Billionaires & the Rise of Socialism

Billionaires & the Rise of Socialism

Surveys are showing overwhelming support for raising taxes on top earners, including a new POLITICO/Morning Consult poll released Monday that found 76 percent of registered voters believe the wealthiest Americans should pay more in taxes. A recent Fox News survey showed that 70 percent of Americans favor raising taxes on those earning over $10 million — including 54 percent of Republicans.

-       Soak the rich? Americans say go for it,  Politico

By JM Hamilton (2-9-2019)

Wow, the times are changing, and rapidly. 

There was a time in America when the middle class, and even in some cases the poor, cheered the boy or girl who made good; but now, when a billionaire pulls themselves up by their bootstraps, Americans increasingly ask who said plutocrat killed or stole from?  And fortunately or unfortunately, depending upon one’s perspective, Americans are coming to realize that is they who are the victims of the billionaire class… it is the 99% who have been robbed, or, all too often, had their lives cut short, by the very system the plutocracy have built.

Horatio Alger – and the American Dream – are dead now.  Mr. Alger was strangled to death by a rapacious billionaire class, as well as, Wall Street analysts and mavens, who place accelerated & quick profits before the economic, fiscal, moral, and political health of the nation.  (In fact, it is these very same analysts & mavens, who often confuse Walls Street’s general health, w/ Main Street’s health; when in the modern era, the two street’s interests have – in most instances – become diametrically opposed.  In short, what is good for Wall Street – layoffs, downsizing, consolidation, the offshoring of labor, and financial engineering, that is loading companies up with debt – is not good for Main Street.) 

Despite the GOPs politics of division, fear, and hatred, Americans – rapidly – are waking up to the realization that it is not one another we have to fear, but the billionaire class. 

We saw last week story after story of how Americans – the clear majority of Americans – want to see the super-wealthy taxed in a more progressive manner, whether it be by estate, income, or wealth (or better yet, if we ever are going to level the playing field, and contain & mitigate the growing threat the robber baron class presents to the 99% and representative democracy… why not the trifecta?).

Of course, the powerful and the rich reacted as they always do. 

Ø Trump played the “socialist” card during his State of the Union address. 

Ø More than one plutocrat said that higher taxes upon the super-wealthy would cause the United States to end up like Venezuela.

Ø While Kevin Hassett, who chairs POTUS Trump’s Counsel of Economic Advisors, called Demo plans to tax the kleptocracy, “economically illiterate.”  (This from a man who predicted the Dow would hit 36,000, back in the '90s.)

Clearly, the billionaire class is running scared and in the process failing to ask the key questions: Why now?  Why are a majority of Americans increasingly warming up to the idea of higher taxation upon the exceptionally wealthy, and the transfer of wealth to those in need?

The problem for the Davos elite is that POTUS Trump campaigned upon the fact that the economy, the government, and the nation are rigged, as did a leading 2016 Democratic candidate, Senator Sanders (Mr. Sanders not only campaigned upon the argument, but then, illustrated it first hand, when the Clinton campaign & its proxy, the DNC, stuck the proverbial knife in the Senator’s back throughout the primary process).

In short, most American’s aren’t buying the plutocracy’s amateurish sales job, which is largely premised upon fear.  That is to say, most Americans are well aware that the financial elite are engaged in their own special brand of socialism & the raiding of the government, courtesy of campaign contributions, Gucci Gulch lobbyist, and a US government that is owned.

This is not good.  Capitalism – not crony capitalism – but the capitalism that provides excellent customer service, innovative products & services, well paying jobs, and rising opportunity has a future (particularly when coupled w/ healthy social programs provided by the state, that support the least among us, or those left behind by a predatory elite).  In short, a capitalism that is defined by many competing entrants into the market place is what is needed.

What doesn’t have a future is an American economy where: a few billionaires rule our country; wages stagnate for decades; monopolies & cartels control the majority of sectors w/in the macro economy; companies are bankrupted & pension funds looted for grandiose profits; and any prospects of upward mobility are about as slim as winning the lottery. 

