Level Playing Field

As any society ages, it is a seeming historical inevitability that increasingly successful elements of that social structure identify themselves and generate resources, access and infrastructure –enhancing technological and legal pathways to their advantage – to maximize the ability of that growing upper class to hold on to those benefits and create specialized access to more. Elites rise to the top, sooner or later, and are resentful if balancing and open-opportunity efforts from the grassroots below threaten their dominatingly successful incumbency. The world is watching the less-than-democratic, centrally-directed Chinese political model, accelerate much, much faster than the “democracy” we call the United States of America… wondering if the American model has outlived its usefulness. They point to our obvious economic disparities/polarization as well as the clear contraction of the American middle class and average buying power.

Arguments without statistical basis rise from American rich incumbents, longing to hang on to their advantages. For example, the discredited “trickle down” theory that rich people with more money are the “job creators” still lingers in our own “rich guy” mythology, despite being repeatedly discredited by the finest economic minds in our country. How else can you explain the hard fact that 1% of our population at the top owns 42% of our wealth, while the 60% of our population at the bottom owns 2.3% of that wealth? The playing field is not just slanted, it is distorted in favor of incumbent wealth.

For an additional example, the military industrial sector of our economy has embedded major manufacturing facilities in the vast majority of Congressional districts, and hence there is a strong political push from representatives from these venues to vote to support massive manufacturing efforts to create weapon systems that are better suited to a bygone, pre-nuclearized era than today’s roiling seas of micro-attacks from stateless zealots. Can you really imagine a war between the United States and Russia over Crimea?

Not that we shouldn’t be obviously strong, but when the motivation no one talks about – the continuing humongous profitability of military suppliers – is the real reason we spend more than is remotely prudent on our military, we all lose much more than we gain. Rome, Sparta, the Ming Dynasty, the Soviet Union, etc. all crashed and burned when their military budgets were literally breaking the backs of their economies. In the United States, we call that “an unsustainable deficit,” but look at how many in Congress fight to keep these expenditures at the highest level on earth (more than the next ten highest-spenders combined).

But wait, there’s more. The high cost of qualifying legally to generate money from the private equity marketplace means that avenue is pretty much open to the mega-rich incumbents, and the new crowd-funding laws offer nothing but token access to a marketplace that clearly prefers investments into established players. Investment funds – where managers get taxed on their incomes at capital gains rates as if they has actually invested cash in the deals they manage – favor big deals and wealthy players, offering little or no access to anyone else.

Want to borrow money at the local bank? Again, this arena favors those will substantial existing capital assets. Banks usually “just say no.” Not only do the wealthy borrow at low rates, people who invest generally get vastly more favorable tax treatment per dollar generated than most people who work for a living.

But if the legal and financial rule system favor incumbent wealth, the ability of the rich to buy and perpetuate advantage – from buying superior educations for their children in a world of skyrocketing tuition, failing public schools and dwindling financial aid to buying the new automated manufacturing equipment (they are owned by the wealthy) that replaces well-paid technicians with robotic machines – is only accelerating.

Even on the trading floors of the biggest stock and commodities exchanges, the advantage goes to the wealthy incumbents. “New York Attorney General Eric Schneiderman is investigating whether U.S. stock exchanges and alternative trading venues provide improper advantages to high-frequency traders, Bloomberg reported, citing a person with direct knowledge of the matter… Schneiderman's office is examining the sale of products and services that offer faster access to data and richer information on trades than what is typically available to the public, the report said…

“High-frequency traders use computer algorithms to generate numerous, lightning-speed automatic trades that make money from tiny price differences in the market… A favored tool of hedge funds and other institutional traders, high-frequency trading has been in regulators' sights now for years, but experts have remained divided on whether the practice helps or harms markets.” Reuters, March 18^th. “Flash trading” – where high speed computers instantly analyze the market and implement advantaged or corrective trades automatically – are simply not remotely available to ordinary day traders.

With a strong move to limit government regulation from conservative interests, these American anomalies – which reflect the pattern economic polarization found in so-called “banana republics” and are found nowhere else in the developed world – would be preserved, and by definition, expanded as the wealthy classes would be able to continue to uses their gathered capital to continue acquiring an expanding segment of the overall economy. When productivity increases as the real buying power of wages falls, the big winners are those who own the underlying assets and companies.

As global climate change continues to sap our resources, altering land-use values, accelerating diseases and natural disasters, the fact is that the government will probably lack the resources to deal with the cost. What’s more, our nation is one where trading and financing (versus making things of value) – the tools of incumbent wealthy interests – are the main source of business profits. This augurs badly… we can expect long-term instability, dangerous volatility (but traders like market movement) and higher risk of bubble-boom-and-bust economic cycles, factors that interface badly with unstoppable costs from climate change issues

The government isn’t tapping the richest segments of our nation in proportion to their wealth. It has not created sufficient bounds against these undamped trading cycles and excessive focus on financial sectors. Our allowing the playing field to remain severely slanted and diverting resources to the narrowest segment of society will eventually hit a wall that could threaten the viability of our very continued existence as the United States of America. Perhaps we really need to address these issues now… before solutions begin to evade us. And losing the political system we have now most certainly doesn’t benefit the wealthy either.

I’m Peter Dekom, and missing the forest in an obsession with mythical trees can tank the best and most solid of nations in the merciless pummeling we call history.