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It’s the Corruption, Stupid!

            The Republican and Democratic National Party Conventions are today little more than political infomercials designed to sell their party’s presidential candidate to the American voter.  Many speeches are given and many videos are played, focused entirely on presenting their candidate as an example of deified human perfection..  When the candidates’ turn to speak finally arrives, they largely discuss the problems that cripple government and have caused recent economic catastrophes.  Unfortunately, the candidates only rarely mention the disease that causes nearly all political problems: corruption.  The fact that politicians have to beg rich people and companies for campaign donations in order to have enough money to buy the advertising resources that mostly win today’s elections, and that the rich only give money when they get promises for special favors when their candidate takes office, is never mentioned.  The Party Conventions could be described as the most effective infomercials on television: they give a list of problems and advertise their product (their candidate) as the miraculous solution to those problems without ever discussing what causes such problems.  Any simple reading of the convention speeches reveals this; we can look particularly to speeches given by President Obama, Paul Ryan, and Elizabeth Warren as examples of such trickery.  The political parties and the candidates clearly believe that the American voting public is stupid enough to believe the infomercial, so the public should analyze these key speeches for content to understand what the politicians promise … and what they want to avoid discussing.

           President Obama’s speech has been hailed as powerful and inspiring, but Obama made only two small references to corruption.  “If you give up on the idea that your voice can make a difference, then other voices will fill the void, the lobbyists and special interests, the people with the $10 million checks who are trying to buy this election and those who are trying to make it harder for you to vote. . . .” (Barak Obama, Transcript: President Obama’s Convention Speech, published by National Public Radio September 6, 2012 at http://www.npr.org/2012/09/06/160713941/transcript-president-obamas-convention-speech)  Obama argued that the people can stop corruption by voting, but he refuses to lay out a program for ensuring that the rich cannot use their wealth to threaten democracy in the first place.  Obama’s indignation is righteous, but his solutions are non-existent.  Obama later advised the American people that “[i]f you reject the notion that our government is forever beholden to the highest bidder, you need to stand up in this election.” (Obama, Convention Speech)  Again, Obama refuses to give any ideas on what laws could be passed to eliminate a rich person’s ability to buy political favors through campaign donations.

           Republican presidential nominee Mitt Romney did not even imply that corruption is the main reason for most American political problems.  Instead, his vice-presidential running-mate Paul Ryan was given the task of diagnosing corruption as the central disease that must be cured.  Unfortunately, Ryan merely described the problems of corruption.  “The stimulus was a case of political patronage, corporate welfare, and cronyism at their worst.”  (Paul Ryan, Transcript: Rep. Paul Ryan’s Convention Speech, published by National Public Radio August 29, 2012 at http://www.npr.org/2012/08/29/160282031/transcript-rep-paul-ryans-convention-speech)  Ryan never described how the corruption created by campaign contributions leads to patronage, corporate welfare, and cronyism.  He described the symptoms of corruption’s disease without actually diagnosing the disease!  Ryan merely says that Mitt Romney can end corruption: “Mitt has not only succeeded, but succeeded where others could not.  He turned around the Olympics at a time when a great institution was collapsing under the eight of band management, overspending, and corruption – sounds familiar, doesn’t it?” (Ryan, Convention Speech)  Ryan alludes to a comparison between Olympic corruption and U.S. government problems, and his lack of ideas on how to solve those problems sound very similar to other basic Republican statements.  He simply wants to elect Romney and then trust Romney to solve problems that Ryan himself does not appear to understand.

