beginning, ” as our preconceived notions of capitalism and communism will hinder the actualization of the movement.

Various signs of a slightly more communist society within the realms of capitalism have shown themselves as some of the contributors point out, in ways such as the extensive social welfare systems in the Scandinavian nations. However Žižek mentions the proliferation of Personal Computers and the Internet as a major catalyst to the communist movement, as access is open to nearly all with relatively low costs and the ability for all peoples to unite without being locked confines of their own state. He also notes that this has changed the basic theory of capitalism by way of the shift from surplus industrial manufacturing (industrial based economy) to surplus intellectual capital (service based economy), which in theory can lower market entry costs as well as reduce market exclusivity, in thus reducing the prior exclusivity of enlightenment and travel. However this still does not deal with the idea of the alienation of labor, it just makes the system more of “a kinder gentler machine gun hand…” to quote the singer Neil Young.

What I took away from The Idea of Communism was that although the radical left (namely communist) movement is still relevant and active, the underlying theories within Marx’s ideology have yet to be realized. The argument for communism is still as relevant today as it was in 1849, however the same systemic problems are keeping it from replacing our current capitalist model (dare I say it) within my lifetime. I believe it is because Marx’s theory is so broad and intertwined with what we, the labor class, would think of our ideal world, that its realization is limited the same way our dreams of fancy are. However, in the same respect I do believe true communism will come to fruition sometime within the timeline of humanity, as it is the closest we will get to our evolutionary and societal apex by definition. This however does not keep the contributors in The Idea of Communism, from “rebranding” many strategies from the Lenin / Bolshevik revolutions, 4^th and 5^th internationals, as well other historical footnotes into current day equivalents. However this is my major quam with the collection, as the saying goes, “don’t beat a dead horse…” many contemporary leftist thinkers fall into the trap of just restating the same theory with modern example. However as it is, the current communist mindset has not prevailed over capitalism for almost 150 years. Not to say it is inferior, but maybe instead of following status quo, humanity could invent a theory that can use the basic elements of Marx combined with more focused contemporary mindset as that would be the best Idea of Communism.

[1]Zizek, Slavoj. The Idea of Communism. London: Verso, 2010. Print.

[2] “”The Idea of Communism” at Marxism 2010 (1/2) on Vimeo.” Vimeo, Video Sharing For You. 6 July 2010. Web. 22 Mar. 2011. <http://vimeo.com/13142973>.Web Video of confrence

[3] Žižek, pg.186

[4] Žižek p206