Bill Totten's Weblog

Friday, November 26, 2010

Far Down the Road to Oligarchy

by Ron Forthofer (November 18 2010)

I'm afraid we've almost reached a point of no return on the road to total domination by a small number of wealthy and powerful people. Throughout our history, 'we the people' have struggled to protect our rights and interests against attacks from a few elite. Unfortunately we have been losing ground in this battle, particularly since the early 1980s. We were then hit by the one-two punch of: (1) the financial sector gaining more influence on government; and (2) the religious-like devotion of many economists, politicians and pundits to the unregulated free market despite overwhelming evidence that it doesn't work.

The Financial Sector

James Madison and Thomas Jefferson strongly warned about the dangers of allowing banks to have control over our currency. For example, in an 1816 letter to John Taylor, Jefferson wrote:

I sincerely believe, with you, that banking establishments are more dangerous than standing armies ...

Another strong opponent of a national bank was Andrew Jackson. In his farewell address in 1837 Jackson said:

It is one of the serious evils of our present system of banking that it enables one class of society - and that by no means a numerous one - by its control over the currency, to act injuriously upon the interests of all the others and to exercise more than its just proportion of influence in political affairs.

Theodore Roosevelt's address to the 1912 Convention of the National Progressive Party strongly echoed Jackson's concern. He said:

The issue of currency is fundamentally a governmental function ... The control should be lodged with the Government, and should be safeguarded against manipulation by Wall Street or the large interests. It should be made impossible to use the machinery or perquisites of the currency system for any speculative purposes.

In 1913, despite Roosevelt's warning, government created the Federal Reserve in a flawed attempt to solve our financial problems. The name Federal Reserve makes it sounds as if the government finally had control of our monetary policy. However, the government doesn't control the Federal Reserve. In reality, a small number of privately owned gigantic banks effectively still control our currency.

Some recent events suggest that Jefferson, Jackson, Roosevelt and others were correct in their concerns about the effects of giving the power over currency to gigantic private banks:

* giving/committing $13 trillion to the bailout of Wall Street while providing relatively little for Main Street;

* establishing the budget deficit commission after Wall Street has gotten its trillions of dollars; programs that benefit the public will take severe hits while Wall Street will likely emerge unscathed; and

* the spending of billions of dollars by the few wealthy and powerful to influence the election outcome.

The recent terribly flawed financial reform legislation also strongly reflected the influence of Wall Street. On October 15th, Dean Baker provided a succinct analysis of the bill in a column appearing on Common Dreams. Unfortunately this flawed legislation was not surprising since Adam Smith had warned us about this possibility in his Wealth of Nations (1776). In his comments about the business community in general, Smith wrote:

The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

The Free Market

In November 2008, at the height of the financial crisis, Michael Skapinker of the Financial Times wrote:

The cry of "leave it to the market" has lost any credibility. This is the second time in less than a decade that the market has shown its inability to prevent corporate excess ...

The 2008 financial meltdown and the concomitant Great Recession are, unfortunately, only the latest in a long line of major financial crises. Since 1790 the US has experienced as many as 47 recessions including numerous major panics and depressions accompanied by terrible suffering.

Speculation by the financial sector played a major role in creating this volatility while decisions made by politicians and the courts also contributed. Increased deregulation and privatization of the economy as well as changes in the tax policies have played an especially detrimental role since the 1960s. Deregulation or lack of enforcement of regulations along with low interest rates allowed some in the financial, insurance and real estate sectors to commit crimes and/or to take huge risks that brought the world to the edge of financial collapse in 2008. Many of these policy changes and subsequent bailouts have also led to the transfer of even more wealth from 'we the people' to a relative few at the very top of the wealth ladder.

Our Current Status

Americans are legitimately outraged at the Bush/Obama bailout of the too-large-to-fail corporations in the financial sector while relatively little was done to: (1) prevent a future crisis; and (2) help ordinary citizens. As a result of past policies and the 2008 crisis:

* almost 44 million (one in seven) Americans live in poverty;

* about 27 million (one in six) workers are unemployed or underemployed;

* almost 51 million (one in six) Americans lack health insurance;

* about three million American homes will be foreclosed on this year, a slight increase over the 2.8 million in 2009;

* approximately one in four homeowners with mortgages owe more on their mortgage than the home is worth;

* the richest one percent of Americans received about 21% of the total income in 2008;

* the US inequality between the rich and the rest of its population is among the greatest among Western industrialized nations; and

* the US democracy has further been weakened.

Our situation is far worse than in almost all other industrialized Western nations. Is the control of our government by a relatively few wealthy elite acceptable? Isn't it past time to consider changes to the US approach?

Among the many groups working on these issues are: United for a Fair Economy, Move to Amend, and Americans for Financial Reform. Get involved and make a difference before it's too late.


Ron Forthofer, PhD is a retired Professor of Biostatistics at the University of Texas School of Public Health, Houston, Texas; former Green Party candidate for Congress and for Governor of Colorado.

Bill Totten


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