Tag Archives: Free Market

Sarah Palin’s Thoughts on Solving Government Corruption

Many Americans are realizing that the United States government is ineffective due the drastic levels of corruption that plague our electoral system and heavily impact the decisions and statements our candidates make as they run for Congress and the White House.  Washington’s policies are absurd because big campaign donors only give money to get political favors, and those favors are paid by our elected officials when they allow the rich to avoid paying taxes, demand ever-increasing amounts of government subsidies, and get away with causing environmental disasters.  Our politicians are not stupid and weak; they are actually strategic and strong, but so heavily corrupted by their need for campaign cash that they sell their votes to the highest bidder.  Both frequent political phenomena over the past few years, the conservative Tea Party and the liberal Occupy Movement, openly recognize and criticize the existing system.  Former Alaskan governor and Vice Presidential candidate Sarah Palin gave a surprisingly clear portrayal of the corrupt system in a September 2011 speech titled “Restoring America.”  (the transcript can be located on her website at http://www.sarahpac.com/posts/governor-palins-speech-at-the-restoring-america-tea-party-of-america-rally-in-indianola-iowa-video-and-transcript and a video of the speech can be viewed athttp://www.youtube.com/watch?v=w0-CLyI8BIE)  Palin described her ideas for ending such corruption, though those ideas are not likely to have much impact on the central problem of money dominating our elections.

After some introductory words of thanks to her audience, Palin quickly launched into a description of current U.S. economic problems.  “Today, one in five working-age men are out of work. One in seven Americans are on food stamps. Thirty percent of our mortgages are underwater. In parts of Michigan and California, they’re suffering from unemployment numbers that are greater than during the depths of the Great Depression.” (Palin, “Restoring America,” September 3, 2011)  Nothing is mysterious about such statements;  even the Princeton economist Paul Krugman agrees with the use “Depression” to describe current circumstances in his book End This Depression Now (W.W. & Norton and Co., Inc.: 2012).  Palin also described how the Depression has been caused by political corruption.  “We sent a new class of leaders to D.C., but immediately the permanent political class tried to co-opt them – because the reality is we are governed by a permanent political class, until we change that.” (Palin, “Restoring America”)  It is unclear whether she referred to the Democratic Party’s victory in the 2008 elections or the Republican Party’s resurgence in 2010 elections.  Either way, nothing much has changed politically because voters are far less powerful than the “permanent political class” of rich donors, lobbyists, and corporate executives that largely decide which candidates win by controlling political advertising money.  Palin is correct to describe our national leaders as co-opted and controlled by money, and that we must change the ability of money to dominate our elections if we hope to ever affect real political change.

Palin next drew a clear connection between the rich that control politicians and how those politicians give in to the rich.  She continued to call the rich and powerful the Permanent Political Class.

Yeah, the permanent political class – they’re doing just fine. Ever notice how so many of them arrive in Washington, D.C. of modest means and then miraculously throughout the years they end up becoming very, very wealthy? Well, it’s because they derive power and their wealth from their access to our money – to taxpayer dollars.  They use it to bail out their friends on Wall Street and their corporate cronies, and to reward campaign contributors, and to buy votes via earmarks. There is so much waste. And there is a name for this: It’s called corporate crony capitalism. This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk. No, this is the capitalism of connections and government bailouts and handouts, of waste and influence peddling and corporate welfare. (Palin, “Restoring America”)

Palin revealed that the rich are often rich because they get government favors.  They spend a part of their income to influence candidates and choose which candidates go into Congress or the White House.  The newly-elected leaders quickly move to give more government favors to their own financial supporters – a financial give-and-take that leaves the rich wallowing in wealth and power, and the rest of the taxpayers wondering where their votes and their money went.  In short, the use of money in politics controls later government decisions, which in the end hurts government efficiency, economic growth, and the general public.

Unfortunately, Sarah Palin then went on to attack President Obama and the Democrats for many of their corrupt deals while largely overlooking the details of her own Republican Party’s similar deals with oil companies and other corporate interests.  Even as she says the American voters must overturn the whole system, she does not name Republican leaders as participating in corrupt bargains.  “So, this is why we must remember that the challenge is not simply to replace Obama in 2012. The real challenge is who and what we will replace him with. It’s not enough to just change up the uniform. If we don’t change the team and the game plan, we won’t save our country.” (Palin, “Restoring America”)  Her statements are still focused, though, on changing the money and advertising systems that largely choose which candidates win elections – she still advocates changing the “game plan” in a fundamental way.

However, she fails to give any ideas likely to change the existing system.  Instead, she begins her plan with a general statement on supporting capitalism but hating corruption.  “I believe in the free market, and that is why I detest crony capitalism.” (Palin, “Restoring America”)  Palin fails to see that crony capitalism is the direct result of what one might call “free market politics.”  Capitalism is the theory of investment, risk, and profit as a reward.  Allowing free market economic ideas into political campaigns naturally allows the rich to invest the most money and, therefore, dominate the election results.  That is how Free Markets create Crony Politics.  Palin fails to see that obvious connection, and therefore fails to understand that giving all candidates equal funding and making it illegal for any candidate to take private money are the best ways of avoiding Crony Politics.  (All of these ideas can be read in detail at www.machineryofpolitics.com)  Instead of advocating for government-funded elections that would eliminate private money, Palin calls for the following policies to end Crony Politics:

1. Reduce Federal government power

2. Create Free Market Health Insurance programs

3.Entitlement reform, but with no suggestions for changing Social Security

4. Drilling for domestic oil sources to make U.S. into an “energy superpower”

5. Eliminate Federal income taxes on corporations

6. Cut corporate loopholes to end Corporate Welfare

7. Create a fully Free Market Economy

Conservative politicians have been demanding such policies since at least the 1980s.  When looking at the outline of her ideas for ending corruption, it is clear that her program will do little to end the dominance of money in our campaigns or in political advertising, and therefore will not change government corruption or eliminate waste.  In fact, many of her ideas could make the current corruption worse by inviting the rich to spend even moreto control government policy.  Opening up all U.S. oil reserves to private drilling companies would convince those companies to spend lavishly on political candidates in order to ensure that their company would gain access to the oil.  Eliminating federal taxes on corporations would give companies even more money to spend on politics, especially if some companies fear losing the profits they currently gain from Corporate Welfare.  Demanding a fully Free Market Economy, Free Market Health Insurance coverage, and reducing government power would likely give even more wealth and power to the rich that already seek to avoid having to follow government laws and regulations designed to protect the public.

In total, Sarah Palin gave a strong description of how money corrupts our politics, how corrupted politicians make wasteful and harmful decisions, and that the existing money-in-politics system must be changed if we hope to save the United States from catastrophe.  She clearly understands the problems that plague government today, but seems to have little idea how to solve those problems.  She powerfully called for a change to the “game plan,” but her conservative ideas distracted her from what the game is and confused her plan for changing it.

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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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