The U.S. Command Economy?

The U.S. Command Economy?

The general rule for the use of the military is that it is better to keep a nation intact than to destroy it.  It is better to keep an army intact than to destroy it, better to keep a division in tact than to destroy it, better to keep a battalion in tact than destroy it….

The Art of War – Sun Tzu  (Translated by Thomas Cleary)

By J.M. Hamilton (2-1-15)

  

In regards Iraq, I guess no one in the Bush Administration bothered to read Sun Tzu.

The thought must have crossed my mind in 2008, in the midst of the financial crisis. The awesome power of the state, The U.S. Federal government, to protect and preserve vast sectors of the economy and major corporations, to save entire industries, and to pick winners and losers... first sparked the idea. And yet, having been a child of the cold-war era, and being raised on the tenets of capitalism... the idea, admittedly, seemed rather odd. Could the U.S. be a command economy, or at least be embracing some key features?

First a definition, as described from several resources, a “command economy,” (aka centrally planed economy), is an economy where government, rather than the market, determines what goods should be produced, and the price of such goods and services. China, North Korea, Cuba and the former U.S.S.R. are often held up as command economy examples. In short, the preeminent power of the state is used to determine what is produced, how much is produced, and the price of the goods and services produced.

In the following piece, J.M.H. attempts to explain how the U.S. may in fact, be a centrally planned economy (wittingly or unwittingly), or embrace some command economy attributes. Then move on to describe the industries that are planned and/or enjoy tremendous state backing and support; and finally, what a centrally planned economy means for Americans, the consumer, and our economy.

So in order to have a command economy, you need a central ruling body or political party. That’s an easy enough case to make, let’s examine the following.

1) As recently reported by Oxfam, the 1% own nearly 50% of all global wealth.

2) Aside from social policy issues, J.M.H. has been making the case for years, that we live in a one party state, with Dems and the GOP fighting each other to demonstrate who can best service the plutocracy. If the stock market is any measure, it looks like the Dems are winning.

3) SCOTUS decisions guarantee the ruling plutocracy are the government’s true puppet-masters, via McCutcheon and Citizens United. In short, our democracy is for sale, in a form of legalized corruption.

4) The amount of money flowing into each successive campaign cycle is both unprecedented and ever growing... much of it from anonymous sources. And neither political party has shown any interest in reining it in.

5) The Chamber and Business Roundtable hold uncompromised sway over the Congress and various government branches.

6) The relationship between government and the private sectors have become both blurred and symbiotic, with privatization of government activities and duties, and government spending making up 40% of GDP. Leading to waste, fraud, and a grossly mismanaged resource allocation.

In short, the nation is ruled by the plutocracy, so we have our central planning committee or single ruling body right here.  As with China, and the former U.S.S.R., not everybody within the governing body, or within the Plutocracy, is of one accord. But generally, as stated by Mr. Lawrence Summers to Senator Elizabeth Warren, one tenet holds basically true: Insiders don’t criticize insiders.

So if the U.S. has a core cadre of elite rulers using democracy as a façade, and politicians as a mask (maybe not dissimilar to China's elite ruling body), what are the key “planned industries” within our economy? Here, look no further than industries that are singled out for privilege, special treatment, tax breaks, government largess, have unimpeded access to politicians, are exceptionally concentrated, and that consistently, roll regulatory bodies and authorities. The following industries make that list:

1) The Wall Street banking cartel. There’s probably no other U.S. industry that receives unprecedented sums of government assistance than the Wall Street cartel. Whether it be outright bailouts, worth trillions of dollars (with no strings attached), or the fact that we have branch of government, The Federal Reserve, that is tacitly dedicated to maximizing banker welfare and inflating asset prices - there is no other industry that receives so much at the nation's expense. That this industry often works at cross purposes with the interests of its clients, Main Street business, investors, and the American public is no longer in dispute. In fact, it’s well documented. And yet, the Leviathan keeps moving forward, rolling back regulatory reform, and setting the U.S. up for the next crisis.

