27 February 2013

Capitalism in Action


Keep in mind that “capitalism” is defined as, “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”

And then read this story:

Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.
The top five banks -- JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. - - account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits (see tables for data on individual banks). In other words, the banks occupying the commanding heights of the U.S. financial industry -- with almost $9 trillion in assets, more than half the size of the U.S. economy -- would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.
Neither bank executives nor shareholders have much incentive to change the situation. On the contrary, the financial industry spends hundreds of millions of dollars every election cycle on campaign donations and lobbying, much of which is aimed at maintaining the subsidy. The result is a bloated financial sector and recurring credit gluts. Left unchecked, the superbanks could ultimately require bailouts that exceed the government’s resources. Picture a meltdown in which the Treasury is helpless to step in as it did in 2008 and 2009.

Whatever this is, it’s not the free market, and it’s not capitalism.  It might be a form of soft socialism, or fascism.  Personally, it appears to be nothing more than a somewhat abstract form of feudalism. At any rate, it’s not capitalism.

This may seem like stating the obvious, but sometimes it helpful to make this point to OWS types, assuming they still exist.  I have still heard from some people in RL that the current economic collapse is a consequence of capitalism.  There are still some leftist economists spewing this nonsense (Thoma and Krugman come to mind, in addition to your average Marxist), so it seems to me that it’s useful to point out that the unholy alliance between state corruption and corporate interests is not, by the standard definition of the word, capitalism.

It’s just not.