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Wednesday, September 24, 2008

Corporate Socialism

This seems like an appropriate week to blog about NY Times reporter David Cay Johnston's Free Lunch; How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill). The collapse of investment firms on Wall Street presents a rare populist moment. It is not necessarily a good time to write a blank check to the elites of the investment class.

On April 7, 2008, The Nation published a review of Johnston's book by Daniel Brook. He provides a succinct summary of the book:
Johnston's contention is an audacious one: the level of inequality and corruption in contemporary America puts us in league not with our putative economic peers, Canada, Europe and Japan, but with Brazil, Mexico and Russia, countries "in which adults have the right to vote, but real political power is wielded by a relatively narrow, and rich, segment of the population." And, as in these unequal "democracies," American elites routinely raid the public purse rather than rely on the free market to succeed. Since the "Reagan revolution," and under the guise of privatization, deregulation and "market-based solutions," wealthy interests have set up a system that Johnston dubs "corporate socialism," in which they succeed through monopoly, public subsidy and even outright theft rather than through competition. And this rigged system, Johnston argues, is what's driving the new inequality off the charts. "Subsidy economics," he writes, "is at the core of the economic malaise felt for so long by a majority of Americans."
Compared to what's being debated this week -- $700 billion in corporate welfare -- Johnston's anecdotes are small potatoes. However, his overall economic data is eye-opening:
...[Johnston's] analysis of tax data, which he recapitulates in Free Lunch, shows that it is not merely the poor and middle class who are being left behind. Even those Americans in the ninety-fifth and ninety-ninth percentiles on the income scale haven't received outsized economic benefits over the past twenty-five years. The only people leaping ahead in winner-take-all America are in the top 1 percent--and more specifically the top .1 and .01 percents.
Incidentally, this data might explain a recent Pew Research result reported in the December 2007 Atlantic Monthly-- "19 percent of the wealthiest third of Americans see themselves as have-nots, suggesting that financial security is sometimes in the eye of the beholder."

Johnston's book looks like it is well worth a look.

As for the $700 billion bailout package -- I'm pretty skeptical of such a plan emerging from the Bush Treasury Department. Think about the administration's post-crisis record -- 9/11, Iraq, Katrina -- and then layer that with Bush economics, secrecy and outright deception. These guys typically provide cover for "looters with limos".

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