2) The Defense Industry. It’s no accident that the top government contractors all work for or supply the DoD and the Surveillance State.  It’s also no accident that the Pentagon has not passed an audit in years, and there’s little or no accountability within this industry. The revolving door between the military brass and executive positions at these major military corporations is on full display, and helps insure that there is no sustained criticism (The Pentagon has become little more than an advocacy group for war and the MIC). Quite to the contrary, at least one political party believes the U.S. must be permanently engaged in war, and plays the fear -card, constantly. Hence helping to insure that a bewildered and frightened American public never questions the gross fraud and negligence that is attendant within the military industrial complex. Lockheed Martin’s F-35 being the classic example. Our Congress not only kowtows to the MIC, but runs interference and heaps contracts upon contractors for weapons systems that are not needed. Offline budgets, black budgets, DoD budgets that are classified: What’s to hide? Apparently, a great deal and billions. The GOP likes to go after government assistance for the elderly, children and the indigent, but when it comes to welfare for the MIC, the sky is the limit.

3) Telecommunications and the Cable Industry. Grants of monopoly are handed out to this industry, like Halloween candy. And all the plutocracy demands in exchange are the communications records of every American with a cell phone, hard line, and/or computer. (Heh, if you are not a member of the plutocracy than you're probably a threat, or at least guilty until proven otherwise.) And the industry is all too happy to comply. The fact that it costs less than $10 a month to provide an internet connection, and our cable/internet bills spiral ever higher, shows just how insidious monopolies and cartels are to consumers, competitors, and other businesses competing for the middle class’ ever declining discretionary income. And yet the Congress and the regulatory bodies (Justice, FTC, SEC) are all too happy to approve combination and consolidation for the enrichment of the plutocracy that governs us all, at the American people's expense.

4) Silicon Valley, U.S. software developers, and Internet Companies. See Telecommunications and the Cable Industry above. Ever wonder why it’s so easy for your computer or phone to be hacked? Ever wonder why businesses and major corporations are hacked daily? It’s in no small part due to our government, the NSA, CIA and FBI, insisting that there be no encryption in the U.S., and that hi-tech companies build back door openings into computer programs, software, and hardware - for ease of government access.  (Moreover, internet companies, like Facebook and MSN, are forced to surrender client information to the Feds, without a warrant, etc.) These built in engineering flaws are not only accessible by our government, but may also be exploited by foreign governments, organized crime, or the hacker next door. That the NSA has had a hell of a time pointing out any major terrorist event that they have stopped by their actions, is beside the point. The symbiotic relationship between the government and Silicon Valley may in some ways be responsible for the billions of dollars in on-line fraud and theft; and through circular logic, one of the key reasons why we need the NSA, FBI and CIA. Karma has an ugly way of exacting justice, and because the Valley works so closely w/ the Nation’s top spies, foreign countries are increasingly cutting their ties, costing the Valley billions. Unfortunately, most American’s are so frightened that they are all too willing to surrender their privacy to these corporations and our government, or are simply, too oblivious to care. Our surveillance state in action, and your freedoms, civil liberties, identity and financial well being, up in smoke or well on their way.

5) Big Pharma - This industry is amazing. We are the only Western democracy that permits this industry to gouge consumers, the taxpayer and our own government, with monopolistic profits. Wonder why nearly 20% of our economy is dominated by Healthcare? Big Pharma plays no small part.  And yet, not content to help themselves to the contents of your life savings or looting our government, Big Pharma has also played its part in industry consolidation and tax inversions. Meanwhile shortages of critical medicines abound, and Big Pharma has become much more adept at extending the lives of patented medicines, and buying out competitors and initiating stock buybacks, than in developing new medicines. And where’s our Congress and government to stand in the way of Big Pharma’s predatory ways?  Owned by the plutocracy, you’re more likely to find our Congress playing lap dog and cheering Big Pharma on.

6) Big Ag.  Yes, nothing is sacred, not even the food that enters your mouth. From killing off the Bee population (the proverbial canary in the coal mine), genetically modified foods, pesticide and herbicide overkill, all the way to farm animals shot through with steroids and antibiotics (and inhumane science experiments conducted upon them), here‘s another industry where the ends always justify the means. And it’s one more industry protected by our government, as the regulators look the other way or allow the Ag industry to regulate itself.

