Tag Archives: capitalism

Cat lady economics

"Job creator."
“Job creator.”

P.T. Barnum would be so proud:  One of the biggest con jobs ever successfully sold to a maddeningly enormous percentage of the masses in Western democracies, particularly in the United States, is that “tax cuts for the rich create jobs.”  It is dispiriting to see this nauseating mantra repeated as fact by low-income individuals who have bought in to the false promise of a country of “haves and soon-to-haves” – that is, the outright lie that everyone can be rich if only they work hard enough (shouted loudest by those who have usually fallen into their fortunes through accidents of birth).  (It was also fascinating to watch conservatives sit stone-faced on their hands as the President promoted the diametrically opposite view in last night’s State of the Union.)  I’m not an economist and I don’t intend to fog up the essence of my argument here with a lot of facts and figures, because the premise gets lost among the spreadsheets and pie charts.  It’s a more basic question, one that goes to the nature of human beings and their capacity for materialism.  Yet it proves just as solidly that supply-side economics will never, ever work.

The presidential election in 2012 offered Americans a stark choice of an incumbent president who had come from a poor family and worked his way up to the highest office in the land – the prototypical American dream, if you will – versus a natural born plutocrat with a silver spoon wedged firmly in his nether regions who dismissed almost half of the public as irredeemable and irrelevant moochers; and, thanks to unprecedented advertising spending and voter intimidation in key states, they came very close to picking the latter.  A remark from President Obama about successful businesses needing to use public infrastructure paid for by the collective taxes of the people was taken out of context and used by the GOP as their rallying cry.  Mitt Romney’s entire presidential campaign, characterized best by the video in which he railed about the “forty-seven percent” to fellow travelers, was trying to assert that the wealthy and successful were singular paragons of virtue, economic growth and American spirit, forever being harassed by a tyrannical, over-reaching government determined to claw away every preciously earned penny and spend it freely on undeserving deadbeats.  (Hardly a rousing “we shall overcome” or even “I like Ike.”)

Basically, Republicans tried to claim that Democrats were demonizing success, sort of a “don’t hate us because we’re beautiful” whine from the country club set. What’s ironic is that on any list of the most admired people in the world, it’s rare to find someone whose net worth is anywhere south of at least a few million.  Rich and famous celebrities are worshiped.  You’re hardly seeing a climate where the likes of Brad Pitt and Katy Perry are dragged from their mansions and paraded naked through the streets by the bedraggled masses.

Even in the aftermath of Romney’s humiliation at the polls and in the new congressional term, Republicans and their sympathizers insist that if we just keep giving rich people more money, well, I don’t really know what the endgame is supposed to be other than giving rich people more money for its own sake.  Perhaps the thought is that if they have $400 million instead of $300 million, that extra $100 million will simply fall from overflowing wallets like proverbial pennies from heaven, as opposed to being stashed in an offshore tax haven.  Even if we try to apply some logic to this argument and suggest that a more-rich person will be more inclined to use his windfall to start a new business that will hire some other folks, who’s to say that business will be successful and produce a product that will resonate and guarantee that these new jobs endure for decades?  It’s lining up all one’s fiduciary chips on a single roulette number and trusting in the decency and intentions of the person you’re enriching.  Communism never worked as Karl Marx intended it to because it failed to account for human nature – if you read The Communist Manifesto, Marx’s ideal state sounds utopian, but it can’t function unless everyone is really, really, REALLY nice to one another – a point lost somewhat on every oppressive Communist world leader ever, which is pretty much all of them.  One might overdose on the irony of capitalism failing for the same reason.

See, here’s the thing with wealthy people.  They may become wealthy because of hard work or, more cynically, because they have a famous surname, but they stay wealthy because they don’t spend their money.  They hoard it with the same obsession and zeal as the sad cases you see every week on A&E who have houses overflowing with old magazines, pieces of broken furniture and used diapers.  And the reason why they hoard it is because they are paranoid – scared to the depth of their bone marrow – that the unwashed barbarian hordes at the gate are coming to take it all away.  Perhaps they’re mindful of the tragic tale of Jack Whittaker, the West Virginia Powerball winner whose prize of $315 million led to him being sued over 400 times by greedy opportunists, the loss of his daughter to drugs and the last of his money to her dealers.  (Whittaker is apparently now broke and wishes in hindsight that he had torn up his ticket.)  But it’s the quintessential human problem of attachment to material things that renders the “more tax cuts for billionaires!” argument utterly unworkable in the real world.  Giving more money to a wealthy man and expecting that act to benefit the economy is like giving a crazy cat lady more cats.  Is the cat lady going to take her new surplus felines and hand them out to deserving orphans who’d love a little kitty of their own?  You can judge the chances of that based on the smell of her house.