Fear doesn’t have a future for American labor.  When forty percent of Americans live a hand to mouth existence, and one in five children live in poverty…  socialism – particularly, the highly successful brand seen in Western Europe, Scandinavian countries, and Canada – seems like an outstanding alternative.

At the end of the day, Americans are keenly aware that socialism works, just as capitalism works.  They also know that socialism, like capitalism, in the hands of a dangerous dictator, or thug politician, can be manipulated – by corruption or fraud – to benefit an elite few and turned against the many.

In fact, America is full of excellent examples of socialism that does work:  Social Security, Medicare, the DOD (when it's not engaged in failed nation building), the local fire department… and w/in the private sector, the NFL, Wall Street banks (bailed out during the 2008 crisis), and insurance companies are all outstanding examples of a socialism that works (in some instances for the few, and in other instances for the many).

Which brings us to what is socialism?  Socialism, in its purest form, is the pooling of risk by a group of citizens or a society, and collectively ceding power to a private collective or governmental body to manage said risk.  Socialism subverts the ego and id, and dethrones individualism, and forms a community that comes together – bands together – to mitigate risk (or an existential threat) at a micro or macro level.  (Many people probably don’t know this but the State of Israel was pioneered by socialists, European & Russian emigres – fleeing pogroms & racism – to scratch out a living on communal farms in a desert, called Palestine. To survive a hostile environment, the founders of the State of Israel, Zionist, lived on communal farms, called a kibbutz.  Many of these communes are alive and well, w/in Israel, to this very day.  Who knew America's number one ally in the Middle East was, & remains, to some degree – gasp – socialist?)

Insurance, a classic example, is the pooling of risk at a micro – economic level.  So that if, by way of example, a business or property owner suffers an unforeseen event or loss, said owner doesn’t have to pay for the loss in its entirety, like a rugged-individualist would – by themselves.  Number crunchers, actuaries, know the probability that so many buildings – w/in a pool of risk - will catch fire in a given year.  Armed with this data, the underwriter, if they do their job correctly, prices the risk or premium, so that no single policyholder or participant w/in the pool suffers a catastrophic loss (which could harm said business owner’s earnings, if not land the business, itself, in bankruptcy).

Socialism requires risk and sacrifice however, not unlike capitalism.   When someone pays into social security all their lives – basically another example of the pooling of risk or socialism – they run into the possibility they could die at an early age, whereby they never see payout.  Likewise, any participant in a capitalist, or socialist, project runs the risk of lost labor, time, or wages (versus engaging in alternative endeavors, also known as opportunity costs).

If we are honest with ourselves, aren’t American workers – in an increasingly consolidated American crony-capitalist economy – facing a similar set of downside risks?  By adopting the crony-capitalist model - w/ increasingly diminished employment opportunities or options, and very little say in the economy or government - isn’t American labor incurring the opportunity costs of an alternative system, that potentially is far more rewarding?  Whether that system is a more compassionate form of capitalism, an enhanced mixed economy, or outright socialism?

Workers at an Israeli kibbutz

When both systems – capitalism and socialism – work in harmony, it’s the best of both worlds.  However, when the financial elite prey upon the tremendous resources of the US government for their personal enrichment, while paying at tax rates significantly below the middle and upper middle class (that is if they bother to pay any taxes at all), it tends to upset a great many Americans.  When the financial elite throw verbal Molotov cocktails at anybody who decries, or threatens, the rigged system they have built for themselves, the people eventually catch on to the con.  And when this same billionaire class, run up the debt to pay for their own 2008 bailout, and then use this same debt as an excuse to enforce government austerity upon the people, it’s bound to incite political rebellion.

Therefore, the overthrow of establishment/centrist political parties – who represent the billionaire class’ interests – throughout the West.  Hence, Brexit… and the arrival of populist parties that would have been considered extreme and inconceivable before the 2008 financial crash.  Republicans, and establishment Dems, who have handed out a byzantine tax code the size of telephone directories for the wealthy, and well healed tax attorneys & accountants, but don’t have the courage to offset trillion dollar tax cuts w/ offsetting cuts in government spending…  in effect, financing tax cuts for the wealthy…  are running up huge deficits, and robbing this & future generations, to coddle an ultra-wealthy donor class, today.

