Note: If you wish, feel free to substitute the word “republic” for “democracy”.
As I wrote in 2008:
The economy is like a poker game … it is human nature to want to get all of the chips, but noted that – if one person does get all of the chips – the game ends.
In other words, the game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone’s money, the game ends.
The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed.
No wonder billionaire George Soros says that the way US Treasury Secretary Henry Paulson was handling the situation was “very reminiscent of the way the central bankers talked in the 1930s”, the time of the Great Depression.
And no wonder Nobel-prize winning economist Joseph Stiglitz stresses putting poker chips back in the hands of the little guy …
This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).
It is a question of focusing any government funding which is made to the majority of poker players – instead of the titans of finance – so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.
As FDR’s Fed chairman Marriner S. Eccles explained:
As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
When most people lose their poker chips – and the game is set up so that only those with the most chips get more – free market capitalism is destroyed, as the “too big to fails” crowd out everyone else.
And the economy as a whole is destroyed. Remember, consumer spending accounts for the lion’s share of economic activity. If most consumers are out of chips, the economy slumps.
And our very democracy is destroyed.
Two leading IMF officials, the former Vice President of the Dallas Federal Reserve, and the the head of the Federal Reserve Bank of Kansas City have all said that the United States is controlled by an oligarchy. And Moody’s economist Mark Zandi has said “the oligopoly has tightened.”
As Supreme Court Justice Louis Brandeis said:
We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.
Dennis Kucinich said in January:
There’s nothing liberal about the bailouts. There’s nothing liberal about standing by and watching banks use public money to get their executive bonuses. There’s nothing liberal about giving insurance companies carte blanche to charge anything they want for health care… Since when did that become liberal?
Every area of the economy is still about taking wealth from the great mass of people and putting it into the hands of a few. If you don’t have an economic democracy, you don’t have a political democracy.
Indeed, when wealth and power become too concentrated, capitalism becomes virtually indistinguishable from socialism or fascism.
And the government could use existing laws to force ill-gotten gains to be disgorged (see this and this), fraudulent transfers to be voided and – perhaps – even bonuses gained at the expense of taxpayers clawed back. Such actions would make the 800 pound gorillas a little smaller, helping to reduce concentration of wealth somewhat. But that would assume that America is still a nation governed by the rule of law.