We do so love our possessions, and it is against our human nature to share them.  Sure, we donate to charity, we give away old clothes – but we keep the really nice stuff for ourselves.  We’re programmed to.  Buddhism correctly equates attachment with unhappiness – it even turned Anakin Skywalker into Darth Vader.  How else can one explain the legions of sour-faced billionaires like Joe Ricketts, Sheldon Adelson and the Koch Brothers who decided to open up their overflowing coffers not to improve the lives of their fellow Americans but instead into endless ad buys for the party that was promising to make things even easier for the likes of Joe Ricketts, Sheldon Adelson and the Koch Brothers?

It’s estimated that trillions of dollars in cash are missing from the global economy because they are being hoarded by corporate entities and others who are waiting for… well, it can’t possibly be the Rapture or the Mayan apocalypse since those both happened last year and we’re all still kicking.  This is the result of over thirty years of tax reductions by conservative and centrist governments clinging to the ideology of supply-side economics and still claiming despite a repeated pattern of failure that tax rates for the top should be reduced even further – since the growth they anticipate from cuts already in place isn’t happening (roughly the equivalent of saying that my house hasn’t caught fire yet so I should keep trying to light the carpet).  We also see pushes for right-to-work laws in multiple states and even Canadian provinces to cripple unions, force wages lower and boost corporate take-home higher.  This is not a plan for economic growth; it’s a plan to concentrate wealth into the hands of a rarefied few so they can continue their hoarding ways.  They forget the lesson of Henry Ford, who knew that his employees needed to be able to afford to buy the cars they were making in order for his company and indeed America to prosper.

“I never got a job from a poor person” is one of the most common retorts – as if one expects Uncle Pennybags and Scrooge McDuck to stroll down Main Street handing out employment contracts while bellowing like Oprah, “You’re getting a job!  And you’re getting a job!”  Lower and middle income workers are actually the people who generate these jobs.  Their spending is economic rocket fuel.  They’re the ones who buy, on a consistent and ongoing basis, the products that other workers make, necessitating that those jobs endure.  And when you earn less, you save less.  Because a higher percentage of their income is devoted to basic necessities, they can’t afford to stash it away, to hoard it in the Caymans and consequently away from the world’s economic engine like the world’s Romneys.  And they spend that money in their hometown or close to it, not on weekend jaunts to France on the private jet.

It continues to absolutely boggle my mind that any free-market conservative would be opposed to socialized medicine, given that absent the need to divert a huge chunk of their take home into monthly medical payments, people are more likely to spend that cash on clothing, furniture, new tech gadgets, you know, stuff that stimulates economic growth rather than the economic dead zone of a bloated insurance company’s bank account.  The same goes, and perhaps even more dramatically, for Social Security, as seniors aren’t likely to put much of their income into savings given they are in the autumn of their life.  They are more likely to spend that monthly cheque on things that require other people to work to make them.  What would “stop the motor of the world,” as the misguided Ayn Rand put it, would be a massive majority of the population unable to afford anything – not a bunch of billionaires throwing hissy fits and going away somewhere to sulk.

A rich guy may have vast reserves of cash, but he still has limited individual needs.  He is still only one mouth to feed and can only drive one car at a time (and can live in only one house at any given moment, even if he might decide to purchase six or seven more for kicks).  Is it not better to have a nation of millions who can all afford to buy food and a car and a home, thus ensuring robust employment for those who produce food, manufacture cars and build houses?  They’re the ones who need their tax burden reduced.  They are the real job creators – a rich man can start as many businesses as he likes, but if lower and middle income people aren’t buying what he’s selling, the businesses will fail and the jobs will disappear.  Ultimately, there will never be enough rich people to support the global economy on their own, because the one percent have no interest in doing so – they’ve proven that they want to keep the treasure for themselves, eternal Buddhist misery be damned.  And that’s why giving them more and expecting them to turn into Mother Teresas, and consequently expecting the economy to become a roaring prosperity factory, is a fatally stupid idea.

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Quis custodiet ipsos numeros?

