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Revolt of the Rich

It was 1993, during congressional debate over the North American Free Trade Agreement. I was having lunch with a staffer for one of the rare Republican congressmen who opposed the policy of so-called free trade. To this day, I remember something my colleague said: “The rich elites of this country have far more in common with their counterparts in London, Paris, and Tokyo than with their fellow American citizens.”

That was only the beginning of the period when the realities of outsourced manufacturing, financialization of the economy, and growing income disparity started to seep into the public consciousness, so at the time it seemed like a striking and novel statement.

At the end of the Cold War many writers predicted the decline of the traditional nation-state. Some looked at the demise of the Soviet Union and foresaw the territorial state breaking up into statelets of different ethnic, religious, or economic compositions. This happened in the Balkans, the former Czechoslovakia, and Sudan. Others predicted a weakening of the state due to the rise of Fourth Generation warfare and the inability of national armies to adapt to it. The quagmires of Iraq and Afghanistan lend credence to that theory. There have been numerous books about globalization and how it would eliminate borders. But I am unaware of a well-developed theory from that time about how the super-rich and the corporations they run would secede from the nation state.

I do not mean secession by physical withdrawal from the territory of the state, although that happens from time to time—for example, Erik Prince, who was born into a fortune, is related to the even bigger Amway fortune, and made yet another fortune as CEO of the mercenary-for-hire firm Blackwater, moved his company (renamed Xe) to the United Arab Emirates in 2011. What I mean by secession is a withdrawal into enclaves, an internal immigration, whereby the rich disconnect themselves from the civic life of the nation and from any concern about its well being except as a place to extract loot.

Our plutocracy now lives like the British in colonial India: in the place and ruling it, but not of it. If one can afford private security, public safety is of no concern; if one owns a Gulfstream jet, crumbling bridges cause less apprehension—and viable public transportation doesn’t even show up on the radar screen. With private doctors on call and a chartered plane to get to the Mayo Clinic, why worry about Medicare?

Being in the country but not of it is what gives the contemporary American super-rich their quality of being abstracted and clueless. Perhaps that explains why Mitt Romney’s regular-guy anecdotes always seem a bit strained. I discussed this with a radio host who recounted a story about Robert Rubin, former secretary of the Treasury as well as an executive at Goldman Sachs and CitiGroup. Rubin was being chauffeured through Manhattan to reach some event whose attendees consisted of the Great and the Good such as himself. Along the way he encountered a traffic jam, and on arriving to his event—late—he complained to a city functionary with the power to look into it. “Where was the jam?” asked the functionary. Rubin, who had lived most of his life in Manhattan, a place of east-west numbered streets and north-south avenues, couldn’t tell him. The super-rich who determine our political arrangements apparently inhabit another, more refined dimension.

To some degree the rich have always secluded themselves from the gaze of the common herd; their habit for centuries has been to send their offspring to private schools. But now this habit is exacerbated by the plutocracy’s palpable animosity towards public education and public educators, as Michael Bloomberg has demonstrated. To the extent public education “reform” is popular among billionaires and their tax-exempt foundations, one suspects it is as a lever to divert the more than $500 billion dollars in annual federal, state, and local education funding into private hands—meaning themselves and their friends. What Halliburton did for U.S. Army logistics, school privatizers will do for public education. A century ago, at least we got some attractive public libraries out of Andrew Carnegie. Noblesse oblige like Carnegie’s is presently lacking among our seceding plutocracy.

In both world wars, even a Harvard man or a New York socialite might know the weight of an army pack. Now the military is for suckers from the laboring classes whose subprime mortgages you just sliced into CDOs and sold to gullible investors in order to buy your second Bentley or rustle up the cash to get Rod Stewart to perform at your birthday party. The sentiment among the super-rich towards the rest of America is often one of contempt rather than noblesse.

Stephen Schwarzman, the hedge fund billionaire CEO of the Blackstone Group who hired Rod Stewart for his $5-million birthday party, believes it is the rabble who are socially irresponsible. Speaking about low-income citizens who pay no income tax, he says: “You have to have skin in the game. I’m not saying how much people should do. But we should all be part of the system.”

