American Culture

Welcome to the jungle: How "gotcha capitalism" has destroyed the American social contract


By Martin Bosworth

In order for a disparate group of individuals to band together into a workable community, there have to be rules, both implicit and explicit. There are laws that people agree to follow to preserve the good of the whole, and there are social constructs developed that the members adhere to. “Don’t screw your friends.” “Play fair.” “You get what you pay for.” Basic principles that everyone (at least overtly) respects, thus maintaining the even keel of the group.

But we’ve seen over the last thirty years a slow, deliberate erosion of those sort of rules, replaced with the glorification of the individual self as paramount. Nothing else matters but you and what you get for yourself. As long as you profit and make out okay, fuck everyone else. This has led to deliberately hostile, antagonistic moves between the buyer and seller in almost every kind of financial transaction imaginable, and many other social obligations besides. The name of the game is to screw the other guy, before he screws you.

MSNBC reporter, columnist, and author Bob Sullivan has explored the erosion of the social contract through the lens of what he smartly calls “gotcha capitalism”–how big businesses use inscrutable agreements, hidden fees, and “gotcha” penalties to wring extra profit from the consumer in everything from credit cards to cable TV contracts, taking advantage of nonexistent regulatory oversight to work their will. As Sullivan writes:

Fundamentally, “Gotcha Capitalism” is a story about the death of the price tag, about the constant bait-and-switch tactics that layer on fees and surcharges long after we’re in a position to bargain over them. It’s about rampant false advertising, about the explosion of small print and asterisks and about the seeming disappearance of federal authorities working to keep our marketplaces fair. It’s about a threat to our economic system, which was designed to reward good companies with innovative products, low prices and smart employees, but now benefits cheating companies who hire the best liars and create the most misleading ads and confusing fine print.

You can see Sullivan’s theory (described at length in his excellent book of the same name) play out in decisions like that of Bank of America, which recently decided to hike the interest rates of many of its cardholders for literally no reason–at least no reason it would name, but in truth to help shore up its losses from exposure to the collapsed mortgage market. Essentially, the bank made a huge number of bad deals and is literally punishing its good customers in order to protect itself. By any standard, this is not playing fair.

Speaking of mortgages and not playing fair, Sullivan’s theory manifests again in a withering editorial by Elliot Spitzer, former Attorney General and current Governor of New York. Spitzer blasts the Bush Administration for actively opposing states’ efforts to combat predatory lending, even going so far as to pass federal regulations that blocked states from bringing suits against subprime lenders.

The social contract has been broken. Businesses use every trick in the book, from mandatory arbitration to universal default, to screw consumers over. Our areas of redress in government have not only diminished to insignificance, but often actively assist corporations in screwing us over. Is it any wonder, then, that citizens no longer feel an obligation to uphold their own social contracts, and do things like walk away from homes buried in debt?:

In recent years, we have also become aware of shifting social attitudes: debt is no longer viewed as a “moral” obligation, a binding social contract between consenting parties, but as an adversarial relationship between borrower and lender. Therefore, as conservative businesspeople we must also account for a higher probability that borrowers will walk away from their debts, if it suits them.

(This phenomenon requires a discussion all by itself. In brief, I believe it is ultimately the product of leadership failure, the placing of inordinate emphasis on “free” markets and individualism instead of regulation and the development of cohesive social structures. Let me put it in this – admittedly extreme- way: in the jungle no one owes anything to anyone.)

The glorification of the individual as the ultimate center of the universe brings with it a concurrent lack of shame or guilt. If you are all that matters–if you are everything there is–then you feel no remorse about anything you do. We’ve seen this abhorrent behavior made manifest in the every action of our so-called “leader” for the past eight years, but even Bush is just a symptom of the larger trend. And as a commenter on Sudden Debt notes, that lack of shame has spread from corporations down to individuals, who no longer care about the consequences of defaulting on loans or their mortgages:

I believe the shift in attitude re debt is due to the adversarial attitude taken by lenders. Anyone who’s ever had a debt collector after them can attest to that. Consumers have finally figured out the game. Defaulting on debt has always been a business decision, but the consumer has baggage of shame and guilt. The cut-throat attitude of lenders in getting consumers to borrow, and then collecting the debt has finally taken its toll. Consumers have woken up, and did the only thing they can – refuse to pay.

