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David Cay Johnston is, as he states, not a socialist, but a capitalist who believes in fair and competitive markets and integrity. My blog concentrates quite a bit on environmental issues and David only passingly mentions the deregulation and rolling back of environmental laws in the interview below, but he has been writing about inequality since the 1960’s and does a great job of describing the “governmental capture” by multinational corporations. An overwhelming proportion of environmental destruction is being caused by these mammoth corporations that are literally a state within a state, so it’s important to make the connection between inequality/political disenfranchisement and the destruction of the environment driven by a “business aristocracy” which has usurped the institutions of society. There can be no social, environmental, and climate justice if there is no government to serve the people. Of particular interest is the interview with Steve Coll and the power that ExxonMobile wields. Three notable examples of government acting as an insurance agency for corporations while leaving a mess for the common people to deal with are the BP oil spill, TEPCO’s Fukushima disaster, and the mortgage crisis created by the Too-Big-To-Fail Banks.

Government rules and policies have been put in place to create the huge wealth gap in America:

– political economy, an amplifying feedback loop where wealth begets access to the rules in politics which begets changes in the rules which reinforce wealth.

– 45 years ago the media was staffed by blue-collar intellectuals. TV news media is now filled with people from wealthy households whose life experience tells them that things are just fine in the world. We’re not hearing about those exploiting the system for their benefit. Very little coverage of poverty as well. The U.S. has the highest % of children who go to bed hungry of any modern country.

– The most important period of determining your lifetime health and well-being is from conception to the first 6 months of life. Little to nonexistent programs and support for mothers and newborn babies in America. Just as the U.S. is neglecting its infrastructure by not maintaining and investing in it, we are also stealing from the future by not nurturing and providing proper care for small children. There will be a price and it will be very high.

– U.S. has been living under Reaganism since 1981 in which we worship money and our measure of the country is money. The purposes of our country were written down for us in the preamble of the Constitution: justice, the general Welfare, common defense, domestic tranquility, liberties. Nothing in the preamble talks about getting rich. That’s a byproduct of these other things, but we have gotten a distorted view of what’s happening and now have 33 years of evidence that Reaganism has made the rich richer at the expense of the 90%. We are mining the 90% to benefit the super-rich rather than creating an economy that benefits everyone.

– The number one driver of this crooked system is campaign finance. There are over 100,000 people in this country whose job it is to mine the public treasury or the rules for their benefit. This corrupt system has to be changed.

– The way we think about this country and its society needs to change. The founders actually wrote a great deal about their concerns over inequality. John Adams, the second President, wrote that his fear was that a business aristocracy would arise to destroy the country, making workers mere wage earners instead of craftsmen owning their own tools. These wage earners, not being truly independent, would be manipulated into voting for policies that would benefit the business aristocracy and we would lose both our liberties and democracy. Adam Smith, in The Theory of Moral Sentiments, talks about inequality being corrosive to the very fabric of society and says that “the greatest corruption of our moral sentiments is the tendency to almost worship the rich and to hold in bad regard people who are poor.” Our politicians reflect this even though many of them will tell you at any moment how religious they are. They obviously have not studied their religious text because if they did they would know that, in the case of the Christians for example, you were required to “give all that thou hast to the poor.”

– Reaganism has led to an enormous concentration of wealth amongst a small minority who cannot possibly consume that wealth and instead are investing it in financial instruments to extract more wealth rather than investing it in the economy. We don’t have to burn more fossil fuels to grow the economy; there are other ways to do that.

– We pay big corporations to not pay their taxes. The way this happens is that corporations are limited in the amount of money they can hold in the U.S., so the corporations get around this by offshoring their money in foreign bank accounts and then turn around and buy U.S. treasuries. The interest they earn from these treasuries will eventually exceed the value of the tax on that money, when and if these corporations decide to bring the money back into the U.S.. This scheme has literally become a profit center for the corporations.

