Paul Krugman, liberal Nobel Economist, points to a huge increase in the corporate share of the economy since President Reagan: from 4-5% to 10% currently, except in the troughs of downturns. In addition, corporations aren't spending this doubled share: they're saving it.
The Roman Senatorial class in the fifth century controlled an even larger share of their economy: their capital was land, slaves, serfs, and gold. They hoarded all of them, but especially gold.
It's argued by conservative economists (non-Keynesians) that corporate hoarding (or saving), doesn’t matter, because it isn't like hoarding gold--the Roman Empire's main currency. Corporations have bank accounts: banks can turn around and lend out corporate deposits; that's their business.
Bank speculation, however, instead of lending, has become the great profit driver for big banks: they don't lend out enough during a recession like ours, because they can make so much more through playing the 'Russian Roulette' Finance game, creating derivatives, and derivatives of derivatives, betting for and against their success (hedging) and selling them to other speculators.
In the case of the Roman Senators, the effect of their hoarding gold and land was to so severely reduce the availability of money in the economy that there was long-term deflation that impoverished almost everyone.
The effect of withdrawing money from Roman society was to reduce the ability of most people to buy anything, and to increase their dependency on those with wealth. That's what precipitated the Dark Ages, AKA feudalism. The other side of this: those hoarding might have been able to buy anything their jaded hearts desired, but since there were few of them, the Empire became progressively poorer. And even marketable goods became less marketable.
The same is true of the effect of corporations hoarding: fewer goods and services are produced or consumed: hoarding intensifies lack of demand that triggers a depression or recession.
Hoarding complements austerity, the cause radical Republicans now proclaim in order to reduce dependency on government. But if people were dependent on government programs to survive or prosper, then, without them, they would be even more vulnerable to exploitation by people and corporations with money. This gets us back to the Sequester, which takes place today, cutting $85 billion in programs "across-the-board" from Defense, the big untouchable, to Head Start and Air Traffic controllers.
The radicals don't seem to care if unemployment worsens, because of the cuts they demand. If you don't have a job, you're a loser; why should we take care of you?
But look on the bright side: the cuts slash bloated Defense the most, so maybe the Sequester isn't all bad. It might force newly appointed Defense Secretary Hagel to really cut the Defense budget. He's the one who called Defense 'bloated' after all.
On the other hand, Tea-Partiers love the domestic cuts: they only hurt "takers," they're told: so far, they hear no other voices.
So, expect a down-turn by Spring.
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If you suddenly withdraw a lot of money from the economy, it's the equivalent of a stock market crash, or worse since the sequester is real spending withdrawn.
ReplyDeleteThe radical conservatives apparently think it's worth it, since the reduced spending will demonstrate that Government can't do anything, and that people can manage on their own.
Unfortunately, in an economy as complex as ours, people really can't manage on their own, so what is the alternative they're offering: private interests taking up the slack, with a greater ability to exploit anyone without capital or resources, especially since fewer government watchdogs will be on the job.
This may be why large corporations and interests like the Koch brothers support the radicals with their money, and lobbying power.