A Case for Economic Equity and Long-Term Growth

Framework: Examine macroeconomic policy issues as well as the theoretical assumptions underpinning their conclusions within a political Liberalism framework that ensures and upholds the democratic values of liberty and equality inherent to the constitution. The complexity of economic development requires a holistic empirical approach that accounts for the historical, political, sociological, and business factors contributing to the makeup of society when crafting and recommending economic policy.

Overview: Economic growth is the aim for any society. Inequality is a product of increased bargaining power resulting from increasingly powerful institutions in the business, financial, and governmental sectors. Research has repeatedly confirmed growing inequality globally and domestically. Inequality, manifested as widening income and wealth disparity, contributes to domestic and global account imbalances, consumer debt, and economic stagflation, i.e. inflation and unemployment. In addition, inequality is linked to key social variables such as political stability, civil unrest, democratization, education attainment, health and longevity, and crime rates. Greater economic equality always results in greater long run economic prosperity for the whole.

Thesis: Bargaining power inequalities causally contribute to economic and socioeconomic inequality due to path dependency, organizational inertia, and habit formation. Bargaining power inequalities increase proportionally with capital accumulation, concentration, and centralization. Restoring bargaining power will rectify financial and labor market imperfections and spur economic growth.

The Problem

  1. Increasing debt, unequal capital accumulation, stagnating wages, and increasing inflation are responsible for the steadily rising economic inequalities experienced the past several decades. The habit formation of conspicuous consumption has compounded the impacts of income inequality.
  1. Inequality has deleterious effects on social well being and long term economic growth, and is the source of a host of cultural ills, affecting education, healthcare, political corruption, etc. It also affects entrepreneurship, creativity, and technological innovation in the long run.

The Cause

  1. Historical monetary policy, financialization, and financial liberalization (deregulation) have directly contributed to exacerbating economic inequality by negatively affecting business cycles through the misdirection of short term economic incentives and failing to consider the long-horizon. In addition, credit market imperfections, due to asymmetrical preferences and institutional constraints, causally contribute to inequality, in both physical and human capital accumulation.
  1. Bargaining power increases with capital accumulation, concentration, and centralization both domestically and globally, establishes organizational inertia in business and legal exchanges, and further compounds the effects of inequality. Avoiding full employment decreases labor demand, in turn decreasing wage bargaining power, leading to wage stagflation.

The Solution

  1. Increasing economic equity yields the highest long term economic growth, improves social well-being, facilitates creativity and innovation, and empowers society to resolve its cultural ills.
  1. Economic equity can be achieved by restoring bargaining power, regulating financial investment activities, incentivizing real-asset investment, and implementing a single structured tax policy on the wealthiest.

A Prediction

To pay off our $15.5 trillion national debt the government will continue monetary expansion and quantitative easing, i.e. printing money. Inflation will rise. Prices Increase. Income/ real wages will stagnate and unemployment will increase as businesses look for ways to cut costs. Since businesses possess bargaining power, wage labor markets will suffer. The cost of living will be so great that people will be forced to reign in consumption and cut spending. If you have debt (financed by wealthy private domestic lenders), you will have difficulty paying it off because cost of living has left you with less money to live on. If you can’t pay it off and file for bankruptcy, they will not only repossess your assets, you’ll still be in debt, thanks to recent revisions in Chapter 7 and 13 Bankruptcy laws. What’s left of the middle class will continue getting squeezed until the income disparity is so large that poverty will be the norm. Meanwhile the wealthy will get richer as they continue cashing in on your debt.

A word of advice: get out of debt, fast.

Now, I have to ask myself: if income drops and consumption decreases, and if credit and loans are more difficult to obtain, what will sustain the domestic demand that drives economic growth? Simplified: if 90% of the country has no money, how will they buy things, and how will businesses make money?

Data indicates that our GDP has continued increasing and is back to pre-recession rates.