For the fifty to sixty percent of Americans who are making it and live a comfortable existence, today, these can be challenging and frightening times.  Fate and the economy have smiled upon you, seemingly, and the middle & upper-middle class don’t want change.  As the system is rigged against all forms of labor – via collusion w/in industries, not to hire from one another; non-compete agreements; monopoly & monopsony powers w/in the industrial & service economy – yes, change is highly disconcerting for those who are doing well.  AI, globalization, and tech have only added to labor’s uncertainty, whether you’re making it or just getting by.

But change is inevitable, and the US has more than a few industries, like Big Coal, that should go the way of the buggy whip.   One way to insure yours and your family's survival – during these challenging times - is to support candidates & politicians willing to challenge, and break up the power base of an elite few.  And that base of power is vast and unseemly wealth, as well as, the source of that wealth (as often as not, rent seeking cartels and monopolies).

The elimination of concentrated wealth better insures the stability of our democracy, the economy, labor markets, and our government.  As it stands, the kleptocracy can, indeed, turn this nation into Venezuela, so concentrated is their power and so dominant is their sway over the economy.  

It is no idle threat.  

The super-wealthy, and Wall Street banks in particular, can manipulate the US economy… just ask Fed Chairman Powell about taper-tantrums.

Americans used to view the prospect of wealth, as a ticket away from the cares and worries of this world; and that’s why citizens, perhaps naively at times, had bought into the American dream: that anybody can make it big; that anybody can become wealthy.  But increasingly, the dream has vanished, (and billionaires have played no small role in making that aspiration disappear) all the more so for those of limited education and means.  We are also seeing a younger generation come up in America, who are not entirely enthralled by materialism.

As such, socialism, and heightened government regulation of business activities, increasingly, is seen as a means to mitigate the risk of a crony-capitalist system that benefits a privileged few at the expense of many.  (Examine the GI Bill as yet another outstanding socialist program that made America great, and rewarded US soldiers, who risked their lives for a grateful nation & world.) 

Government intervention & redistributive policies, in favor of the people, are seen as a means to provide freedom from the cares and worries of a world turning particularly violent - economically & politically - against, nearly, the majority of Americans w/ limited, or no, resources.

As for our billionaire friends, they’d probably do well to remember that the catalyst for both the American & French revolutions were excessive taxation foisted upon the mercantile, middle, and lower tiers of society (while royalty, aristocracy, and nobles often escaped taxation, altogether).  Interestingly, some of the taxes issued by the English monarch against the American colonies were used to pay for – what was increasingly viewed as  - an occupying British military force.  These taxes not only were issued directly by the state, England, but also, indirectly by monopolies – empowered by the state (aka the British East India Company) – in the form of attempted monopolistic taxation/profit taking, against the American colonies.

Some may recall the famous dumping of the tea, in a then, colonial backwater, Boston Harbor.  

And hence, the rumbling of the tumbrels to the Place de la Concorde within Paris, relatively, a few short years later.

Given their colossal power, both w/in the private & public spheres, w/ no checks or balances against same, Americans have every right to ask if their current rulers – the billionaire class -  should even be allowed to exist?

P.S.  For those who say the wealthy contribute to charities & foundations, my response would be that the detrimental impact the ultra-wealthy have upon the economy & government far outweigh the good.  For those who say taxing the ultra-wealthy will not pay down the national debt, JMH would remind those individuals that tax policies also serve a social role (to control and contain bad behaviors & outcomes, while also, encouraging behaviors society deems favorable).  And finally, to those who say the Green New Deal & social spending are unaffordable, given the national debt, JMH responds that the Federal Reserve, via monetary policy, can make good things happen.  If the Fed can print trillions to bailout billionaires, banks, finance credit card wars, and provide tax cuts for the ultra-wealthy, surely the Fed can expand its balance sheet - or even write down Federal debt - to pay for social spending for the nation and the 99%.

Copyright JM Hamilton Publishing 2019