Monday, December 11, 2006

Voodoo Economics

The principle of supply-side economics, also known as Reagan's "voodoo economics", is to give the suppliers of the economy, i.e. the business/corporate side, tax breaks and other benefits so as to encourage them to create more jobs and find more business.

The problem with this version of economics is that it assumes that business has an interest in creating more jobs and finding new businesses. Unfortunately, history tells us that it does not. During the 20 years this country was controlled by voodoo economic freaks, business used the extra money to (1) move to other countries, (2) buy their competition, (3) buy company's with large trust and retirement funds so they could bust them, (4) try to bust unions and (5) buy more government toadies.

(1) move to other countries. This has the effect of putting pressure on wages in THIS country. It is an attempt by business (which has neither patriotic nor worker loyalties) to force the American worker back to some sub-human wage condition that existed in the late 1800's.

(2) Buy their competition. If they can buy their competition and reduce the workforce, they can gain more profit with less expense. Business is about profit - not employees.

(3) Buy other companies who have large cash reserves (trust fund or retirement fund). This activity got so bad during Regan's term that golden umbrellas and poisoned pills were invented to protect businesses from predator businesses. The object of the predator company was often the cash reserves of the target company without regard for the employees of the target company. Quite often the retirement plans were raped, the business gutted and employees dumped.

(4) With extra cash, a company could try to bust a union contract since it could withstand a strike longer than the union members could go without food. Also, companies could buy judges, lawyers and police officials who could bankrupt unions with phony court cases. The focus of this effort was to reduce wages and benefits earned by the unions over the years since these impeded profits.

(5) Business always needs toadies in congress - state and federal. More money means more lobbies means more toadies means more power. Also they need judges to avoid nasty court renderings such as environmental requirements.

During the time Reagan and the elder Bush were in power, I was sitting in a safe job on a railroad in the midwest. For 12 years my railroad did not hire a single soul - in fact it (and other railroads) got federal laws changed to do away with 2 members of a crew and a caboose. While I was not a part of management I was around them all the time and I was well aware of their objectives: reduce employees to interchangeable robots, eliminate work rules, reduce wages and benefits. During this era the railroad reduced it's total amount of rail and closed goodly percentage of it's stations. Now, if Reagan's economics were so beneficial, why would the railroad do that? Why would not the railroad be out there looking for more business and hiring more employees? It's because supply-side economics helps no one - not even business.

Point: If a business man does not hear his cash-registers jingle, he won't hire new employees and he won't attempt to expand his business. And supply-side economics does not make the registers jingle.

Now the current Bush continues the same old bullshit. At this point we have had over 6 more years of supply-side bullshit and the economy sucks. The middle class is smaller than ever and the growth of those in the lower class is overwhelming. Bush keeps claiming that the economy is making jobs but those are low paying jobs with no benefits - just the kind of jobs that businesses want. Some people work two-three jobs but, since none of them are over 40 hours a week, they can't get benefits. The various free trade agreements continue to attack American industry and endanger American security (do we really want to buy our military supplies from other countries?) benefiting only the global corporations. Free trade agreements are great when made amongst equals but who in America can compete with a $.50/hr Chinese or Thai worker? Ask what's left of the American textile industry how they like the free trade agreements.

Myself - I believe in eliminating the myth of the corporate individual. I believe that corporation shareholders are directly responsible for the behavior of their corporation and should not be shielded by this myth. When you eliminate the corporate individual you also eliminate the corporate income tax. This is fine with me because corporate profits have been illegally taxed twice (once as a corporate profit and once as shareholder income) for a long time. With no corporate tax and no corporate deductions, corporations can decide to reinvest their money or spread it out to their shareholders where it can be taxed as income ONCE. BUT - if it is deemed that the corporation has done something illegal, ALL company officials and shareholders are deemed equally liable. Such as dumping dangerous waste material into areas where a school's water supply comes from.....

And then - i believe in much reducing the taxes of the lower and middle classes. Why? Because, they buy things, they save money, they make the cash registers ring.
Both buying things and saving money are good for the USofA. Because all these people do not work as a unit - they work as individuals and are therefore more responsible, more patriotic and much less dangerous than corporations. Whereas an individual may want to get ahead in the world and make more money, he is generally able to do that without harming others.

Now - you might think that after all this I am against business and corporations and global corporations. I am not. Neither am I against lions and tigers - but I know a predator when I see one. The primary goal of business is to make a profit. For a few businesses, secondary goals may include the welfare of its workers but that is very rare. In almost all modern businesses, workers are a cost center not a profit center. They are liabilities, not assets. The same is true of corporations and global corporations only you can add that most global corporations are not loyal to any particular country - they are loyal only to themselves. But some things just can't be done in a Mom and Pop shop. Some things require organization beyond the mundane. From that I feel that businesses and corporations are necessary mechanisms without which we could not function. They need to be healthy and growing for us to be healthy and growing. But, as with Lions and Tigers and Bears, you need to keep your eye on them and protect yourself as much as you can because they will turn on you in a minute and eat you alive.

See this link for more information on Voodoo Economics:

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