But millions of Americans who do not pay federal income taxes do pay federal payroll taxes. These taxes are regressive, and the dirty little secret is that over the last several decades they have made up a greater and greater share of federal revenues. In 1950, payroll and other federal retirement contributions constituted 10.9 percent of all federal revenues. By 2007, the last “normal” economic year before federal revenues began falling, they made up 33.9 percent. By contrast, corporate income taxes were 26.4 percent of federal revenues in 1950. By 2007 they had fallen to 14.4 percent. So who has skin in the game?

While there is plenty to criticize the incumbent president for, notably his broadening and deepening of President George W. Bush’s extra-constitutional surveillance state, under President Obama the overall federal tax burden has not been raised, it has been lowered. Approximately half the deficit impact of the stimulus bill was the result of tax-cut provisions. The temporary payroll-tax cut and other miscellaneous tax-cut provisions make up the rest of the cuts we have seen in the last three and a half years. Yet for the president’s heresy of advocating that billionaires who receive the bulk of their income from capital gains should pay taxes at the same rate as the rest of us, Schwarzman said this about Obama: “It’s a war. It’s like when Hitler invaded Poland in 1939.”  For a hedge-fund billionaire to defend his extraordinary tax privileges vis-à-vis the rest of the citizenry in such a manner shows an extraordinary capacity to be out-of-touch. He lives in a world apart, psychologically as well as in the flesh.

Schwarzman benefits from the so-called “carried interest rule” loophole: financial sharks typically take their compensation in the form of capital gains rather than salaries, thus knocking down their income-tax rate from 35 percent to 15 percent. But that’s not the only way Mr. Skin-in-the-Game benefits: the 6.2 percent Social Security tax and the 1.45 percent Medicare tax apply only to wages and salaries, not capital gains distributions. Accordingly, Schwarzman is stiffing the system in two ways: not only is his income-tax rate less than half the top marginal rate, he is shorting the Social Security system that others of his billionaire colleagues like Pete Peterson say is unsustainable and needs to be cut.

This lack of skin in the game may explain why Romney has been so coy about releasing his income-tax returns. It would make sense for someone with $264 million in net worth to joke that he is “unemployed”—as if he were some jobless sheet metal worker in Youngstown—if he were really saying in code that his income stream is not a salary subject to payroll deduction. His effective rate for federal taxes, at 14 percent, is lower than that of many a wage slave.

After the biggest financial meltdown in 80 years and a consequent long, steep drop in the American standard of living, who is the nominee for one of the only two parties allowed to be competitive in American politics? None other than Mitt Romney, the man who says corporations are people. Opposing him will be the incumbent president, who will raise up to a billion dollars to compete. Much of that loot will come from the same corporations, hedge-fund managers, merger-and-acquisition specialists, and leveraged-buyout artists the president will denounce in pro forma fashion.

The super-rich have seceded from America even as their grip on its control mechanisms has tightened. But how did this evolve historically, what does it mean for the rest of us, and where is it likely to be going?

That wealth-worship—and a consequent special status for the wealthy as a kind of clerisy—should have arisen in the United States is hardly surprising, given the peculiar sort of Protestantism that was planted here from the British Isles. Starting with the Puritanism of New England, there has been a long and intimate connection between the sanctification of wealth and America’s economic and social relationships. The rich are a class apart because they are the elect.

Most present-day Americans, if they think about the historical roots of our wealth-worship at all, will say something about free markets, rugged individualism, and the Horatio Alger myth—all in a purely secular context. But perhaps the most notable 19th-century exponent of wealth as virtue and poverty as the mark of Cain was Russell Herman Conwell, a canny Baptist minister, founder of perhaps the first tabernacle large enough that it could later be called a megachurch, and author of the immensely famous “Acres of Diamonds” speech of 1890 that would make him a rich man. This is what he said:

I say that you ought to get rich, and it is your duty to get rich. … The men who get rich may be the most honest men you find in the community. Let me say here clearly … ninety-eight out of one hundred of the rich men of America are honest. That is why they are rich. That is why they are trusted with money. … I sympathize with the poor, but the number of poor who are to be sympathized with is very small. To sympathize with a man whom God has punished for his sins … is to do wrong … let us remember there is not a poor person in the United States who was not made poor by his own shortcomings.