In order for a society to function, there have to be rules that everyone adheres to. If no one follows the rules, then it really is every man for himself. And if we don’t stop glorifying the self as the ultimate–if we don’t stop treating citizens like criminals and patsies to be played and bilked at every turn–if we don’t reinvest our common government with the power to protect its people–then we’ll have no society.

Welcome to the jungle.

UPDATE: I would be remiss if I didn’t include a link to Sean-Paul Kelley of the Agonist, who communicated very similar sentiments last week, and quoted from the always-excellent Mish Shedlock in the doing.

(Special thanks to Open Left for tipping me off to the Sudden Debt blog.)

49 replies »

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  2. Thanks, Martin. I’ve been thinking about this for some time, and you beat me to the post. Recall I wrote about Wachovia Bank a few weeks back and how it helped scam artists cheat Wachovia customers?

    I don’t mind capitalism. I don’t mind “markets.’ But Economics 101 was always based on the presumption of open, fair and competitive markets. Now, with so much rampant cheating occurring markets, capitalism has lost its power to create wealth and opportunity for everyone without fear or favor.

    Well done, sir.

  3. Yup. As I noted here last year, the crux of the issue seems to lie in the distinction between “self interest” and what de Tocqueville astutely observed about “self interest, rightly understood.”

  4. Hmm, at the same time, if a bank couldn’t shore up its losses, it would have to default on its deposits. Perhaps this might make you feel better about the “punishment” that the bank has to bear (everyone loses their jobs), but it’s a bit hard on their clients (everyone loses their savings).

    And, by the by, bankers are losing their jobs. I don’t know what the US is like, but – having just returned from the UK – I can tell you that bankers are being felled like so many flies in a Raid commercial.

  5. My gut tells me that the “family values” movement in the U.S. is largely responsible for this. After all, focusing on the family and personal morals (however often ignored by the very people preaching them the most – Ted Haggard, anyone?) tends to splinter communities. For example, vouchers let you enroll your kids in private schools, but at the cost of learning how to deal with people who aren’t like you – and the bulk of the world is always unlike you.

    The question is how to fix it, since the “good old days” were never as good as we think, and future society needs to incorporate not only strong “community values” in place of “family values”, but also the atomizing power of many technologies (which are probably responsible for much of the rest of this problem).

    Tricky problem.

  6. In truth, capitalism lends itself to difficulty interpreting just how far to take competition. It’s as if there’s an arch over the entrance to the business world that reads: “Abandon all ethics, ye who enter here.”

    To believe there’s a self-regulating mechanism built into the mechanism of the market is to delude oneself.


  7. If you want to know where a lot of this “I’m for number one” attitude has been fostered, read Alyssa Rosenbaum’s (she wrote under the name ‘Ayn Rand’) bloated, turgid, absurd book, “Atlas Shrugged”. Everyone has a half-baked idea now and then, but her’s never saw the inside of an oven. Unbridled capitalism destroys because there are people who will do anything for money. Anything. I live in a northern European country where there is general concern for all of our citizens; note that that I do not refer to us as ‘consumers’. My expectation is that the U.S. will collapse under the weight of its debts, both public and private, with the federal government owing 9 trillion dollars (that’s 9 followed by 15 zeros; 17 if you want to count cents, but then when was the last time you saw a cents sign?). And private debt is even more frightening: 14 trillion dollars. What happens after the fall, I don’t know, but I’m glad I’m here instead of there.

  8. Prospero:

    Interesting you should mention Rand (and also interesting you should take on the name of a Shakespearean sorcerer). I was also thinking of her.

    Rand used to say that she would answer any “honest” question any audience put to her. My own take is that any question she could not easily answer became “dishonest,” which is a neat trick when you think about it.

    I wish I could have asked her this, though:

    “Ms. Rand, what would happen to your philosophy if modern science proved, without question, that people are motivated to action by much more than self-interest, whether that self-interest manifests itself in money or not?”

    Because, it has.