An emergency board meeting in Margin Call.

Margin Call, written and directed by J.C. Chandor, is a 2011 movie about the 2008 financial crisis that stars Kevin Spacey, Paul Bettany, Jeremy Irons, Demi Moore, Stanley Tucci and Zachary Quinto (who also produced).  It features a topical storyline, some strong, subtle performances (particularly from Irons and Tucci), interesting characters and key ethical questions to be asked about the spiritual worth of the pursuit of money.  It is also somewhat difficult to follow if you do not have experience in high finance.  Characters drop references to commercial securities, asset valuations and market fluctuations so fast, without pausing for a breath to catch the audience up, that you almost find yourself wishing for subtitles.  Even when characters make jokes about not being able to understand what they’re looking at, and plead for facts to be explained in plain English (or as Irons says at one point, as if one is speaking to a small child or dog), what follows remains untranslated biz jargon.  Cobbling together what you do comprehend, you conclude that a major investment firm has gotten too greedy and has purchased too many high-risk assets that, due to changes in the market, are about to become worthless, necessitating a massive pre-emptive sell-off that will, in itself, precipitate a further worldwide decline, but may, it is hoped, save a portion of the firm.  (I hope you got all that because I’m still trying to figure it out.)  The moment this becomes clear is when Irons puts it into colloquial terms, declaring, “The music is about to stop and we’ll be left holding a bag of odorous excrement.”

One cannot help but be reminded of the Star Trek trope where one character proposes a long technobabbling resolution to a crisis, summed up by someone else with a much simpler metaphor:  “If we reconfigure the deflector dish to emit a synchronous stream of alpha-wave positrons along a non-linear coefficient curve, we might be able to produce a stable gravimetric oscillation that would divert the asteroid’s course.”  “Like dropping pebbles into a pond… make it so!”  As tiresome as this became, it was done for a reason.  When setting any scene in a foreign environment – be it another country, another world or simply an exotic office – the writer has to walk a tightrope between being truthful to the environment and servicing the demands of drama.  The audience has to be able to relate to what’s going on in front of them, or it might as well indeed all be playing out in Mandarin Chinese.  Yet you don’t want to dumb things down for mass consumption, and you can’t succumb to the dreaded “As you know, Bob” epic fail:  characters stopping to explain things that they already know, and would have no reason to discuss given the course of their day.  If you’re an accountant, are you going to spend any time explaining to your veteran colleague what a trial balance is?  Is Alex Rodriguez going to pause mid-game for a five-minute exegesis with Derek Jeter on the infield fly rule?  Nor does it make any sense for these experienced brokers to sermonize on the basics of brokerage.  Usually a writer gets around this by introducing a “fresh-faced intern on his first day” who can ask the “business 101” questions on behalf of us dummies watching.

There are no interns or other such clichés in Margin Call, which chooses not to explain its dialogue in digestible nuggets for the masses.  Characters in this glass-enclosed world debate, ruminate, decide what they have to do and proceed with their financial chicanery, complicit in what may turn out to be their own destruction.  And after scratching your head for an hour and a half, you discover that what is sneakily clever about Margin Call’s screenplay is how it turns the incomprehensibility of its subject matter into a revelation about its subjects – the wheelers and dealers of the Wall Street world, men and women who are as much prisoners of an impenetrable capitalist system as those of us who can scarcely be bothered to look at our mutual fund statement every month.  No one understands this stuff, not really; they just want it all to work seamlessly and invisibly to make them rich, which is part of what makes the system so vulnerable to collapse.  Depressingly, here in the real world, four years on, the same cycle of greed has circumvented the installation of proper safeguards to ensure that these mistakes are not repeated.  It’s too complicated, no one really gets it, they can’t be bothered, it’s trivial, that’s the other guy’s problem, the market will regulate itself as it always has.  But the genie is long out of the bottle.  In a moment of insight, Jeremy Irons’ character judges this world thus: “It’s just money; it’s made up. Pieces of paper with pictures on it so we don’t have to kill each other just to get something to eat.” 

The problem is we are killing each other over these pieces of paper – we are letting the numbers control our lives, and as Margin Call demonstrates, no one is truly in control of the numbers.  It’s all gambling, and as any experienced gambler will tell you, no matter how well you play, in the end the house always wins.  I’m not sure who “the house” is in this case, but I’m fairly certain that it isn’t us.