Five Ways that Financial Elites are Destroying Democracy
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Is democracy compatible with a financial system run by billionaires? Maybe not. Here are five ways that high finance is undermining democracy:
1. Billionaires replace one person, one vote.
Ask any American what’s wrong with our country and they will say that money rules politics. And they are correct. It’s obvious that major political donors and lobbyists for the super-rich have more political influence than we do. As the top 1 percent gains more and more of the nation’s income, the 99 percent effectively become disenfranchised. And of course, the Citizens United Supreme Court decision makes it even easier for the rich to buy political power. Lopsided campaign contributions by and for the super-rich are making a mockery out of elections. In 2010, for example, business outspent labor by a factor of 14 to 1.
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2. The stock market exercises an instant veto.
Virtually every economic decision in our democracy is now subject to an instant stock market veto. The first question asked by the White House and Congress before making a policy decision is “How will the markets react?” When the House of Representatives rejected the first TARP bailout bill on Sept. 29, 2008, the stock market fell by a record 777 points. After it passed, the markets were “calmed.”
Now, the New York Times reports that if the deficit “supercommittee” doesn’t get its act together by its Thanksgiving deadline, markets won’t like it:
Some fear that such a failure could lead to the kind of stock market slide and loss of investor confidence that accompanied stalled efforts to raise the federal debt limit earlier this year.
Just who comprises “investor confidence?” Who makes financial markets dive in a matter of moments? Well, it’s certainly not those of us who piddle around with our 401ks in E-trade accounts. It’s not our slow-moving pension funds either. Rather, it’s the proprietary trading desks of big banks and the giant pools of unregulated cash in hedge funds. These big-time players have a very keen sense of their own self-interests. They have made it perfectly clear to the supercommittee that they want massive debt reduction so that 1) their bonds and bets will stay valuable; and 2) they won’t have to pay higher taxes on their outrageous incomes and profits.
Because of the skewed distribution of income, these money manipulations have enormous impacts on markets and therefore also on our 401ks. When they drive the markets down, we feel it as well. They’re holding us hostage and counting on us to suffer from financial Stockholm Syndrome – that we’ll side with our financial captors. Financial elites know we are likely to urge our politicians to avoid any moves that might drive markets down.
3. Governments are not permitted to create full employment economies.
The Wall Street casino crash killed 8 million jobs in a matter of months. It will now take more than 20 million jobs to get us back to full-employment (defined as an unemployment rate of 5 percent or lower.) At the current rate of recovery, it will take nearly a generation to get there. This is intolerable.
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Why aren’t the jobs there? Unless you’ve been blinded by ideology, it’s obvious that the Wall Street crash killed effective demand in the economy. Without that demand, business won’t hire and invest. It’s not rocket science. With unemployment so high, consumers don’t have the economic muscle to generate that demand. The obvious answer is for the government to step in to put our people back to work. The government needs to spend money – even if it has to go deeper into debt – to hire more public sector workers and to spend money on labor intensive programs like weatherization, higher education, infrastructure rebuilding and the like. We need a massive set of programs to create full-employment – which is supposed to be the key goal of our economy.