Wealth Distribution: In the Eye of the Beholder

The US, UK and others have been moving to the right for about three decades, with the general themes of less government and personal freedom and responsibility as the keystones of modern societies.

Lower taxes are better in this Compassionate Conservative model, as governments are seen as wasteful and giving people too much help results in a “Nanny State”, which violates the second theme of personal responsibility.

The belief is that no matter what the form, less is more when it comes to government In the US, the habit is to pick some statement from one of the “Forefathers” that speaks to the tyranny of Government, which at the time was a Monarchy across an ocean and try to apply it to the representative government we have in the US today.

Taxes are reviled as being Wealth Redistribution instead of the effective system that provides services like Social Security and Medicaid, two of the reasons that the over-65 poverty rate in the US is in the single digits percentages compared to the nearly 40 per cent of older people who were in poverty in the 1930’s.

Ronald Reagan, a man who was on the Government’s payroll for more of his life than he wasn’t, created a scheme to discredit the good works of Government and promote CEO’s and Bankers as heroes, Captains of Industry who lead companies that will lead us all to success if we don’t tax them or force them to make workplaces fair through unions or other “group” efforts.

Conservatives label any group effort as Socialism in the US, using the general lack of understanding of the difference between Communist or Fascist states that went or go under that title to discredit any efforts of society that require a tax or limit on industry.

The cry of “wealth redistribution” is a main stay of the high income crowd, but the staggering redistribution of wealth through the plundering of the Social Security Trust Fund along with State Run Pensions Funds executed by the unregulated so-called “financial services” industry over the past three decades has done more to sap cash and energy from the economy than any tax or social plan could ever achieve.

The deregulation of the financial industry re-routed large portions of tax free money to 401K’s, where they were usually invested in mutual funds, one of the least efficient financial instruments ever invented. The companies that had access to this market were hand picked by the politicians passing the new laws striking down regulations that had kept the system stable for decades, and now after 30 years the politicians are picked by the bankers, an interesting and uncomfortable state of affairs.

The results after three decades of Deregulation are a massive redistribution of wealth through fees imposed at every step of the financial industry “value” chain, which has shown to enrich the few and impoverish the many that aren’t part of the insider game that is Wall Street and Wall Street South (Washington, DC).

This warped system logic goes back to a hatred of the working class that pervaded the Reagan administration and captured the hearts of many Americans, especially the middle Americans that believe in the fable of the “Good Old Days”. When women and minorities could be underpaid, and unions could be smashed by force.

For most of last century the wealth of our nation was built on the backs of immigrants and workers protected by unions that claimed a fair share and safe conditions. The work is dangerous, and despite the best efforts of men in suits who scoffed at unions and then at OSHA, and despite the explosion yesterday that killed 24 coal miners in West Virginia, we have reduced work place injuries and deaths.

Once it is determined that lives are not a standard cost of business then we can build the industries that make work places safer and grow GDP in other industries to keep water and air from being polluted iIf we lead the world in developing these technologies we will have an expanding global market for at least the next 50 years.

But what is the best way to develop those capabilities, private industry or government efforts? If we look at past results for a clue we see that the most robust area of the US economy has been driven by technology - over the last 50 years a lion’s share of the advancements have been in computing or information technology.

If you look at the facts you will see that almost all of the seminal work was the result of Government efforts and taxes. Everything from Radar to IC’s were built on the back of government-funded research, and following a Saffo Cycle of 30 years or so went from being intellectual curiosities to some of the most important tools in businesses today.

When President Kennedy made the bold claim that the US would go to the moon in 10 years he inspired a nation of scientists and engineers. He backed it up with the creation of the Apollo Programme and funded NASA with big money at a time when the economy was struggling to get past the downturns of the 1950’s.

President Obama needs to be brave, think big and continue to show that the wealth has already been transferred from people that work to people that collect fees while wearing nice suits.

It is time to move the money out of the banker’s phony “Value Chain” and put the 30 per cent of GDP that it leaches from industry back into play for wages, investments and a safety net. These actions will provide the foundations that have made the US the place to go continue towards a bright and safe future.

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