  9. JSO said: “Because, it has.”

    Really? I won’t claim to be an expert or even really well read here, but there isn’t a study that I’ve read that I couldn’t explain as self-interest in some way, shape, or form. Not self-interest in a Rand-ian sense, perhaps, but self-interest nonetheless. Care to share a few links?

  10. Being an adherent of Objectivism, and a life long fan of Ayn Rand, I am an unabashed fan of laissez faire capitalism. However, I’m also tempered by Adam Simth’s “Theory of Moral Sentiments” which demands honor, virtue, and “for the betterment of mankind” in business dealings. Capitalism is a jungle, as it should be. However, people should read the fine print before they sign on the dotted line.

    As for the “victims” of the subprime mess, how could anyone think that a $600/month mortgage deal controlling $400K, completely with negative amortization could do anything else but crater. I feel bad for the people who lost their houses, but I also feel for the investors, pension funds, insuranceh companies, and banks that got stuck with a bunch of bad paper. Call me old fashioned, but I, would rather starve than default on a deal….after all, we’re only as good as our word.


  11. “how could anyone think that a $600/month mortgage deal controlling $400K, completely with negative amortization could do anything else but crater?”

    I’ll tell you how, Jeff. I’m a reasonably intelligent guy when it comes to a lot of things, but I have no understanding of money and never have. My family never taught me anything about it and now, at age 48, I’m trying to learn. I’ve frittered away plenty of it and been virtually fleeced by an “Investment Advisor” as well as a very large Financial Institution which treated my nest egg like it was compost for their many IPOs, losing 60 percent of the principle in the process.

    My point is, my awareness of my ignorance has kept me from making any large purchases like a house (which reflects poorly on my credit rating) but not everyone knows what they don’t know and so they get fleeced or they’re forced to fleece someone else. I’m trying to learn more about money, but there’s also that problem of keeping a roof over my head, keeping my health insurance, and trying to stay ahead of an industry (publishing) that alternates between naissance and rigor mortis month to month.

    In short, I’m the guy who wants my Social Security intact, thanks. I’m happy to pay into it and I know I will need it some day. The other stuff? All those fabulous investment accounts and all that? I need my finances simple. And I’m not the only one.

  12. Hey Brian,

    If you mean that the good feeling one gets (actually tracked by brain scans, these days) by doing something good for someone else is “self-interest,” then you would be right. I was talking about Rand’s assertion that human behavior all about maximizing your individual outcomes economically.

    She was wrong. It’s not how human beings work.

  13. McQuaidLA:

    Simple, as far as investments go, is the best way to go and you’re on the right track..As far as investment advisors are concerned, at least you got a good lesson….don’t trust investment advisors, brokers, insurance salesmen, or anyone who wants to place your money at risk. If an advisor were any good, he wouldn’t be in the business of advising other people, but would be solely trading his own account. The financial world is full of so many predators, sleaze bags, and crooks, all acting under the guise of respectibility. They’re just salesmen, pushing product on which they’ll earn a commission. Anyways, not owning a house isn’t such a bad thing……If you had bought a house 2 years ago, you would be underwater right now. As for simple, there’s always things such as savings accounts and government bonds. Compound interest does work miracles if one adopts a savings plan. Most people get fleeced by brokers because they want a better rate of return than they could get at a bank. Their greed ultimately does them in. Interest rates are kind of like working a horse. If a horse were money, it could work nonstop all day at 3%. At 10%, it would get very tired after a day’s work. At 20%, it would need frequent rest, at least a break every 3 hours or so. At 50%, it probably would break down after an hour of work. At 100%, it would probably lay down and die.

    Simple is good for most people. I’ve said it before, and I’ll say it again….The general public has no business being in the market. The only exception would be if one invested in index funds at a regular interval. There’s been an average upward drift in the stock market of an average of 9% per annum over the last century and a half.


  14. Jeff:

    Like you, I believe strongly in capitalism, but only in regulated capitalism. Unregulated capitalism leads business owners to the rational decision that it is better to cooperate than compete, so that they get a win/win at the cost of the consumer. It also has led business owners to the rational decision that they can put harmful products on the market so long as no one finds out.