           Elizabeth Warren, the Democratic Party’s nominee for Massachusetts senator, went only slightly further than Obama and Ryan in diagnosing corruption as the central political disease that must be cured.  Warren alluded to corruption in government: “People feel like the system is rigged against them.  And here’s the painful part: they’re right.  The system is rigged.  Look around.  Oil companies guzzle down billions in subsidies.  Billionaires pay lower tax rates than their secretaries.  Wall Street CEOs—the same ones who wrecked our economy and destroyed millions of jobs—still strut around Congress, no shame, demanding favors, and acting like we should thank them.” (Elizabeth Warren, Transcript: Elizabeth Warren’s Democratic Convention Speech, published by ABCNews September 5, 2012 at http://abcnews.go.com/Politics/OTUS/transcript-elizabeth-warrens-democratic-convention-speech/story?id=17164726#.UFq_W65kG-Y)  Warren failed to indentify the campaign finance system as the source of political corruption, wasteful spending, and lopsided tax rates.  Later in the speech, she talked about how such problems had been solved in the past.  “About a century ago, when corrosive greed threatened our economy and our way of life, the American people came together under the leadership of Teddy Roosevelt and other progressives, to bring our nation back from the brink.” (Warren, Convention Speech)  However, Warren still avoided describing what the politicians did in the early 1900s, what laws were passed, how corruption was reduced, or why corruption has re-emerged so powerfully in our own time.

           Elizabeth Warren’s clearest statements on solutions to corruption are hidden within attacks against Mitt Romney and the Republican Party.  “Republicans say they don’t believe in government.  Sure they do.  They believe in government to help themselves and their powerful friends.  After all, Mitt Romney’s the guy who said corporations are people.”  This ignores the fact that the Supreme Court has enforced corporate personhood and avoids any clear statements on what she would do to end corporate personhood.  Instead, she moves on to discuss banking fraud, her specialty issue.  “I had an idea for a consumer financial protection agency to stop the rip-offs.  The big banks sure didn’t like it, and they marshaled one of the biggest lobbying forces on earth to destroy the agency before it ever saw the light of day.” (Warren, Convention Speech)  Warren correctly identified bank fraud as a giant problem that could be solved by government oversight and punishment, and even correctly revealed corporate lobbying power as the greatest threat to such protection.  However, she refused to say how we can eliminate corporate lobbying power, instead simply saying that having a good person in the White House is the key to winning such battle for government oversight.

           Are candidates such as Obama, Ryan, and Warren too stupid to understand the central role that corruption has played, and continues to play, in castrating the United States government?  No, these politicians are clearly intelligent and strategic people.  They know the American voter is angry at the government, and that politicians must give voice to that anger to win elections.  The problem is that politicians also need to avoid offending the rich in order to keep getting big donations so they have enough advertising money to get votes.  American politicians therefore play a complex tightrope-walking game of talking about American problems without discussing the role that corruption plays in causing those problems.  They are great tricksters, and their conventions resemble strange political informercials.

           Instead, American voters act stupidly when they are angered by corruption but keep voting for Republicans and Democrats that never clearly say why these problems occur and never take steps to solve these problems when in power.  Other parties exist, many of which have given stronger statements on how to end corruption.  One idea for eliminating corruption is to cut the link between rich campaign donors and political campaigns.  It can be read for free at www.machineryofpolitics.com

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The “Free Market” Fantasy: How Free Market Ideas Hurt Competition and Self-Regulation

Many politicians and commentators argue that government regulations hurt company profits and, therefore, hurt the economy as a whole.  They argue that government should stop setting rules for businesses in order to create a “free market.” Such statements rely on a patchwork of different ideas that may sound reasonable in theory, but do not work well in practice and have historically harmed the U.S. economy.

“Free market” strategy depends on several connected ideas.  It argues that businesses can regulate themselves, and that they are actually forced to regulate themselves in order to keep customers.  Companies need to keep loyal customers in order to continue selling goods, so companies that make and sell defective, dangerous, or generally bad products will quickly lose customers.  Companies therefore need to sell good, reliable products in order to keep sales up, increase company profits, and stay in business.  Companies in competition with other companies, therefore, are thought to be the best source of regulation.  Free market theorists call this “self-regulation.”

These free market ideas clearly rely on the fact that businesses are in constant, active competition with other companies selling similar things.  Free market theory further assumes that customers have many choices in buying products, have reliable information about the products so that they can make good decisions on what to buy, and that customers actually use that information to punish companies that make inferior goods.  All of these assumptions are destroyed in any real “free market,” so the mere existence of a free market undercuts a company’s willingness to regulate itself.

Economists have argued and effectively proved that true free markets destroy competition over time.  Even Adam Smith, one of the theoretical founders of market capitalism, argued that big, rich businesses quickly buy out their competition.

