Real Wealth Society

Friday, December 30, 2005

Free Enterprise or Corporatocracy By Unlawfulcombatant

Many blame our current economic difficulties on Capitalism. There are certainly good arguments for doing so. However, there are even better arguments to blame it on current perversions of capitalism, and the corporatocracy that has replaced "free enterprise."Capitalism is an extremely productive economic system. Unfortunately it is subject to almost unlimited abuses and perversions. It is these abuses that will ultimately lead us to an Economic Armageddon, not capitalism itself. "Corporatocracy" is a better definition of our current economic system, rather than free enterprise capitalism.
The number of anti-free enterprise, pro-corporate laws and policies of our government is extensive. When extensive legislation exists to protect corporate interests, our system of "free market" capitalism is compromised. There are many examples of such corporate protection. Patent exclusivity is one example. Numerous extensions of patent exclusivity greatly reduce competition. These are anything but "free enterprise" policies.
When huge amounts of taxpayer funds are given to business interests, the free market is compromised. Many "private" entities survive almost exclusively on taxpayer money. The defense industry is one such example. The only thing "private" about the defense industry is that profits go into the pockets of "private" individuals. Many other industries also gorge themselves at the taxpayer-funded feeding trough. Much of the money that funds HMO"s, health care insurance, and pharmaceutical cartels comes directly from the taxpayer, not private individuals.Less direct monetary assistance also perverts the free market. Government insurance of loans encourages riskier and less productive investments. Corporate bankruptcy protection further insulates Corporate America from paying the consequences for poor business investment and practice. It also allows for abuse of the system and rewards misappropriation of funds.
Government granted monopolies, such as phone and power companies, are further perversions of the free market system. Regardless of any issues of necessity, such monopolies limit competition.The whole concept of anti-trust policy has been perverted as well. Anti-trust legislation was designed to prevent monopolies and the control of the market by large corporations and businesses. It was designed to prevent price-fixing, as well as other market-controlling issues. Today anti-trust legislation is used to prevent smaller entities from grouping together, such as labor groups. Anti-trust legislation is now used ensure the exorbitant profits of Corporate America. It is rare for any government body to block a merger. Yet it is not uncommon to see collective bargaining rights denied under the guise of "anti-trust" violation. (For example, unionization of doctors has been blocked as an anti-trust violation.)Our tax system is another method used to subvert "free enterprise" and support corporatocracy. Tax deductions for 401Ks and IRAs encourage workers to donate part of their wages to Corporate America, thus providing even more funding for Corporate America, allowing more over-investment and misuse of funds. Few realize that much of their money goes toward CEO salaries, and further pro-corporate lobbying of Congress. Some of this money even goes into pro-corporate campaign contributions.
Deceptively encouraging workers to give part of their income to Corporate America is definitely [b]not[/b] "free enterprise." [b]There is also an ongoing trend of Corporate America to focus on short-term gains, at the expense of long-term gains.[/b] This may well be the most damaging of modern business trends. The reduction of labor costs (and labor/consumer income) may increase short-term profits. But it reduces consumer income, as well as the market created by that income. The end result is a continual reduction in the income necessary to buy American production. Much of this problem has been [b]created[/b] by government intervention, as well as selective removal of key regulations. Legislation to protect Corporate America, extensive taxpayer funding, and pro-corporate tax policy have largely eliminated "free market" capitalism. Adam Smith, the most noted proponent of "free enterprise," would roll over in his grave if he heard today's Corporatocracy was being touted as "free enterprise." Smith believed the government should take an active role to [b]promote[/b] free enterprise, not stifle it like the current administration is doing.The shortfalls of current pro-Corporate, anti-free enterprise policies have gone largely unnoticed. The reduction in labor/consumer income, government-enhanced price increases, and demand decreases that would have resulted, have been obscured by increasing consumer "deficit" spending. Consumers have been able to maintain demand with borrowed money, despite declining real wages. Spending financed with borrowed money has compensated for real wage declines. Had consumer spending been limited to income, the current Corporatocratic excesses would never have occurred. Business revenue would have been limited by the wage income that consumers had to spend.The result of current government policy has been an over-investment in most assets, as well as investment in minimally productive assets. Market forces have not been allowed to provide the negative feedback for bad business investment and practices.
As a result, bad investments and business practices have continued unchecked by normal market forces. The current business climate in America is not the result of capitalism, or "free enterprise." It's the lack thereof that is the biggest problem. Though so-called "capitalists" may be the cause of an Economic Armageddon, capitalism itself will [b]not[/b] be the cause. The cause will be the many perversions that are masquerading as capitalism and free enterprise.

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