What if I said GDP is a worthless measure of the economy? What about exponential growth in inequality? What if I said real wages were a better determinant of economic prosperity and success?

The Great Dichotomy: Passionate Power

Random musings.

Money to get power, and power to guard the money.”
~Medici family motto

Dichotomies are interesting. Many are none other than existential paradoxes: mind and body, thought and matter, possibility and necessity, spiritual and physical,  and the list goes on. Kierkegaard, as well as Nietzsche and other agents of enlightenment, was a literary guru when it came to expounding upon how to live with these irreconcilable realities. Over the years I’ve learned to cope with the resulting blindness of these realities, the otiose character of life and the recondite disunion of body and soul. I’ve compromised with myself and learned to live with one eye pointed inward and the other pointed outward so as to balance introspection and aspiration.

In recent years I’ve faced a dilemma of deciding what to do with my life and career. It’s not like I didn’t see this crisis coming, but I guess I didn’t realize how many times I would be wrestling with my conclusions and convictions. Despite the temporary setbacks and failures mottling my youth, I’ve orchestrated my education beautifully over the years, exploiting a multitude of disciplines of thought and growing ever cognizant of how achievement is actualized. I’ve gone to great pains to realize the context of my condition and the contingencies of my aspirations.

Out of my experience grew two concentrations of study, economics and philosophy, each representing the broader dichotomies encompassing life. One satisfies my intuitions about what I perceive other people to value, the other regards what I value in my heart. I’ve tried to reconcile these over the years and explain why this dichotomy exists, whether a balance can be achieved, or what direction I should favor. For a long time I decided to refuse to sell out. But this clashed with the omnious system that I would face upon entering the workforce: success seemed tantamount to abiding to the myriad of expectations laid out by others.  As I have no trust fund to lean on for support, no assets to buy my way into fortune (compounding investment: you must have money if you wish to accumulate more money), I faced the reality that no upper echelon would endorse my musings, my art, my thoughts, unless I belonged to them, to their network or, by chance, satisfied their criterion of worth.

The citizen of the world in me refused to conform to the ‘system’, to the authority that dictates standardized achievement and propagates worldly values. The autonomy within me bucked as I studied philosophy and developed the tools and methods for critical inquiry, tools I used to ridicule the backward nature I learned to see in the world. The pragmatic element of my spirit recognized the utility of conformity and uptook various preoccupations that would fashion my mind according to them, such as the study of economics and finance.

But I ask myself: what does it take to be successful? I always like referring to the context in question. I’m American. I live in a ‘democratic’ country where the few rule the many. The few in this case are not the parasitic politicians (although in many cases, when it’s convenient, they are one in the same). The politicians are figureheads, merely the arm or scepter of power, not the head of governance. The true source of governance and power resides in the wealthy, the capitalists, the business owners, the stock holders. These are the greats that arbitrate the economic and political atmosphere. They embody the will to power. They pass the laws, set the wages, orchestrate the commerce, conduct the symphonious marketplace we’re lead to believe is free and open. The current sentiment is that if governance is left to the people, we’ll be in a real mess. The populous is simply a bewildered herd, uneducated and incapable of self-rule. (The Wagner Act of 1935 was the last real effort of the masses to mobilize. Since then these efforts have been squashed. Unions are ‘evil’ and communist.) This is why we live in a ‘democratic republic’ where we elect a small group of ‘leaders’ to instruct the masses on which policies they should live by.

To be successful you must be a sycophant. More specifically, you must possess utility for those in power. If you cannot help these people achieve more power, you are worthless and will amount to nothing more than a cog, expendable and interchangeable. But the wealthy will not extend a job or opportunity to just anyone with ample capacity and a strong will. No. They must be familiar with you. You must possess some wealth, influence, charisma, intelligence, talent or power that they can leverage for their own gain. Posterity is as empty as truth. Rationality is an instrument of the powerful: they dictate the rules of the game, the vernacular, the premises and logical structure of your success.