– When this country was founded, there had been only seven corporations in the old british colonial United States at the time of the Declaration of Independence. Six of them were what today we would either call a charity or a utility. The Boston Water Works is a good example; it was the very first one and was essentially a utility. One corporation created in the colony of New Haven was set up solely to make profit. It was such a scandal they had to shut it down within a year and it took ten years to clean up the mess. The founders disliked and distrusted corporations, but they believed in collective bargaining because in 1792, Congress passed the first significant labor law and subsidy law based on a study conducted by Thomas Jefferson. It was to revive and protect the cod fishing industry ravaged by the British Navy. The class of fisherman known as “sharesmen” were able to negotiate with the wealthy ship owners in order to share in the profits. Those ships who participated in sharing their profits with the fishermen were given the subsidy and those who did not were exempt from the subsidy.

– Violent, explosive rise in executive pay which diverts CEOs from the welfare of the company. All large pools of capital that are owned collectively (charitable endowments, pension funds, etc) are systematically being predated. The assets of utility companies are being worn down and stripped.

We now have a government that does not go after people who are engaged in criminal frauds because they are considered so powerful that if they were prosecuted it would “damage the economy”. The government has become an insurance agency for the rich and powerful and the common people pay the premiums.

– We have gotten the results that Mr. Reagan said, if you listen to him carefully in 1980, that we would get which is that those people who are wealth holders would realize the income from that wealth, and they have. The actual tax rates of the people at the very top are 60% lower than what they paid in the 1980’s, but at the same time by getting rid of unions, by having these “free trade deals” which are really deals to drive down the cost of labor, we have driven down the wages and salaries of the vast majority of Americans as well as the environmental conditions (laws to protect the environment). A whole mechanism has been put in place that favors profit over labor and when you look at the data you can see it. The returns to labor in the Fed reserve data show a marked decline and returns to capital have been rising and since 2009 it has skyrocketed. Because labor returns have gone down, there is not enough aggregate demand in the economy for people to buy goods and services. The next thought would be that capitalists would change because people have to be able to buy their goods and services. No, if you are a global capitalist it does not matter. As long as there are no riots in the streets, you can sell your goods in other countries. We have lots of corporations now that are bigger than governments. Steve Coll’s book on ExxonMobile basically describes a private foreign service and a private military:

The scope of the market has become larger than the domain of the sovereignty of nation-states.

– The ultimate solution is very simple: the 90% of Americans who are worse off, who are back to the income level of 1966, can vote in a new government and start with the state legislatures because they are the ones that set the boundaries for the congressional districts but it will take many decades to get to a better path. The fundamental question about this division between the super-rich and everyone else is, “Are we going to revise the rules?” Right now you are seeing the rise of oligarchical thinking such as Tom Perkins saying the number of votes you should have should be based on the amount of money you have. The founders explicitly rejected that kind of thinking.

– This idea that if you make a lot of money, you should pay more in taxes is the most conservative idea in western civilization if your standard is something that’s been tested through time and works which is the classic meaning of conservative. Progressive taxation was invented 2,500 years ago in Athens when they invented democracy. The people of the city-state of Athens concluded that the only way one could become wealthy is by following the rules and laws set down to protect everyone. The infrastructure of Athens, its military, and government services that were provided to benefit everyone meant that those who did become wealthy were expected to bear a greater burden for those costs of society to ensure that Athens would endure. Society made their fortunes possible. This idea has been embraced by every classic worldly philosopher. 

– The game doesn’t just comfortably and stably go on if people don’t become active and we keep driving towards deeper and deeper hollowing out and inequality. Isn’t there a dark scenario here also?  Yes, we’re giving up on democracy and our descendents will read history books that begin with these words: “The United States of America was… ” It became a failed experiment where cynicism is used to mock anyone who is idealistic, a foolish romantic…

– We have governmental capture. We literally have a federal government that responds to the political donor class, which is a narrow group of very wealthy people, in how it taxes, how it doesn’t regulate, how it doesn’t enforce laws, how it makes trade agreements with other countries, and that imbalance should worry us a great deal. What did Plutarch tell us 2,000 years ago? “An imbalance between rich and poor is the most frequent and fatal ailment of all republics.”