Evidently Conwell was made of sterner stuff than the sob-sister moralizing in the Sermon on the Mount. Somewhat discordantly, though, Conwell had been drummed out of the military during the Civil War for deserting his post. For Conwell, as for the modern tax-avoiding expat billionaire, the dollar sign tends to trump Old Glory.

The conjoining of wealth, Christian morality, and the American way of life reached an apotheosis in Bruce Barton’s 1925 book The Man Nobody Knows. The son of a Congregationalist minister, Barton, who was an advertising executive, depicted Jesus as a successful salesman, publicist, and the very role model of the modern businessman.

But this peculiarly American creed took a severe hit after the crash of 1929, and wealth ceased to be equated with godliness. While the number of Wall Street suicides has been exaggerated in national memory, Jesse Livermore, perhaps the most famous of the Wall Street speculators, shot himself, and so did several others of his profession. There was then still a lingering old-fashioned sense of shame now generally absent from the über-rich. While many of the elites hated Franklin Roosevelt—consider the famous New Yorker cartoon wherein the rich socialite tells her companions, “Come along. We’re going to the Trans-Lux to hiss Roosevelt”—most had the wit to make a calculated bet that they would have to give a little of their wealth, power, and prestige to retain the rest, particularly with the collapsing parliamentary systems of contemporary Europe in mind. Even a bootlegging brigand like Joe Kennedy Sr. reconciled himself to the New Deal.

And so it lasted for a generation: the wealthy could get more wealth—fabulous fortunes were made in World War II; think of Henry J. Kaiser—but they were subject to a windfall-profits tax. And tycoons like Kaiser constructed the Hoover Dam and liberty ships rather than the synthetic CDOs that precipitated the latest economic collapse. In the 1950s, many Republicans pressed Eisenhower to lower the prevailing 91 percent top marginal income tax rate, but citing his concerns about the deficit, he refused. In view of our present $15 trillion gross national debt, Ike was right.

Characteristic of the era was the widely misquoted and misunderstood statement of General Motors CEO and Secretary of Defense Charles E. “Engine Charlie” Wilson, who said he believed “what was good for the country was good for General Motors, and vice versa.” He expressed, however clumsily, the view that the fates of corporations and the citizenry were conjoined. It is a view a world away from the present regime of downsizing, offshoring, profits without production, and financialization. The now-prevailing Milton Friedmanite economic dogma holds that a corporation that acts responsibly to the community is irresponsible. Yet somehow in the 1950s the country eked out higher average GDP growth rates than those we have experienced in the last dozen years.

After the 2008 collapse, the worst since the Great Depression, the rich, rather than having the modesty to temper their demands, this time have made the calculated bet that they are politically invulnerable—Wall Street moguls angrily and successfully rejected executive-compensation limits even for banks that had been bailed out by taxpayer funds. And what I saw in Congress after the 2008 crash confirms what economist Simon Johnson has said: that Wall Street, and behind it the commanding heights of power that control Wall Street, has seized the policy-making apparatus in Washington. Both parties are in thrall to what our great-grandparents would have called the Money Power. One party is furtive and hypocritical in its money chase; the other enthusiastically embraces it as the embodiment of the American Way. The Citizens United Supreme Court decision of two years ago would certainly elicit a response from the 19th-century populists similar to their 1892 Omaha platform. It called out the highest court, along with the rest of the political apparatus, as rotted by money.

We meet in the midst of a nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot-box, the Legislatures, the Congress, and touches even the ermine of the bench. The people are demoralized. … The newspapers are largely subsidized or muzzled, public opinion silenced, business prostrated, homes covered with mortgages, labor impoverished, and the land concentrating in the hands of capitalists. The urban workmen are denied the right to organize for self-protection, imported pauperized labor beats down their wages. … The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind, and the possessors of these, in turn, despise the Republic and endanger liberty. From the same prolific womb of governmental injustice we breed the two great classes—tramps and millionaires.