“All things are subject to interpretation whichever interpretation prevails at a given time is a function of power and not truth.” (Nietzsche)

Rationality is a function of motives, of intention. Pin-point desires and motivations and you can construct a cathedral of reason to leverage against those in power to mutually achieve independently contrived ends.

The questions that have wracked my mind most over the years: Do I follow my heart or my mind? Do I follow my passions or my prudence? What it’s come down to is that, given the current state of affairs, given my context as a young American, passions are prized only in youth, as is freedom. With the coming of age what is most prized is security, with the passions left to fantasy much like the irrealism of dreams are left to enamoring vagaries. We discard our passions and convictions, our fantastical visions of grandeur for a better world, in favor of a ‘realism’ scented with a dark cynicism that dispels illusion, that acquiesces under the ‘system’ that we obey out of sheer necessity grown from our will to survive. What has been trampled is our will to power, but it is never too late to revive this urge.

The artists, when they are not lining the capitalists pockets with profits, are simply muses in the most passive sense of the term. These artists are no longer concerned with inspiring as much as they are fixed on entertaining, or ‘amusing’, for their agenda is the same as the capitalists: money. They render the audience as docile and facile as possible, getting them in a blurred frenzy, caught up in emotion, totally distracted from the realities that oppress their sad existence. The poorest, the most impoverished left with only their intangible dreams, love these entertainers the most. Since they cannot live through possessions and materialism they escape through fantasy, artificial emotions induced through hollow emotives.

I’ve decided I want to sell out, for a time. I want to master the system so I can one day create the system. Considering my background, I’ve played my cards right up until now: the best university, the best internships, solid degrees, great grades. What is necessary now is to capitalize on these achievements instead of forfeiting them for the preponderances of my heart, the longings of my spirit, the existential conundrums I unravel in my reflections.

What I need to do is exploit the source of power for my ends: finance. I need to get into the industry where all the wealthy have a mutual stake. Wealth is the common denominator of power. Investment banking, wealth advising, asset management.

I need to toss these ephemeral thoughts about passion, about right and wrong, about selfless creation, to the garbage. They are fruitless. If I want to succeed, I must capitalize on my strengths: people skills, smooth talking, will-power, vision, charm, intelligence, good nature, pleasant appearance. I can be obedient. My rebellious nature was resistant to obey arbitrary authority, and my attitude throughout school and to my superiors proves this. But this needs to be corrected if I am to succeed and dominate. I must fawn these superiors in order to advance. There are many who wish to succeed, but only those who stroke the ego’s of those holding the keys to power will allow be to ascend to their true potential. I look around me and I see so much talent. Young automatons do everything right, except they haven’t a clue that doing everything right has a ceiling. You must not only serve the interest of your superiors, you must also create value for them, you must learn to hijack and supplant their vision with yours in order to aid them in their accumulation and concentration of capital. In this way achievement is guaranteed.

Morality does not exist. There are no facts, only interpretations. You cannot have a universal moral conscience as a businessman, as a ruler of wealth: only a fabricated justification that accepts the inequality of man as a rule. Nietzsche said, “The reasons for which ‘this’ world has been characterized as ‘apparent’ are the very reasons which indicate its reality; any other kind of reality is absolutely indemonstrable.” Those in power dictate these reasons. Their are the moral clergymen.

It’s interesting to consider the influence of media control. The media is the mouthpiece of the powerful. As Chomsky said in his book Media Control, “Propaganda is to democracy what the bludgeon is to a totalitarian state.”

Who rules the world? The powerful, the elite. These are the American ruling class. We elect proffered politicians which have been paid for by these elite with the single agenda of taming the bewildered herd, of keeping the masses complacently compliant.

