Thursday, July 8, 2010

It's the Corporations, Stupid

Exhibit A:

We're in a Recession Because the Rich Are Raking in an Absurd Portion of Wealth
By Robert Reich as per AlterNet and Susie

Excerpt: Our economy can't thrive when the richest 1% get an ever larger share of the nation's income and wealth, and everyone else's share shrinks.

The structural reason for the Great Recession still haunts America. That reason is America's surging [income] inequality.

Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation's total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity [all progressive legislature]. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America's total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928—with 23.5 percent of the total.

Each of America's two biggest economic crashes occurred in the year immediately following these twin peaks. When —in 1929 and 2008. This is no mere coincidence. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don't have enough purchasing power to buy what the economy is capable of producing. America's median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped.

The problem isn't that typical Americans have spent beyond their means. It's that their means haven't kept up with what the growing economy could and should have been able to provide them.

None of us can thrive in a nation divided between a small number of people receiving an ever larger share of the nation's income and wealth, and everyone else receiving a declining share. The lopsidedness not only diminishes economic growth but also tears at the social fabric of our society.

Read the whole article here

Exhibit B: Myopic Corporate Greed
By Yves Smith via KOS

Excerpt: What it boils down to, IMHO, is when corporations are stripmining their near-record profits, as opposed to reinvesting them in times of economic downturns, the results for society are devastating.

Combine this reality with a legislative branch in complete corporatocratic rapture (i.e.: regulatory capture, deep capture), and you have the recipe for where we are with our economy, today.

...we need to set fiscal policy to the task of incentivizing the reinvestment of corporate profits in business operations rather than games at the casino.

Possible measures to achieve these aims include:

1) an aggressive tax on retained earnings that are not reinvested with a 24 month period after they have been booked (this provision needs to be designed carefully to defeat efforts to circumvent it through artful accounting);

2) a financial asset turnover tax that raises the cost to management (and others) of speculating rather than reinvesting profits in productive capital investment;

3) a reinvigorated public or public/private investment program that helps speed up the shift to new energy technologies (as scaling up usually induces a drop in unit costs of production).