25 October 2011

A Nation Run Not By Shopkeepers, But By Con Men, Protection Rackets, and Swindlers

"And remember, where you have the concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

Lord Acton

Income inequality such that it suppresses the middle class is a practical policy problem for what I hope are obvious reasons of inadequate demand and economic stagnation.  As the US currently has one of the most extreme income distributions since the Great Depression it is currently a topic of renewed interest.

Mark Thoma has an interesting discussion of this here: Income Inequality Is Hobbling the Middle Class

But  in addition to this more practical discussion, Matt Taibbi brings out a key point in his most recent essay on the financial crisis. It is not so much the inequality per se that is troubling people, but rather the concomitant gaming of the system, the blatant cheating, that is making people angry.

"When you take into consideration all the theft and fraud and market manipulation and other evil shit Wall Street bankers have been guilty of in the last ten-fifteen years, you have to have balls like church bells to trot out a propaganda line that says the protesters are just jealous of their hard-earned money...At last count, there were 245 millionaires in congress, including 66 in the Senate. And we hate the rich? Come on. Success is the national religion, and almost everyone is a believer. Americans love winners. But that's just the problem. These guys on Wall Street are not winning – they're cheating. And as much as we love the self-made success story, we hate the cheater that much more."

OWS's Beef: Wall Street Isn't Winning – It's Cheating - Matt Taibbi

The perception is that the US has slipped from meritocracy to oligarchy, with the implications for long term growth and competitiveness of course. Oligarchies are quite often a study in stagnation and decline, plagued by idiot sons and frivolous dissipation of wealth and vitality. It is the deep capture and ravaging of the American dream by dishonest and dishonorable men.

But in what is nominally still a democratic republic, the rise of an oligarchy is a tearing of the social fabric with some serious long term consequences. And there will be a serious price to pay if dissent and efforts at reform are further suppressed.

If legitimate criticism and reform is stifled, rising domestic turmoil often results in a change of regime, or at least a shifting of power. We are seeing this in various countries across the world as the great empire totters. But sometimes the local bully boys are able to suppress domestic dissent, and so other interested but exogenous parties become involved. We most recently have seen this in Libya for example.

If the rest of the world acts first, and expresses its revulsion at the long endured abuses of the Anglo-American banking cartel, we may see a flight from a capital system gone rotten, with all the chaos and wealth destruction and death of innocence that this implies.

This is the most probable scenario for a hyperinflation that I can imagine.

"Turn where we may, within, around, the voice of great events is proclaiming to us, Reform, that you may preserve."

Thomas B. Macaulay