To widen the market and to narrow the competition, is always the interest of the dealers.  To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, and absurd tax upon the rest of their fellow-citizens. (Adam Smith, Wealth of Nations.  Amherst, New York: Prometheus Books, 1991, pages 219-220.)

Smith warned that free market capitalism encourages companies to monopolize their industry by eliminating competing companies.  As one company becomes dominant and eliminates all others, competition amongst companies disappears and customers are left with only one source to buy from.  This consolidation of entire industries occurred repeatedly in the 1800s in the steel industry under Andrew Carnegie, oil under John Rockefeller, meat packaging under Gustavus Swift, communications under Alexander Graham Bell, and many others.  Many of these monopolies were broken up by Anti-Trust legislation passed and enforced in the late 1800s and early 1900s.  However, a new wave of monopolization has occurred over the past forty years.  For example, the 1996 Telecommunications Act and recent FCC decisions have eroded the limit on how many media outlets an individual company can own in a certain market.  (For more information on these problems, visit www.freepress.net or read their book Changing Media: Public Interest Policies for the Digital Age, which can be downloaded for free through the website.)  We cannot expect customers to punish a company for bad practices if they can only buy a product from one monopolistic company.

Companies also seek to stop the spread of information that buyers find useful when deciding which company to buy from.  Big, rich businesses use their wealth to stop investigations into their practices.  Corporate leaders use bribery and financial threats to force governments to avoid investigating the bad practices and destructive results that companies use to make money.  The current American campaign donation system has even been described as “legalized bribery” by former Congressmen (Cecil Heftel, End Legalized Bribery: An Ex-Congressman’s Proposal to Clean Up Congress.  Santa Ana, California: Seven Locks Press, 1998).  We see this problem lead to catastrophes such the Wall Street collapse of 2008, the 2010 BP oil spill in the Gulf of Mexico, and the Massey coal mine explosion that killed 29 miners in Montcoal, West Virginia in 2010.  When big businesses use money to influence politics, we can expect government investigations into unfair or dangerous practices to disappear and become ineffective.

Many monopolistic companies use their great wealth to stop government officials from collecting and advertising even the most basic information about certain products.  One recent example is the massive corporate attempt to stop the government from publishing nutritional statistics on food packages.  The public won that battle with the National Labeling and Education Act of 1990, but such victories are rare.  The American public generally receives little information on the products they buy because government investigations are often castrated on the orders of corporate leaders.  This makes it extremely difficult for the public to get any reliable information to base their buying choices on.  The customers’ power to threaten a company through boycott is greatly reduced in any “free market.”  Monopolistic companies are therefore not threatened, so they often neglect regulating themselves.

Customers often put themselves into an even more dangerous position when they do not make a personal attempt to learn about the products they buy or the companies they buy from.  In fact, many customers continue buying products that have been publicly labeled dangerous, defective, or of poor quality.  Many Americans today have built up psychological “brand loyalty” to the point that they continue buying from companies they know are harmful.  Americans continue to flock to buy from Wal-Mart, BP, McDonalds, Exxon-Mobile, and Coca-Cola even though a great amount of information exists that proves those companies are harmful.  Other companies sell similar products, but American consumers continue to buy due to “brand loyalty” and advertising.  (The brand loyalty and advertising problems are examined in detail in Naomi Klein, No Logo: Taking Aim at the Brand Bullies, Picador USA, 2000).  This causes another collapse in free market theory: companies will not regulate themselves when they see that their customers are not using public information to punish a company’s bad practices.

“Free market” and “self-regulation” ideas will not free us from the evils of our most powerful businesses.  These ideas are a fantasy that will only make things worse and possibly send American society back to the problems, mass inequalities, and entrenched powers that controlled the United States in the 1800s.  Society cannot rely on “free markets” to regulate companies because free markets undercut the public pressures that are supposed to force companies to regulate themselves.  Free markets naturally create monopolies that annihilate customer choice, the spread of public information, and the willingness of people to use information to punish offensive companies.  Instead, governments must be empowered to ensure that competition amongst many companies continues to exist.  This may require government to break up large monopolies, as the United States government did in the early 1900s.

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