  15. In Atlas Shrugged Ayn Rand depicts a society in which the good people have been so abused by society (John Galt) that he disappears and refuses to participate. While her “enemy” is communism, she did not foresee that unbridled capitalism (in France they call it “capitalisme sauvage” — wild capitalism) can run away with itself and do the same thing. In the US we, the good people, the middle class and working class, have been those whose works are constantly stolen by amoral pirates. The christian right is correct that there is a break down in morality. They just lost their focus that there is also a morality in commerce and community. We need a little community-ism to control those who are beasts of prey in our society.

  16. JS:

    I agree that there should be some regulations in business, mainly for product standards. Cooperation rather than competition has fallen by the wayside in most businesses due to market supply and demand forces, and the Sherman Antitrust Act which is still enforced, but sometimes you wouldn’t know it. The oil companies don’t really cooperate with one another and set the price of oil, as the price is discovered in the pit at the NYMEX. The same price discovery process goes on for all food, energy, metals, interest rates, and money. The problems I have with free markets is the cutting of corners that businesses will do in order to bring the product to market cheaper (Think China). Those cuts can involve safety issues, and I have issues with that. However, the invisible hand of the market will ultimately drive out the harmful product….I don’t want harmful product in the first place. Some regulations, are pretty over the top, and add great cost to the product. Many regulations in the CFR actually contradict one another….it’s as the left hand doesn’t know what the right one is doing.

    We’re really not that far apart on this one:)

  17. “regulated capitalism”

    Can there ever be such a thing as “Regulated Capitalism”? The regulators will always become corrupted.

  18. From Game Theory.

    Most or all business people get some game theory if they have a BA or MBA, respectively. The part always shocks and disappoints me was when such a class gets to Nash Equilibrium, zero-sum,minimax and predilections to optimality of defection over cooperation, you see a wry smile of satisfaction appear on too many faces indicating they’ve found a justification for all of the greediest deeds and urges they’ve done or imagined.

    The part they prefer to overlook (and which apparently most of corporate America has overlooked based on the article) is that Nash Equilibrium preference for defection ONLY APPLIES CERTAIN GAMES WHEN THE PARTIES PLAY THE GAME ONLY **ONCE** AND NEVER AGAIN. So, for example, such optimal plays apply to things like nuclear war and tourists buying souvenirs in faraway lands they’ll never return to but SELDOM APPLY TO REAL BUSINESS SITUATIONS.

    Most economic interactions are *iterated* games which have entirely different optimal solutions. Most often “Tit-for-Tat” empirically applies. And what does Tit-for-Tat require? Always cooperate unless *the other side defects*, then defect *once* and return to cooperating. This is exactly the of the flavor of “old school” American ethic and contract that has been destroyed.

    Apparently too many B-school boys (and girls) spent more time partying than studying and learning.

  19. Well, I havent seem any here discussing fractional banking, but this is the problem, I think, as to why so much money has to be pumped in to keep the credit system liquid. That is banks loan out money they dont have, and invest the same way. Fractional banking is predatory and a scam to boot.

    Capitalism as I understand it means to exploit. Peoples habits, wants and desires are exploited for profit as is their inability to decipher complex legalese in fine print. Capitalism also leads to empire building and grand designs. Look at what happened after WW2 and how America has basically taken up [Iraq] where the British empire left off. Capitalism doesnt work, nor does communism, so, people must learn to moderate.

    As for Laissez Faire markets, Clinton repealed parts of the glass steagall act [1929] with the Graham., Leach, Bliely act in 1993 which deregualted Banking/mortgages which helped lead to the credit mess tpday. Deregulation ends in predatory lending, as well it gave rise to these SIVehicles. People refinanced and basically, as never before, turned their homes into ATM machines. When the FED bails out ‘free markets: they are no longer free and work to promote bad behaviour. The recent stimulus bill raised the amount Fannie Mae and Freddie Mac would insure!! But that little fact escapes many who think its about giving consumers a bit of spending money!!

    Finally, the value voter moral majority thing was of course complete bovine plop. The people were basically fooled into following a robber baron mentality and actually voted for bigger government, bigger deficits, bigger budgets. Christianity is about helping your fellow man, not screwng him over!!

