Monday, March 12, 2012

Free Markets vs. an Individual's Freedoms

"Deo Ducente Nil Nocet" Latin for "Nothing can harm us when God leads us."

"I serve the company, whatever they need me to do." - Benedict Huntington, manager for the British East India Trading Company in Hong Kong in the 17th century/

After the Crusades, around 1100, the aristocrat's first trick was to outlaw local currencies.

In 1599 their second great idea was the chartered monopoly (the corporation). It gave just one firm -- one friend of the king -- the authority to do business in a certain industry. The British East India Trading Company, for example, had all rights to cotton in America. A farmer wasn't permitted to sell his cotton to neighbors, or to make it into anything. He had to sell it at fixed prices to the company, which shipped it to England and let some other chartered corporation make mittens and hats, which were then shipped back to America for sale.

That's why we fought the American Revolution.

America was later shaped by the nation’s radical transformation in the wake of the Industrial Revolution. The stunning growth of corporations created powerful new companies like the Standard Oil Trust and financial giants like J.P. Morgan. Meanwhile increasing urbanization, poverty and social displacement combined with recurring boom and bust economic cycles to create a new level of economic insecurity.

The wealthy stayed wealthy by extracting value instead of creating it. The more value they extracted, the more laws they wrote protecting the rights and privileges of the extractors. As companies like General Electric* realized, it was better to sell off productive assets and become more like a bank. The system was created for people who have money to make money.

* General Electric's Chief Executive Jeff Immelt said GE is well positioned overall, even as the world has entered a new economic era in which instability is the norm and emerging markets are growing while developed markets slow....and that broad-based social unrest around the world could be an issue for a long time. He defended GE's status as a major exporter with a big overseas presence: "We are consistently among America's top exporters," he wrote. "Are we 'un-American' because we sell around the world? No. Our company, because of our great people, can win. And, that is the American spirit." (Oh yeah? You also export jobs. Aren't you supposed to be America's "job czar"?)

Progressive reformers faced three major obstacles. First, there was the problem of concentrated private power: large corporations, trusts and monopolies. The vast sums of money and market dominance of railroads, financial firms and industrial factories made it obvious that these corporations could use their power arbitrarily or self-interestedly, to the detriment of individual citizens and the public good.

Second, this new economy created enormous instability. Fluctuations in commodity prices affected both producers and consumers, and wages were similarly volatile. Individuals found themselves in a more precarious position than ever, increasingly dependent on wage income.

These problems were magnified by the third challenge facing of Progressive Era reformers: political corruption.

At precisely the time when citizens were mobilizing in favor of policies to protect workers’ health, safety and economic opportunity, it was becoming increasingly clear that our government was incapable of responding to these needs. Muckraking accounts of legislative corruption highlighted how big business had captured state and federal legislatures. Meanwhile, a conservative Supreme Court judge struck down reform efforts such as the workday regulations revoked in the infamous 1905 case of Lochner v. New York.

Progressive Era thinkers such as the philosopher and activist John Dewey, and Supreme Court Justice Louis Brandeis, thought "freedom" meant more than just individual autonomy and free market exchange. Instead, freedom was achieved when citizens were able to live meaningful lives. In a modern economy, creating this sort of freedom meant enacting public policies that would protect individuals from extreme insecurity and exploitation.

First, this required a robust welfare state (for which the Republicans are now misrepresenting about Obama), to provide social insurance so that, as in Brandeis’ words, "citizens may live and not just merely exist.” Freedom was threatened by unrestrained competition that created unacceptable risks for individual incomes and basic well-being. To protect freedom, then, required social insurance and minimum standards for wages, health and safety.

Second, there had to be regulations and oversight to place checks and balances on the power of large corporations, for such powerful private actors could dominate workers, extract unfair profits from consumers, and corrupt the political process itself. America needs to end the practice of government regulators and military officers accepting private sectors jobs in the very industries they were previously regulating. EXAMPLE: U.S. Senator and Chairman of the Senate Banking Committee, Phil Gramm introduced the Gramm-Leach-Bliley Act, deregulating banks. Three years later after leaving office Senator Phil Gramm served as Vice Chairman and a member of the Swiss banking giant UBS.

* Read my post about how American corporations helped create China's new middle-class and how corporations like Apple screwed the middle-class. It's not at all like the Republicans claim: It's not high taxes or over regulation, it's corporate greed and cheap wages that drives American jobs overseas. Also, Americans don't lack job skills, just fair-paying jobs. And taxes are already historically low. Also read: How Corporate Tax Dodgers Hoarded $2 Trillion

Third, for both Dewey and Brandeis, "freedom" also meant that citizens were empowered to participate in politics, hold government officials accountable, and help drive new policies. As a result, both thinkers emphasized the mobilization of citizens in associations like labor unions, and the importance of policy making at the local level where citizens could engage directly with the political process and hold the government accountable. End the Republican's war on worker's rights and labor unions - - and repeal "right to work" laws.

In today’s world where most citizens are increasingly dis-empowered—at the mercy of big corporations, the vagaries of the market economy, and the corruption of public officials—freedom has to be more than just the conservative view of freedom from the state and freedom to transact in the market. Instead, the progressive view of freedom expands the power of individuals themselves, by protecting them from private interests and insecurity, while giving them a more direct voice in government. We can start by repealing Citizens United v. Federal Election Commission.

Now the ultra-wealthy and big corporations have sucked all the money out of the system, and don't know how to create any more*. It's not the 99% who need to retrain themselves in order to get jobs. It's the 1% who need to face the fact that their 900-year workaround of the value creation has reached the very endpoint of diminishing returns -- hence, our "emerging markets", "free markets", and "free trade agreements" (see a short list of the lobbyists currently promoting this).

* Read my post about how American corporations helped create China's new middle-class and how corporations like Apple screwed the middle-class. It's not at all like the Republicans claim: It's not high taxes or over regulation, it's corporate greed and cheap wages that drives American jobs overseas. Also, Americans don't lack job skills, just fair-paying jobs. And taxes are already historically low. Also read: How Corporate Tax Dodgers Hoarded $2 Trillion

To the Republicans, "freedom" really means freedom for large corporations to do whatever it is they want to for profits: low wages, outsourcing jobs, poor working conditions, low taxes, less regulation, less culpability to the environment, taxpayer subsidies to profitable corporations, allowing private entities to own and profit from America's natural resources, "tort reform" so citizens can't sue corporations for illegal wrong-doing, and "free" to exploit the political system with super PACs and political donations.

To the Republicans, individual freedoms (fair play, justice, and economic security) are trumped by "free trade agreements" and "free markets" for corporate profits that only enrich the top 1%. There's been no "trickle-down" economy. Read: Trickle-Down Economics: The Cruel 30-Year Hoax

CREDITS: This post was abridged and excerpted from two articles: A new role for the 1% by Douglas Rushkof at CNN and The 99 Percent Plan, which is a joint Roosevelt Institute-Salon series that explores how Americans can shape a new vision for the economy (the fifth and final essay in the series)...and the Wall Street Journal, and sections from some of my previous posts where they're hyper-linked.

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