Scylla and Charybdis

The deregulation of the market in the past 30 years has enabled corporations and banks to grow to a size which has started to destabilize the fabric of not only society but of capitalism itself. This shows itself in a number of ways.

Mass Extinction through Gravity

Because of their size, certain banks and corporations have started to destroy the competition ecosystem in the sense that their gravity makes it virtually impossible for competitors to even get a footing in the market: Competition is vital for the health of any ecosystem as it creates incentives for out of the box innovation. This innovation is driven by consumer demand. If consumer demand is controlled via mainstream mass media, and any alternative messages are drowned out by massive marketing campaigns, smaller companies and/or start-ups will quickly default. Compare this to putting earth close to Jupiter: though earth has technologically reasonably advanced civilizations compared to Jupiter (according to current knowledge), it will be ripped apart by the sheer gravity of Jupiter.

If the market is to stay healthy, it is necessary to create a more level playing field in the market where smaller companies can compete with the big boys.

Government Influencing through Gravity

Corporations are now in a position to severely influence and destabilize governments through the fact that they pay well for certain services. This former lobbyist describes in detail how just mentioning ‘that his company could be interested to offer a job to a government official when he stops’ was usually enough to own this person. Some people will object that this official should ‘just say no’, and in general I would agree that if somebody wants to serve the people, he should do exactly that: serve the people. However, should it be legal (or unregulated) for the company to just waltz in and try to bribe a government official? Many people refer to such regulation as ‘big government’, I rather see it as civilized government. If the United States want to evolve to a real democracy, such interfacing with the public should be regulated to battle the 3^rd world-type corruption that is witnessed nowadays.

Corporate Welfare through Corruption

Though corporations and banks maintain that they operate on the basis of ‘real capitalism’, I have some doubts: if real capitalism had been applied, most of Wall Street, the US automotive industry and many others would have folded. Instead, these companies have been bailed out with public money without even the constraint of transparency in how this money was spent.

Now this is a situation that 99% of us would like to be in…

This is not capitalism, it is not even socialism, it is a scam. Naomi Klein has described the principle of this scam in ‘The ShockDoctrine’: move public money to private entities' accounts.

Translation: taxpayer’s (public) money, meant for e.g. infrastructure, healthcare, environment etc, is taken and given to private companies where these companies have no result obligation.

Some people would get hanged for doing so in earlier centuries. We would call them highway robbers.

These are strong statements, but so is a foreclosure notice from Bank A to someone who did not make payment to Bank A because he was fired from his job at Bank A which he bailed out. 

If anybody wants to play in a capitalist market, they should be able to deal with adverse times by themselves. As companies in general do not want to make the investment to get to this state, the government should regulate and monitor this and be empowered to sanction non-compliancy if only to protect citizens against wild west style shoot outs.

Foreclosures by Companies on Welfare

This is adding insult to injury. What we see happening is that Bank A is bailed out by the government after losing at gambling with ‘products’ consisting of doomed mortgages (mortgages sold under false pretenses, i.e. we know the people that received the mortgage had a high likelihood of defaulting). Note: I am simplifying here and make no pretense that I understand such scams. The professionals don’t even really understand the Frankenstein monster they created.

So, Bank A is saved, and CEOs, sales managers and so on at the bank continue to receive their millions in bonuses, stock options and what have you. They now have time to look at the mortgages. Because of the crisis which Bank A partly caused, people start defaulting on their mortgages, and Bank A does not hesitate: foreclosure, get those people out. Let the state take care of them…

Again, public money to cover for private mis-management.

If banks can be saved from ‘toxic assets’ and be allowed to make a profit despite just having basically defaulted to the state, shouldn't citizens be saved from those same toxins?

Or should we just kick them out and see where it ends?

This is back to Corporate Welfare through Corruption. If the public bails out banks, this should mean that the banks have no claim on such mortgages.

Quick Conclusion

Am I saying that government should regulate everything? Am I pushing for ‘big government’?

Nope, I am just saying that it is time to find that thin line between a state-controlled market (does not work, the Soviet Union collapsed because of that) and a completely free market (as per above: does not work and is collapsing). Basically, the challenge is to navigate in between Scylla and Charybdis.

And that is something that some Greek dude was good at some time ago...

[To be continued...]