  20. The “jungle” is wholly inaccurate and insufficient a descriptor for this phenomenon, and it borders even on the irrelevant. In tribal societies, everybody has enough–Native Americans, Africans, ancient Celts, all of these held the community above the self. Every individual is allowed to develop their capacity to serve the community and the people all serve to foster the special skills and capabilities of each individual. The West has failed in every conceivable capacity to perform to snuff in this way that is mutually beneficial for all people, and has lead to a highly self-worshiping, pseudo-Satanic culture, leading to the psychic disease of ceaseless want. Would that Western culture could adopt some of the healthy habits of the supposedly “savage jungle.”

  21. The whole suspecious, predatory, antagonostic feel today seems to be permeating all of US society. At work the “bosses” are ever more distrustful and disrespectful of their employees. They pay them as little as they can while they themselves rake in the big bucks. This, of course, does not make for happy “team players”.

    I tried to cash a check the other day at B of A from a customer (his bank, not mine). I had to give a thumb print for the priviledge. I noticed that they had about 15 cameras pointed at their customers from all angles. I made a lame joke about not being a terrorist that didn’t go over too well.

    Everywhere, everyone seems to want your name, address, phone #, SSN, past residence and work history. How long until its retinal and brain scans and blood samples? Oh, and your “Real ID” card. Privacy is, sadly, a thing of the past, now replaced with brazen demands for all kind of personal information these people have no business asking for. It’s then secretly sold to marketers – the scum of the earth IMO.

    A lot of the cynicism today is due to the minority of really amoral, bad apples out there that care nothing for right and wrong, lying, cheating, stealing and scamming if the opportunity but presents itself. So society has to continue to make new rules to cover the loop holes these victimizing bastards have found in the old ones. Problem is, all of society then has to pay for it with an ever more restrictive country. Sobriety check points on the freeway in which everyone, guilty or not, is made to pull over is an example. A lot of it, though, is invented by insurance companies and their Republican co-horts in office who work tirelessly to convince people that right is wrong and wrong is right.

  22. As soon as you mention “community” that word will be twisted, pretzel-like, by right-wingers, into a another with a darker connotation – “communism”.

    But, to be fair, there needs to be a balance between community and individual. All one or the other is not good. Community is obviously essential to a cohesive society yet taken to the extreme, a person would lose autonomy and privacy. No community should be able to legislate the way an individual chooses to live his/her own life – so long as he/she is not harming others or destroying the environment in the process.

  23. Capitalism is a completely artificial construct that has no basis in the natural world and is therefore destined to fail. In the real world greed is easily contained. If a member of a village is hording food, clothes, or anything else he is immediately confronted about it and things are set right. He has no choice. The privelage of living in the village is the reward for containing his greed. In capitalism there is no such natural constraint. Individuals are completely unfettered in their pursuit of accumulation and there are no consequences for their immoral behavior. The only way the “system” can ever work is if there are consequences. A person’s reward for being a moral person and containing his greed is that he is granted the privilege of living and working in the society. If he does not, the natural world gives us more than enough examples of what should happen to him.

  24. ““Ms. Rand, what would happen to your philosophy if modern science proved, without question, that people are motivated to action by much more than self-interest, whether that self-interest manifests itself in money or not?””

    Well, Ms Rand’s book should be compulsory for all 18 year olds to read. It may give them a tool in life to fight for their own self interest when necessary. Having been handicapped by a liberal, think of the other person mentality before self it certainly helped me!

    A few observations:

    1. I can certainly accept that it was self interest that kept the fictional character Winston alive. Winston, having been tortured and then confronted by his life long fear of rats, forsook the lovely Julia. His professed love for her and Winston’s beliefs were toast in the name of self interest.

    2. When I was 7 years old I played a game of pass the parcel with my ‘friends’. It was MY Birthday. Dad was Chief Organiser of the games but failed at this particular game because I ended up opening the main present.

    It was the most fantastic bubble maker – I loved it. Bubbles were my favourite thing. It was in my hands for a minute, as I gazed with joy (and I thought it was the best present of the day) a hand reached down and removed it. The voice said…you’ve had enough presents for today let someone else have it….

    My heart sank, I buried my objection and smiled at the man who called himself my Father.