Slavery was replaced by share cropping, which has been replaced by credit and loans: all of these forms of debt rob the citizens of equality, life and liberty, and it’s legal. Bankruptcy laws. Capital gains taxes. Trickle down economics. Sub-prime mortgage lending. Failed education reforms: No child left behind. The war on drugs. The rise in pharmaceutical psycho-therapeutics. Currency manipulation: Coinage Act of 1972. Foreign wars and fear mongering, communism, creating enemies like Russian and terrorists as a means of keeping the populous paralyzed and fearful, of keeping their attention turned outward instead of inward. All creating fear. All manufactured to suit the ends of the elite. All propaganda.

Truth and lies are one in the same. They condemn or praise according to which subjective end you are most vested.


Aging and Poverty: Longevity and Wealth

So I e-mailed a group of my more thoughtful and opinionated friends the following link:

DNA test links ageing and poverty: Scientists in Glasgow develop a new test of the ageing process, which confirms it is linked to social factors.

They responded to the article back and forth in typical jesting fashion (see below). These are my abridged thoughts:

I’d like to add my psychoanalytic interpretation: In the American capitalist culture, wealth and materialism are some of the most prized values. The failure to achieve success in their acquisition, as typified by the vast majority of people, may be the cause of the depression and anxiety we identify as being so prevalent.

Think about it: If you existed in a culture where the value of a person was measured in terms of wealth and material possessions, and you lacked these things, what would that do to an individual’s psyche? My guess: it would result in a profound neurosis, something like the collapse of the ego, due to the failures to live up to these societal indicators of value. The duress of this failure would undoubtedly cause a physical stress to manifest in all sorts of ailments.

Of course, our society doesn’t only see the value of a person in wealth and material accumulation, but mainstream media and pop-culture definitely over inflate how important these values should be perceived. Depending on your cultural influences, anything could cause a neurosis like depression if you were to fail to live up to a societal standard of value and success. Most other cultures value family, community, altruism, intelligence, religion, etc. In some parts of China culture academics seems to be the trump value, in South American cultures we find family, in Middle Eastern cultures we find piety and devotion. The list goes on. Failure to live up to these values in their respective culture would be a major blow to the ego.

My point is this: in a culture that emphasizes values such as wealth that inherently operate as a result of scarcity, it’s no wonder we have so much ‘mental illness’ such as anxiety and depression. It is impossible for everyone to possess a value that by definition is reserved for few. Yet, capitalism relies on our desire to live out this fantasy in order to consume and possess by any means possible, even if it means selling ourselves as slaves to debt.

The remedy exists in realizing that these values are culturally dictated and that your value as a person can and should be self-generated and dictated from within; and this is by no means an easy task. We navigate our world through symbols and the symbolic meanings attached to them are typically inherited from our culture: community, family, peer group, etc. It’s extremely difficult to overcome this conditioning, and I’d say that only the most genius in a society ever successfully create a system of values and meanings that are original to them and them alone.

I’ll end by saying that stress is a major cause of physical aging. The more money one has, the less one has to worry about. You may argue that accumulating that wealth may cause even greater stress, but I’d defer to a Bible verse to counter: “For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs” (1 Timothy 6:10).

Now, I’m not a religious person, but I mine for wisdom where I can find it. Having money and loving money are two different animals in my book. If you can accumulate money without getting absorbed in a romance with it, I believe you will not only live longer, but you will live happier!


Continue reading “Aging and Poverty: Longevity and Wealth”

Alfred Marshall and the Growth of Wealth: A Short Microeconomic Analysis of Wealth Accumulation

Alfred Marshall was a pioneer in economics, even by today’s standards. In 1890 he published Principles of Economics which, compiled from years of study and contemplation, proved to be his magnum opus on economic thought. The work was so fastidiously compiled that it served as a standard in which all economic thought over the next century would respectfully consider. This essay will delve into the concept and history of the growth in wealth. A brief outline of Marshall’s descriptive analysis of wealth accumulation will provide a basic framework that can be used for comparing Marshall’s thoughts to that of other economists.

Continue reading “Alfred Marshall and the Growth of Wealth: A Short Microeconomic Analysis of Wealth Accumulation”