Governments Change, the Corporatocracy Endures

One little-remarked consequence of the central banks’ policies of near-zero interest rates and quantitative easing is the unrivaled dominance of mobile global capital, i.e. the Corporatocracy. The source of corporate political power is the ability to borrow essentially unlimited sums for next to nothing: what I have long termed free money for financiers.

Armed with central-bank supplied unlimited credit, global capital can outbid local residents and businesses. Over time, profitable enterprises and assets end up in corporate hands.

Consider the typical family farm, not just in America but in Germany, Australia, etc. It’s hard work squeezing a livelihood from the land in a market dominated by a handful of global corporate giants and their state handmaidens, and so unsurprisingly many in the next generation have opted for corporate-state jobs in urban areas rather than shoulder the financial risks of continuing the family farm.

A neighboring farmer might be interested in buying, be he/she will have to borrow the money at (say) 4%.

The global corporation can sell bonds (i.e. borrow money) at less than 1%. The lower cost of capital enables the corporation to outbid local farmers for the land, and this low cost of borrowing also enables the corporation to fund capital-intensiveeconomies of scale that are beyond the reach of family farms.

The net result is the nation’s farmland, its core productive asset, slides inevitably into corporate ownership. Anyone who resists selling out is crushed by low prices (corporate farms can over-produce and survive low prices, family farms cannot), or they are crushed by the disadvantages of being an “outsider” selling to the corporate supply chain, which favors in-house suppliers or large corporate producers.

The same dynamic–the unparalleled power of cheap credit–leads to corporate ownership which then funds corporate dominance of the political process.Consider building a house for your family. You’ll need construction financing, and since that’s riskier than a conventional mortgage to buy an existing home, that will cost you between 4% and 5%, and requires thousands of dollars in fees.

The corporate homebuilder can borrow at 1%. Guess who’s construction costs are cheaper?

As corporations buy up productive assets, they consolidate these assets into cartels and quasi-monopolies that can be protected from competition by lobbying and campaign contributions. Once you can buy up productive assets with cheap borrowed money, the profits start piling up, and you can use a thin sliver of these profits to hire lobbyists and buy political favors/protection from politicos desperate to cling onto their power.

The net result of unlimited credit for corporations is a Corporatocracy that constantly expands its financial and political power. And the net result of this corporate control of governance is: governments come and go, candidates come and go, and political movements come and go, but the Corporatocracy remains in charge.

If interest rates were 10% for everyone and every entity, individuals and small enterprises that had saved up cash could outbid corporations, which habitually get crushed in downturns by high interest payments. At zero interest rates, corporations can outbid savers, households and small businesses, who don’t get to borrow billions of dollars at near-zero rates from central banks.

Loan me $10 billion at 0.25% annual interest and I’ll assemble some profitable assets, too. Any of us can get obscenely wealthy if we have an unlimited credit line at .25% annual interest (i.e. essentially free money).

Ultimately, the dominance of global capital (the Corporatocracy) is not financial– it’s political. The populace and their elected leadership either allow corporations to dominate (via central bank policies) or they strip the central banks of the power to create a dominant Corporatocracy.

The choice is ours–or it used to be. No wonder voting fraud is the tool-du-jour of the Corporatocracy’s political toadies in the U.S.. It’s far too dangerous to actually let the Great Unwashed taxpayers make political decisions; they might oust the central bankers, and if they did that, the corporatocracy and their political toadies would suffer an inevitable decline as their free-money spigots were turned off.

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  • MrLiberty

    But NONE of this would be possible without the presence of a government-protected central bank. In a free market system of HONEST banking, there would ONLY be money to lend if people saved. If nobody saved, banks would be forced to pay higher and higher interest rates to encourage savings so lending funds would be available. Conversely, as more and more people took advantage of higher rates of return, rates would drop as more savings were available for lending. In this manner, as the banks get richer through lending, savers get richer through saving, and borrowers are provided clear and sound economic signals as to the TRUE amount of future savings/capital available to sustain long-term projects.

    In today’s system of central banking, money is created out of thin air. Money is cheaper to borrow from the central banks and so NO interest needs to be paid to savers to encourage savings or to provide a pool of available funds for lending. Additionally, government legal tender laws force the citizens of the nation to take and use central bank fiat currencies for transactions, thus enabling the inherent wealth transfer that accompanies monetary inflation and easy money policies.

    People seem to forget that money/wealth is NOT created out of thin air. All of the money being discussed above is NOT magically always present. The productive sector is the owner of the money and ONLY when they have relinquished it in the form of savings (in a free market/honest banking system) is it available for corporations or others to borrow. Restore honest banking, eliminate central banking, restore sound money, prevent any and ALL government intervention aside from the prosecution of fraud (if government is to have any role) and the problem of corporate ownership of the nation would dwindle rapidly. Americans do not save. Without the Fed, there would be no money to lend – unless the banks finally started paying us REAL interest rates to encourage savings – which would then require higher rates to be charged for borrowing. Win-win, and the asset bubbles, housing bubbles, etc. would all be kept in check by REAL and honest signals and controls provided by market forces.

    Government – as always – is the root of all of this evil. To ignore the fundamental role THEY PLAY is to deceive oneself as to the true culprit in the crime of crony capitalism.

  • diogenes

    Sure enough, the power to create money, whether the Fed’s or a financier’s with bonds — that is, properly termed, sovereignty, and today it is no longer the attribute of government in America, it is the attribute of Wall Street, our dictator. Until we face this, and deal with it, America will remain what it has become, and keep getting worse, a dictatorial oligarchic prison state full of wage slaves and debt peons. Now, who will YOU vote for this year? Pile of Shit A, or Pile of Shit B? It’s a FREE COUNTRY! You have a CHOICE! Use it wisely.