  25. The truth of this has been apparent for many years. One need but look at the abhorent behaviors of Corporations around evading cleaning up their pollution and despoiling of their neighbors space—-after having been given very generous tax breaks and other “incentives” to locate in that area. It has been a belief of mine for many years that Corporations do NOT make good neighbors.

  26. Milton Freeman unleashed. “do for yourself —” Well we have it, crumbling roads, Increasing poverty, health care in a disaster,wars and planned wars, Fascism, ect. You wanted it now take it.

  27. As a worker and a consumer, all I know is that NOBODY is on my side. Not my employer, the sellers, the corporations, the courts, the law, or the government. Not even my neighbor. All I’ve got is a union and lawsuit-happy lawyers–and sometimes not even them.

    Laissez-faire does not exist. The corporations have purchased a gov’t that is eager to take their sides in almost every case. This 2-on-1 gangup is not “hands off.”

    “Let the buyer beware” might have worked when people traded one on one, direct with the “company owner,” and for natural items such as livestock and timber (of which everyone was somewhat knowledgable). But today, the concept is merely another one-sided principal that favors the corporation. Why no “let the SELLER beware”? Why does ALL the responsibility of a fair and just transaction lay at the feet of the powerless?

    We cannot “choose” to participate in capitalism. It’s established and sanctioned by the gov’t. Since we cannot choose an alternative, it is forced upon us. And that alone is justification enough for regulations.

    I do not exist to serve ‘capitalism.’ Capitalism exists to serve me. And when it falters, I have the right to adjust it.

  28. As an anthropologist, I can’t agree that human nature has changed recently. The principle has always been support you in-group and exploit the bloody hell out of the out-group – the further out, the bloodier. Successful evolutionary strategy for any fit primate. Chris, you’ve been suckered into the myth of the noble savage. No such thing.
    However, I can agree that government has changed recently. Government is what keeps what would otherwise be our non-adaptive self-interest in check. Universally, in social animals, what government has meant is that the alpha male and cohorts maintain peace and order among the peons in order to support their first-in-line position.
    Actually, it would be easy to read, “The glorification of the individual as the ultimate center of the universe” as evidence that in a liberal, cheap energy society more people have the luxury to be one of the “haves”.

  29. Wow! I go away for just a little while and this turns into the best … blog … thread … EVER.

    I’d like to address what everyone has had to say, but that would take too long, so let me just address a few and summarize the rest.

    Jeff: Corner-cutting happens in areas other than product safety. For instance, mining companies that use arsenic to leach gold out of low-quality ore have been known to dump that arsenic into the water table. Not good. But I think we agree that we need regulation to keep companies from cutting corners and engaging in anti-social behavior for the sake of short-term profts.

    We’ll have to disagree about the invisible hand of the market. I strongly believe it works only when there is perfect and widespread dissemination of information. Absent information, the consumer has little way to make a rational choice when making even semi-complex transactions. And, of course, companies do their best to deny such information to consumers except when it’s in their best interests (positive information, for instance). For instance, the recent beef recall happened only because the Humane Society employed hidden cameras. I think it would be naive of me to believe that all such instances are being exposed, which means that I can’t make a rational, informed decision when buying a hamburger. And if I develop mad cow disease, how would we track the batch of meat that gave it to me?

    J Gruszynski: THANK YOU for bringing up game theory. My understanding from an economist I know is that there is currently a backlash in the field against GT, led by a guy out of Stanford whose name I can’t recall, and for both the reasons you cite and because a very few economists are finally beginning to look at findings in mass and personal pscychology and realizing that “economic man” is only a part of the total picture.

    Still, we have a number of economists who are, sadly, idealogues and will never admit, even in the face of overwhelming evidence, that there can be any other explanation for behavior other than that origiinating in the neo-cortex.

    Elaine: I don’t think what you’re describing is what Rand had in mind. Instead it’s ad parenting that tends to drive adults into narcissistic disorders. Let me suggest a book by Alice Miller entitled “The Drama of the Gifted Child.” You’ll find that she relates other instances like yours, the effects of same, and gives some form and substance to the issue.

    General to think about:

    I don’t believe the word “captialism” means “exploitation.” Adam Smith used the word to designate that part of wealth that is used to generate more wealth, and went on to say that this generally includes production of products of some kind (and, today, we would add “services”).