It is no coincidence that as the Supreme Court has been removing the last constraints on the legalized corruption of politicians, the American standard of living has been falling at the fastest rate in decades. According to the Federal Reserve Board’s report of June 2012, the median net worth of families plummeted almost 40 percent between 2007 and 2010. This is not only a decline when measured against our own past economic performance; it also represents a decline relative to other countries, a far cry from the post-World War II era, when the United States had by any measure the highest living standard in the world. A study by the Bertelsmann Foundation concluded that in measures of economic equality, social mobility, and poverty prevention, the United States ranks 27th out of the 31 advanced industrial nations belonging to the Organization for Economic Cooperation and Development. Thank God we are still ahead of Turkey, Chile, and Mexico!

This raises disturbing questions for those who call themselves conservatives. Almost all conservatives who care to vote congregate in the Republican Party. But Republican ideology celebrates outsourcing, globalization, and takeovers as the glorious fruits of capitalism’s “creative destruction.” As a former Republican congressional staff member, I saw for myself how GOP proponents of globalized vulture capitalism, such as Grover Norquist, Dick Armey, Phil Gramm, and Lawrence Kudlow, extolled the offshoring and financialization process as an unalloyed benefit. They were quick to denounce as socialism any attempt to mitigate its impact on society. Yet their ideology is nothing more than an upside-down utopianism, an absolutist twin of Marxism. If millions of people’s interests get damaged in the process of implementing their ideology, it is a necessary outcome of scientific laws of economics that must never be tampered with, just as Lenin believed that his version of materialist laws were final and inexorable.

[1]If a morally acceptable American conservatism is ever to extricate itself from a pseudo-scientific inverted Marxist economic theory, it must grasp that order, tradition, and stability are not coterminous with an uncritical worship of the Almighty Dollar, nor with obeisance to the demands of the wealthy. Conservatives need to think about the world they want: do they really desire a social Darwinist dystopia?

The objective of the predatory super-rich and their political handmaidens is to discredit and destroy the traditional nation state and auction its resources to themselves. Those super-rich, in turn, aim to create a “tollbooth” economy, whereby more and more of our highways, bridges, libraries, parks, and beaches are possessed by private oligarchs who will extract a toll from the rest of us. Was this the vision of the Founders? Was this why they believed governments were instituted among men—that the very sinews of the state should be possessed by the wealthy in the same manner that kingdoms of the Old World were the personal property of the monarch?

Since the first ziggurats rose in ancient Babylonia, the so-called forces of order, stability, and tradition have feared a revolt from below. Beginning with Edmund Burke and Joseph de Maistre after the French Revolution, a whole genre of political writings—some classical liberal, some conservative, some reactionary—has propounded this theme. The title of Ortega y Gasset’s most famous work, The Revolt of the Masses, tells us something about the mental atmosphere of this literature.

But in globalized postmodern America, what if this whole vision about where order, stability, and a tolerable framework for governance come from, and who threatens those values, is inverted? What if Christopher Lasch came closer to the truth in The Revolt of the Elites, wherein he wrote, “In our time, the chief threat seems to come from those at the top of the social hierarchy, not the masses”? Lasch held that the elites—by which he meant not just the super-wealthy but also their managerial coat holders and professional apologists—were undermining the country’s promise as a constitutional republic with their prehensile greed, their asocial cultural values, and their absence of civic responsibility.

Lasch wrote that in 1995. Now, almost two decades later, the super-rich have achieved escape velocity from the gravitational pull of the very society they rule over. They have seceded from America.

Mike Lofgren served 16 years on the Republican staff of the House and Senate Budget Committees. He has just published The Party Is Over: How Republicans Went Crazy, Democrats Became Useless, and the Middle Class Got Shafted [2]

The American Conservative is the home of independent, intelligent conservatism. Follow @amconmag [3].

