It Is 1% Capitalism That Is The Problem

It is NOT the “best economy ever” acquired at the cost of keeping unions weak and the environment degraded, it is not Trumpism that isn’t working for working people. Are there not people who want to work, and cannot find a job? Due to the peculiar statistics about employment and unemployment, we don’t even know how many millions of them there are.

No, it is not Capitalism that is creating such horrible conditions as the one in which people in the upper and middle classes die by overwork, and the poor die horrible deaths for lack of work.

It is the 1% Capitalism.

It is economic inequality that is the rot at the core of our lives.

I should qualify that. In our heart of hearts, we common mortals know that. Even card-carrying members of the One Percenters, from Warren Buffet down, know that the problem is economic inequality.

It is the rear guard composed of economists who do NOT know that.

I should qualify this, too. The economics profession bifurcates. Some say that inequality is a Law of Nature about which there is nothing to do; some even say that inequality is GOOD for us, otherwise, we would not have—what? The “economy”? Many do not go that far but certainly, maintain that inequality is good for GROWTH.

No, I should qualify this too. Even card-carrying members of the economics profession know that inequality is the rot at the core of 1% Capitalism. Inequality is the tree; 1% Capitalism is the fruit.

Indeed, the literature produced by economists on this topic uses untold terabytes of data. I feel the pain of computers groaning under that weight.

Trouble is, this brave phalanx of economists searches for inequality EVERYWHERE—BUT IN THE ECONOMY.

Thus, the spread of pixie dust that obfuscates the reality. Some economists, aided and abetted by sociologists, even blame either the character or the intelligence of the 99 Percenters.

Enough already. When will economists look into the economy to find the sources of inequality?

Trouble is that if they look into the libraries of mainstream economics or even Austrian economics et hoc genus omne, they cannot find the answers. They can only get confused.

Here is the literature that they should absorb: First, a paper written by Benjamin Franklin, yes the same Benjamin Franklin who instigated the War of Independence—and helped us win it, only to lose it to Alexander Hamilton, who created the Bank of the United States on the model of the Bank of England, whose requests had created the need for the insurrection of the Colonists in the first place. 

Yes, it is Benjamin Franklin who worked indefatigably for the proclamation of the United States Constitution in whose Article 1, Section 8, we find that members of Congress, the representatives of the people, have the (implicitly exclusive) power to “coin Money” and “regulate the Value thereof.”

Not only Oresme, the writer of the first treatise on money in the 14th Century, the creator of Gresham’s Law that bad money drives good money out of the economy by hoarding it; it is not only Oresme who declared that “coinage belongs to the public, not to the prince.” Even Adam Smith believed that the effective control of money and loans by an independent, Central Bank would create an institution that could promote the fortunes of those who were charitable (the sober people) while penalizing/neutralizing those who were greedy (the prodigals, projectors, and imprudent risk takers).

Did not Adam Smith also say: “All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.“ Is not this streak of Adam Smith’s thought kept under strict wrap?    

The second set of literature and commentaries to absorb concerns Progress and Poverty by Henry George.

The third set of literature is the output of Louis D. Brandeis.

The fourth set of literature can be found in and about some of the books of Louis O. Kelso, especially his delightful, extremely important essay titled “Karl Marx: The Almost Capitalist.”

What will economists, moralists, and the literati find in this short literature?

They will find the four horses of inequality, namely:

  1.       Low taxes on land and natural resources foster vast land holdings;
  2.       (Legal) appropriation of capital appreciation that ought to belong to the creators of wealth grows into vast accumulations of real and financial wealth in the hands of the few;
  3.       The concentration of national credit in the hands of prime dealers, rather than its judicious dispersal among the people who are the ultimate creators of the value of our national credit, generates an imbalance whereby, beyond the satisfaction of needs for real wealth, the few accumulate financial multiples of zeros, while the many starve; and
  4.       The practices of the Pac Man Economy give rise, not to internal harmonious growth, but to zombie corporations that are “too big to fail.” These ventures must be allowed to fail—if they fail.

How to tame these horses? Well, the solutions roll out of this list by themselves:

       A.    Raise taxes on land and natural resources;

       B.    Use equity sharing programs;

       C.    Create money (i) only to fund the production of new real wealth, not financial assets; (ii) issue loans to qualified people and corporation with ESOPs, cooperatives, and public entities with power of taxation so to assure the repayment of the loan received; (iii) issue loans at cost;

       D.    Let corporations be free to grow internally as large as they are able to, but sternly prohibit the PacMan Economy: growth by purchase; external growth by mergers and acquisitions.

Sternly apply these four policies, and in ten years you redress all the evils of inequality; you do not beg one cent out of the rich; you deflate the power of politicians to take economic decisions for us.

Disclosure: Carmine Gorga is president of The Somist Institute and a former Fulbright Scholar.

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Gary Anderson 3 years ago Contributor's comment

Great article, and thoughtful. Certainly we are failing where China is succeeding. That communists can run capitalism better than the capitalists is certainly disconcerting. But it shows the weakness of letting the 1 percent write all the laws. Belt and Road is proof of what I say:

Doug Morris 3 years ago Member's comment

Couldn't have said it better.