    The modern corporation is an absolute marvel of human ingenuity. I cannot think, off the top of my head, of any other institution that provides such a win/win/win/win/win to so many constituencies.

    1. Owners win if the organization produces profits, and their risk is only their initial investment, as the modern corporation insulates them from debts the corporation incurs
    2. Employees win by having jobs that pay them for their services
    3. Vendors win because they can sell or lend to the organization
    4. Customers win because the organization must produce useful goods and/or services if it is to be profitable, thereby producing something customers want to buy
    5. Society wins because such organizations pay taxes, their employees pay taxes, the vendors pay taxes, and these taxes can be used for the common good.

    This is the proverbial goose that laid the golden eggs. As long as no one gets too greedy, it works extremely well. But ANY of these consituencies can pull out of the “deal” and kill a corporation, and I have seen each of these consituencies kill a corporation in my lifetime.

    Where we get trouble, though, is when “society as a whole,” through its representative the “gummint,” bands together with the one or more of the consituencies to alter the mutually beneficial relationship too radically. In communism, the gummint bands together with workers. In some versions of fascism, the gummint bands together with owners. In overregulated societies, the gummint is siding with consumers and, potentially, vendors.

    I think what the US is facing now is a case where gummint is confused about its role. On the one hand, it’s reducing oversight in critical areas, including product inspection. On the other hand, it has passed Sarbanes-Oxley, which increases reporting and paperwork prodigiously for, in some cases, no discernible benefit.

    Personally, I think the gummint’s role is to regulate corporations in such a way that no constituency gains the upper hand and goes on to produce short-term gains by anti-social means.

  30. Hifi:

    Tarnation! It just gets better and better! Now we have an anthropologist. I have just died and gone to heaven.

    I’ve taken some grad-level cultural anthropology courses, and you and I agree that humans haven’t changed a bit, but I think we would also agree that societal behavioral norms can change over time.

    And I have greatly enjoyed learning about chimpanzees and their behavior toward outsiders. Freakin’ frightening stuff.

  31. Great post, and great blog; I hadn’t heard about you until today when a friend sent me a link. I agree with your article, despite how disheartening it is and how lonely it makes one feel. Society has slowly disintegrated from a social, communal experience of trusting relationships into a island-like self-centered wasteland. I am interested in money and finance-related matter in my blog, and it’s interesting to me to look at the system of retirement we have. Social security is no longer taking care of society nor is it secure; it’s been plundered and mismanaged and current and future generations are, like you describe, on their own. Retirement saving itself is an individual activity; most companies now have discarded pension plans, and suck the life out of employees without any future promise of care. A worker has to rely on his own money and intuition to invest well for retirement or face being destitute in old age. Even family, once a solace as people described being able to be surrounded by family in their old age, is no more; it’s off to the ‘active-seniors’ community, then the nursing home, then the hospice. And of course, you get buried alone.

  32. Mr O’Brien: Thank you for the book recommendation I shall check it out.

    With regard to corporations they are not pulling their weight in the UK with regard to taxation.

    A small point:

    If people produced offspring that they could afford to keep, educate, clothe etc there would be smaller populations and I suspect less hardship for many families.

    Population explosions would be avoided and delivering goods, services, help and work to the population would be less of a headache for all.

  33. “This is not just a threat to state services in the developed and developing worlds alike, it’s a threat to the whole democratic way of life we enjoy, because a powerful and influential elite is giving clear signals that the way forward is to opt out of society.”

    The state is being challenged, as ever, by individuals.

  34. Sad makes an important point about privacy. As our personal lives become more transparent, the power structure becomes more opaque. How much more secrecy is it possible to heap upon our public institutions? The perfect culture in which to grow fascism .

    Also, those books by Ayn Rand were written during a time and in a place that does not even remotely resemble our present moment. The philosophy espoused is simplistic, naive and short-sighted. Limited.

  35. I need my finances simple.

    I’m with you, McQuaid. An economy can’t be run on the premise that every citizen will become a financial advisor unto his or herself. Finding one you trust is hard enough.

    I remember when Bush was trying to push his private savings account to replace Social Security. Despite being a high-net-worth type, this lawyer spoke for everybody when he said, “Oh no. Not something else to think about.”