180 Comments (Open | Close)

180 Comments To "Revolt of the Rich"

#1 Comment By Chris Brandt On September 14, 2012 @ 1:51 pm

Brenda G – If your employee is filing as head of household while being supported by her parents (as you imply), then she is breaking the law. How you would know about how she files her taxes, and what sort of check she gets back would be interesting to know, though. Otherwise, it sounds like you’re making it up. Also, sounds like you’re jealous. If the poor have it so good, as you, Trutie, and Shane seem to think, why not join us?

#2 Comment By David Flinn On September 19, 2012 @ 10:00 am

What those in the article dont realize is that the gates can be locked from either side.

#3 Comment By Poet and Priest On September 19, 2012 @ 3:23 pm

The poor have sometimes objected to being governed badly; the rich have always objected to being governed at all. — GKC

#4 Comment By Gareth Murphy On September 21, 2012 @ 4:44 am

Stupendously good article. Well done sir for voicing it, especially given how much it goes against the grain of current GOP trends of thought!

I think the most prescient bit of it is the comparison of the new neo-liberal ‘utopia’ that the elite envisage for us, with the communist ‘utopia’ they so often accuse the opposition of desiring.

When ideology trumps reason and evidence, we are well on the way to totalitarianism.

#5 Comment By Khalid Hyder On September 23, 2012 @ 4:19 am

A truly excellent article. I find striking similarities in the behaviour of the super rich in the USA and the warlords in Pakistan and Afghanistan. But the writer has not foretold how its all going to end. Are the middle class and the poor of the world sentenced to live in misery?

#6 Comment By Fake Name On September 23, 2012 @ 6:55 am

Wonderful commentary, the beginning of an argument _for_ something, perhaps, but for what? At least to see this kind of thought coming from a conservative and published in a conservative organ is enormously cheering. Now if only we can get the liberals to reexamine their cherished pre-conceptions… there may be hope for America yet.

#7 Comment By DGPSr On September 24, 2012 @ 6:46 am

Perhaps the cause for extremes and the plight of the middle-class is explained in the original Karate Kid movie script…
Miyagi: Now, ready?
Daniel: Yeah, I guess so.
Miyagi: [sighs] Daniel-san, must talk.
[they both kneel]
Miyagi: Walk on road, hm? Walk left side, safe. Walk right side, safe. Walk middle, sooner or later
[makes squish gesture]
Miyagi: get squish just like grape. Here, karate, same thing. Either you karate do “yes” or karate do “no.” You karate do “guess so,”
[makes squish gesture]
Miyagi: just like grape. Understand?
Daniel: Yeah, I understand.
Miyagi: Now, ready?
Daniel: Yeah, I’m ready.

#8 Comment By Michael Maciocia On September 26, 2012 @ 8:09 am

I read an extract from this in a UK publication called The Week. Being a European Liberal, (or, a leftie as the right here say, communist as Romney’s right would say), I believe that many of the issues Mike raises are present here.
I thank-you for a very revealing and insightful article.

#9 Comment By wjohnfaust On September 29, 2012 @ 3:48 am

Thoughtful article. It’s not clear there is a way out. At least in ’29, some shame and responsibility gripped the wealthy. They recognized their role in the collapse and accepted slaps on the wrist.

Current neoliberal ideology seems to absolve the faithful from any responsibility. Is there a non-destructive way out of this mess? Is collapse or revolt a necessary condition for something that might address the needs of the hoi polloi? Change from within the political arena will not be tolerated.

#10 Comment By Nancy Irving On October 4, 2012 @ 4:03 am

A very thoughtful article. Kudos to Lofgren, and to TAC for their courage in printing this.

One small quibble: “…financial sharks typically take their compensation in the form of capital gains rather than salaries…”

I think it’d be more accurate to say that the law allows them to *call* their compensation capital gains, and thus qualify for a lower tax rate, even though it isn’t. This compensation is actually commission income which investment managers earn as a percentage of their funds’ *investors’* gains. If you haven’t invested the capital, how can you call it a capital gain? (I always wonder what they use as a basis on their tax forms…I guess I will never know.)

#11 Comment By scott On October 8, 2012 @ 5:48 pm

This is quite possibly the best article I have ever read in a lifetime of reading political commentary. Will be forwarding it far and wide. Thank you for absolutely nailing it.

