It is our hypothesis that a certain relatively small subset of people are predisposed through both nurture and nature to seek to monopolize the public economy by distorting the rules, in order to gain control over the many through the possession of key assets.
It is not a matter of need or survival or even rational economic preference; it is a pathology, a compulsion, an intense neurosis. We have seen this happen in large companies and in nations where fear and greed become the dominant forces of societal impulse. The coupe de grace is generally the propagation of power to idiot sons and assorted mediocrities and sycophants, although the inherent instability of the principals is not to be discounted as a destructive force. The Roman Empire, Stalinism, and the Third Reich come to mind.
This tendency is kept in check in a balanced system by peer pressure, strong cultural mores, and public laws and regulations which tend to suppress an assortment of unproductive and outright destructive impulses.
But when through whatever means the acquisitors gain an undue influence in the system then we have an enormous accumulation of wealth and power in the hands of a few, and a growing tension between sustainability and collapse. The concentration of power tends to increase the probability of uncorrected and self-propagating policy errors.
This is why the majority passes laws, sanctions, and reforms to prevent a collapse from recurring when the memory of the disaster and its causes is fresh in their minds. Over time the safeguards are weakened and overcome as the public grows complacent, and the cycle is repeated again as it arises from enduring quirks in the variety of human nature.
Inequality and the Credit Crisis
By Steve Waldman
It's a cliché, of course, that the 2000s are the new Gilded Age, that inequality in America is at levels not seen since the original Gilded Age, which you may recall was ended by a terrible depression...
In a way, the credit crisis comes out of a tension between the broad-middle-class America of our collective imagination and the economically polarized nation we have in fact come to be...
...Credit was the means by which we reconciled the social ideals of America with an economic reality that increasingly resembles a "banana republic". We are making a choice, in how we respond to this crisis, and so far I'd say we are making the wrong choice. We are bailing out creditors and going all personal-responsibility on debtors. We are coddling large institutions of prestige and power, despite their having made allocative errors that would put a Soviet 5-year plan to shame. We applaud the fact that "wage pressures are contained", protecting the macroeconomy of the wealthy from the microeconomy of the middle class.
The credit crisis will end, and life in America will go on. What we have to decide now is, when the floodwaters clear, what kind of country will be revealed. Peering down through the murk, I don't like what I am seeing.
I'm still very stagflation-oriented in my personal portfolio (precious metals, short long bonds and stocks), so the wage-price spiral demagoguing might be interpreted as self-interested. That said, no apologies. It astonishes me that even very liberal economists take comfort in the evisceration of wage-earners' bargaining power. Yes, it means that Ben doesn't need to hike, regardless of what commodities do. But what kind of economy are we building when we take the price of past mistakes out of future wage-earners' pay packets, while protecting the accumulated wealth of those who profited by erring?