    Aside to Jeff: thanks again for understanding that. Also this is an amazing metaphor:

    Interest rates are kind of like working a horse. If a horse were money, it could work nonstop all day at 3%. At 10%, it would get very tired after a day’s work. At 20%, it would need frequent rest, at least a break every 3 hours or so. At 50%, it probably would break down after an hour of work. At 100%, it would probably lay down and die.

    JSO, I agree with you: Best. Thread. Ever. In fact, it’s way over my head. I’ll just watch if it continues.

  36. “She may be taken, nevertheless, for what she will continue to be: An inspiring advocate for the free market and for the creativity of the autonomous individual. With her intimate, personal knowledge of the Russian Revolution, and all the loathing that it inspired in her, Rand will always be an invaluable witness to the practice and folly of totalitarianism.”

    Yes! 🙂

  37. JS:

    Regarding the invisible hand of the market. The invisible hand of the market works precisely because the information is not perfect, and is unequally disseminated. Can you imagine a life where everyone had 100% information that was perfect about the market.(When I say market, I’m referring to all capitalistic transactions) For one thing, stocks, bonds, and commodities wouldn’t change price because everyone would know everything. Nobody would be able to retire, because investments wouldn’t move upward because there would be no buying pressure(people buy because they expect to make a profit). Perfect information would reduce profits because all costs would be known by the public. Perfect information would reduce incentive and competition because everyone would have the same set of data. Everything in the world would would turn into a 30 year Treasury bond with a “put at par” option and a 2% yield. Capitalism, with all of it’s quirks, is inherent to man’s nature, despite what some other commenters have put forth. Capitalism thrived underground during then darkest phases of the old Soviet Union and outlasted the USSR. Capitalism was around pre-Roman times, and the renaissance Medici’s turned it into an art form. It’s inherent in man’s nature to try to turn a profit, just as it’s inherent for man to speculate. Capitalism is not wrong, nor is it morally unjust. And, JS, you’re right….Capitalism is not exploitation.



  38. Jeff:

    If you’re telling me that capitalism is not wrong or immoral, you’re preaching to the choir.

    Let me first pull back on the word “perfect.” I overreached. Thanks for pointing that out.

    On the other hand, the point I was trying to make still stands, I think. The “market” I was talking about was the one for goods and services. In those cases that the consumer doesn’t have enough information to make a rational buying choice, bad goods and services don’t get driven out of the market by good ones, because the customer doesn’t know the difference.

  39. Pingback: Prose Before Hos
  40. Isn’t what we’re really talking about here is the rise of oligopolies and mega-corporations? Come on, who’s kidding whom. Your reading this and you know deep inside that your just as greedy and self-serving as anyone else. Even when you’re being selfless, it to serve a purpose: to feed the superego and appear noble to those close to us, and the greater community at large. Are there truly saintly people walking among us? Probably not.

    Capitalism works because it’s based upon serving one’s own highest and best interests. Where it begins to fail is in a marketplace that has become so homogenous, consolidated and vertically integrated that the consumer lacks the requisite competitive diversity that keeps competitors honest because it is their own best interests to be honest in order to assure repeat business. Today, our economy is dominated and controlled by a relative few and monolithic banks, retailers, cable and telecommunications giants which have tipped the scales way way way away from behaving responsibly in order to assure their own longer term self interest. (Ever try to move your accounts away from Bank of America? With Autobill pay, auto direct deposit, $35 overdrafts, and the like, it creates an almost insurmountable hurdle that is such a pain that many depositers simply give up and remainin spite of the ongoing rape of fees leveled against their dwindling checking accounts.)

    The self-serving, policy setting behemoths have robbed the consumer blind and we have no choice but to sit there and take it. A diverse marketplace without monopolies and oligopolies is a requisite for a free society practicing capitalism. Consumers are not in a position to exert pressure on huge corporations through collective bargaining or mass exodus by voting with their feet. Perhaps large tax incentives (as in NO TAX) for small and very small businesses will revitalize the economy by leveling the playing field slightly in their favor and restore diversity and small businesses to this now monolithic corporate country which acts it what it believes to be its own best short term interests..