#12 Comment By Yawp On October 21, 2012 @ 1:20 pm

This is the best article on the topic i’ve read in a long time. Sure having disgusting amounts of wealth makes for some good lulz, but for some reason they forget it’s also the indicator for the end of lulz. “abstracted and clueless” nails it. I’m reminded of the Russian monarchy being gunned down in a basement somewhere, the children had to be shot multiple times up close and personal because of all the gold and jewels stuffed into their clothing. What is it about this type of gross wealth that makes the oligarchs completely happy to ignore the pain and misery of everyone else on the planet? Why can’t the oligarchs see the relationship to the success of their fellow humans and the longevity of their own children? abstracted and clueless i guess. I’m probably getting too close to the topic of wealth re-distribution which doesn’t go over well in our rugged individualist fake cowboy clint eastwood Carmel screw everyone else society. Cheers on the article, have forwarded it on.

#13 Comment By Jerry Coleman On October 21, 2012 @ 8:07 pm

This piece is very well done. It captures the reality of the times in fine irony and yet is not impenitrable. It’s a little depressing too.

#14 Comment By Best Home and Family On December 18, 2012 @ 1:16 am

Superb content, my friend. You are truly a literary genius. …This kind of article requires a great mind and a lot of research… I commend you on the hard work you put into this writing.

#15 Comment By Marco Tollo On January 7, 2013 @ 12:24 pm

What is missing here is that you think the “super-rich” and political class are two entities. Follow the trail of financing and power where it always ends at the all levels of government. The political class are the super-rich, either before or after. Bush, Kennedy, Rockefeller,…. are the befores and just about every single non-convicted politician is after leaving office. Some convicted are also “super-rich”. The founders where short sighted about the biggest problem today, term limits. Next would be that whole families would hold high office and create a generational political class that insures it’s survival through public money and power. The monarchies are back to stay! Each year, new politicians are becoming royalty amongst the thieves. Certain countries, not to be named, are key in expanding this incestuous class of princes and princesses. A twissited version of two respectable religions, have cemented themselves in the US political class. No conspiracy here, just a repeat of the past and current events. Notice how certain people change there religious beliefs(or accuire) and they get accepted in to the fold. On both coasts this is very obvious. Kind of like the Middle East or Comminist Party, be a beleiver or become a sub human serf.(If they don’t do worse) The vast majority of these two religions have no clue of this elite political branch, and just live a normal life of family, friends, and God.

#16 Comment By Timothy On January 28, 2013 @ 8:53 pm

As the man himself says, this is not a strikingly novel thought, but I’ve never seen it more compellingly argued and illustrated.

Congratulations, Mike, you’ve just sold another copy of your book.

#17 Comment By mna On January 29, 2013 @ 12:46 am

This brings to mind a documentary I once watched on the lives of the super-wealthy in Brazil. Most had to live inside fortified compounds, sometimes overlooking slums and commute via helicopter to avoid the very real likelihood of car jackings amidst the snails-pace traffic. Rare road journeys required several bodyguards and a near POTUS level bullet-proofed vehicle. There was also the omnipresent danger that your children would be kidnapped and bodyparts mailed to you until you coughed up a hefty ransom.

It struck me that sometimes you cant really opt out of society and also that there’s little point having a Ferrari (or luxury car of the moment) if you don’t get to drive it.

#18 Comment By M.P.L On January 29, 2013 @ 11:02 am

Brilliant article very well written. It is truly astonishing how well this article reflects the workings of the current Conservative government in Britain.
It explains their loathing of any kind of public servant however hard working or in (the case of the police) brave. It explains how they can demonise the poor, that their friends have put out of work, and joyfully make them poorer.
The majority of them are sitting on vast wealth drawn (as in the article) by outsourcing and/or by speculation on the wealth and poverty of the very poor that they despise.

#19 Comment By Russell Seitz On February 8, 2013 @ 5:29 am

in the Strange New Respect department, this article may mark the first time TAC has been [4]

#20 Comment By Ryan Volpe On February 16, 2013 @ 11:44 pm

As per Russell’s comment above — congratulations on hitting enough facts to fully cross the aisle (and “the pond” to boot).