7) Big Oil. For sake of time, I think it’s best to the let the industry and a recent J.M.H. piece speak for itself: Big Oil has got Your Back.

These industries are the players in our possible de jure or de facto command economy.  Noticeably missing from the list are manufacturing concerns, and I suppose we could place GM on the list, since the automotive industry has enjoyed a couple of bailouts over the years. But it seems that up until recently, most American politicians, and the plutocracy, had all but given up on U.S. manufacturing. Given free trade agreements, globalization, outsourcing, and private equity, manufacturing seemed all but done for.  Only the realization that a diverse economy, without too much dependence upon anyone sector for jobs and opportunity, caused our political leadership to re-evaluate manufacturing. That and the growing cost of labor within the BRICs, and inexpensive U.S. energy, have combined to cause industry to reconsider America as a manufacturing destination.

No, if I was to consider adding one more protected industry to the list, it would be Private Equity. An industry that is antithetical to all the best attributes of capitalism, that is laissez faire capitalism’s extreme. For all intents and purposes unregulated, private equity robs employees, fosters consolidation and monopoly, often cheats investors, and all too often leads formerly, perfectly healthy companies into bankruptcy. It is an industry that is the American dream’s darkest chapter.

So if America operates a command economy or exhibits many of the characteristics of a centrally planned economy, what does that mean for workers, consumers, opportunity, and the economy at large?

  

One of the more shocking revelations of the 2008 financial crisis was how dependent the one-percent are on the government for maintaining both their wealth and power.   In fact the one-percent have co-opted government and taken over our democracy, and in the process redistributed wealth from the 99%, and future generations, to themselves.  That these same elites often decry “socialism” for the "masses" and insist upon fiscal austerity, while helping themselves to a heaping plate full of government largess through deficit spending, wars without end/nation building, privatization of government, too big to fail institutions, free money from the Federal Reserve, tax cuts, the lack of regulation in key industries, and grants of monopoly…. Screams hypocrisy.

In the process many industries have metastasized into monopolies, oligopolies and cartels… in short, the crony economy, and perhaps a command economy.  Wall Street, the stock market, and stock analyst love cartels and monopoly because it guarantees profits.  But as I wrote in my last piece, Lombardi, Exceptionalism, and the Rule of Law, grants of monopoly, or gifting the means of production into a single private party’s hands, are little more than socialism by private proxy.  Once again, demonstrating the double-standard the elites live by.

There’s just one problem:  capitalism without competition – that is, bordering on a command economy -  leaves consumers, workers, investors and Main Street businesses to be preyed upon.  The aforementioned, the 99%, suffer: by paying higher taxes to subsidize tax dodges for the elite; paying higher prices to support monopolistic taxation; the 99% bears the unseen and delayed costs of the lack of rules, regulation and the contamination of our planet; and it is our children who will pay the price for deficit spending, a national debt that it out of control, and the machinations of Federal Reserve policy utilized to bailout the plutocracy.  And investors suffer through a lack of alternative investments and businesses with which to place their money.

Moreover, when wealth is redistributed to the 99%, it makes its way back into the economy, whereas the elite generally hoard same, or send their savings/government largess back to Wall Street (which has diverged from the Main Street economy's interests).

As a devout reader of National Review throughout much of the eighties, William F. Buckley’s magazine, rightly, used to denounce the rulers who stood upon the Kremlin’s walls during the May Day parades as little more than mafia and gangsters, and simultaneously, lamented that Russia's citizens were mere slaves.  A command economy is ultimately a highly dangerous thing, as the economy finally stagnates; becomes less responsive to consumer, worker and investor needs - due to the lack of competition; and moreover, results in serious resource dislocation.

Don’t take my word for it.  Examine the former Soviet Union, which has now been consigned to the dust bin of history.

It's no accident that the last thirty-five years have coincided with the rise of the plutocracy, middle-class diminishment, and greatly polarized wealth inequality.  It's just another symptom of a possible command economy.

Copyright JM Hamilton Publishing 2015