My question: when are the pejorative RINOs going to realize this populist tide was actually foisted by the same elites their moderation threatened to restrain? What are they going to do about it, besides cede the “Conservative” title to Democrats — Nihilists are inherently apolitical.

#21 Comment By PJM On March 1, 2013 @ 5:40 pm

Nobody seems to have pointed out what caused the problems in the first place – the fact that banks have surreptitiously, through technology, taken over more and more of what should be the sole prerogative of governments, namely the creation of each nation’s money supply. It makes absolutely no logical sense for us all to ‘rent’ our money from banks that create it out of nothing in the first place and then charge us interest on it.
The monetary system we have is the major reason why the ratio of median income to median house price has more than halved over the last 30 years, making it exceedingly difficult for thirtysomethings to buy their first house.
There is no law that allows banks to create money out of nothing. A new law should be enacted to make it illegal for banks to create money. There should be a statutorily independent Money Creation Committee charged with the responsibility of monitoring economic growth and instructing the government-owned central bank to create money at the same rate as economic growth, so that inflation is zero. The new money created by the central bank should be handed to the government as a debt-free and interest-free asset for the government to spend according to its democratic mandate. Government could then reduce the sum of its need to borrow and its need to tax, leaving all taxpayers with higher after-tax incomes, and with correspondingly less need to borrow money. No banking license would be necessary, and finance companies and banks would compete against each other on an equal footing. The central bank would not set interest rates – the market would. Banks would be reduced to being what they have forever held themselves out to be – financial intermediaries brokering loans between savers and borrowers, and earning an honest margin in the process. Simple, really!
USA readers may find more about this at [5]
UK readers may find more about this at [6] where there is a list of links to similar organisations in other countries.

#22 Comment By julia On March 25, 2013 @ 8:46 pm

really good article. i sense an impending implosion in this country. or maybe another revolutionary war against the oppressors.

#23 Comment By Chris Forman On April 3, 2013 @ 5:09 am

I suppose if the rich people can go and live in harmony on their own, this is a good thing for them. The real trick is to learn how to achieve this for everybody!

Some simple back of the envelope calculations show that there are enough resources on the planet for every family to live like modern American millionaires. There is enough good land for a roomy 100m x 100m square for 2.5 billion families of four people, in which incident sunlight can provide up to 20 MW of power, and in which the top few mm of soil alone provides sufficient material to build a mansion. (Do the sums yourself. The data is available on line!).

In such a scenario, instead of relying of wage slaves to do our dirty work, we would seek to build a local infrastucture in which energy from the sun drives trillions of chemical reactions, that are organised through a technological hierarchy to add up to the things we want.

Sounds impossible, but such a system already exists in the form of biology! Think about it… a jungle is a collection of trillions of chemical reactions powered by sunlight. The decision about which chemical reactions happen is determined by the genes of the various species. Thus a jungle is a system which has local control over a solar powered hierarchy of chemical reactions.

What does this Sci-Fi utopian idealistic claptrap have to do with finance and rich people getting richer? Well it seems to me that perhaps we have an opportunity here to kill two birds with one stone: poverty and pollution! A combined finance, materials science, pollution control and research and development strategy aimed at creating economic and technological tools to both maximise and equalise value could create an ecosystem-like infrastructure that surrounds us, uses sunlight to pay for everything (rather than slave workers) and automatically balances our inputs and outputs with the local environment. Look after the pennies and the pounds look after themselves….

All these millionaires presumably delight in showing off their latest gadgets and gizmos. Well imagine a house that was made from objects a hundred times more complex than iPhones, that could do solar powered chemistry in the walls.

There isn’t a billionaire alive who can afford that! It doesn’t exist yet. and the research required to build it would be very, very expensive.

Nonetheless, a cave man living in a cave in the jungle already has a similar system for free!

Instead of destroying our world to help rich people feel good about themselves, lets use the greed of the rich people against them. Make them invest in an infrastructure that meets everyone’s fundamental needs, powered by sunlight and in which everyone has the ability to create what they need locally, in a way which doesn’t pollute!

Then we can print money, hand it out and pay rent to the rich people who own the land and infrastructure, if that’s what will make them happy. But they won’t have anything to spend the money on because the infrastructure they invested in already would provide everything they needed and more. So, they may as well not bother charging us to live there. Globally we can all live locally with the people that matter to us nearby.

In short: once technology is as good as we know it can be (from biology) money will be useless because everyone will have everything they need and the work will be done by sunlight, which is free. No matter how big and rich the billionaires get their insatiable need to grow ever larger fortunes will force them to invest in the technology that will eventually make their fortunes worthless.

Although no doubt some inveterate bastard will still figure out a way to make themselves the grand high pooh bah and get the others to pay homage to themselves by brainwashing them. Education is the key!

#24 Comment By frank wright On April 20, 2013 @ 11:34 am

frightening confirmation of what I have been seeing & theorizing. How are so many conservatives not seeing this?

#25 Comment By ibsteve2u On April 23, 2013 @ 5:33 pm

Sadly, above and beyond the greed that typifies America’s wealthy there is an element of sadism: They seek to make the many poor because they derive pleasure both from the suffering of others and their own invulnerability – due to their financial worth – to such suffering.

Further, diverting the wealth of the many to themselves reinforces their perception of their own worth…not just in financial terms, but in terms of their value to society/America/the species.

Hence you hear them protest that they are “job creators” even though so very many of them first attained their wealth from an inheritance and then grew their wealth via the artful manipulations (of law, tax law, and politics) carried out by our increasingly parasitical financial sector rather than by creating jobs. Worse, far too many of them grew their wealth not by creating jobs but in the commodity and stock markets.

In the latter market, by demanding that America’s corporations increase their margins…that is, reduce costs – namely “labor” – by offshoring production and service provision.

In the former market, by using food and petroleum (both refined and not) as platforms from which they can levy the private taxes known as “speculation”…in turn hammering all aspects of America’s economy and the lives of every American and forcing more American jobs offshore as rising energy costs forced America’s manufacturers and service providers to seek cheaper climes offshore.

“Job creators”? Hah! They’re job destroyers.

It was amusing to watch them go ballistic over who “built” what – that is, watching them flat-out reject the fact that America was built by others and is maintained by others. Or, put another way, they reject the fact that if they themselves disappeared, it would make only the tiniest of ripples – if any – in American society.

#26 Comment By Graham Weston On September 9, 2013 @ 8:05 pm

This is a very eye-opening and startling article. It shows how these ‘super-rich’ people are basically using the United States as nothing more than a money making machine. They could care less about the well being of their fellow Americans as long as they stay ridiculously rich. The word ‘public’ is basically nonexistent to these people.

#27 Comment By Ralph On October 15, 2013 @ 3:55 am

In New Zealand, we still have a Queen, Her Majesty Queen Elizabeth. And we have stripped away much of the majesty, and nearly all of the executive power, and there are plenty of people who think that was awfully clever and empowering for the populace.

We have traded one monarch, who at least had a sense of duty towards the people, for thousands of Evil Kings who could not care less if you die freezing on a street corner.

I also get a “vote” which has been clearly been shown to be useless.

Yay.

#28 Comment By Tom On November 20, 2013 @ 12:03 pm

As a “progressive” liberal I have to admit this article is one of the most concise I’ve ever read. I also agree with all of it. OMG, right?

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#30 Comment By Robert On September 10, 2015 @ 5:12 pm

Human nature has evolved very little over the past 4000 years of recorded history, so realistically, is there any real hope for a lasting substantial change? Given the steadily rising tide of humanity, if you were a member of the unlimited resources crowd, what would you do for your family in the face of a Soylent Green future? For over 15 years I have tried to envision a workable solution to our present and future predicament, yet the only viable “solution”, which will surely come from the “elites”, is some creative form of mass genocide. A more hopeful, yet well thought out viable solution would be most welcome. Let us not forget though, the Pundits predictions of 100 years or less before massive shortages of finite raw materials becomes a reality, which could well start the fires of anarchy burning. Can anyone say recycle?