I know, it's a couple years late. I've been really busy, so getting a movie in here and there is hard. Fortunately, I figured out how to get Netflix running on my Linux machine and it works great. So, last night, I took some time to watch "We're Not Broke" an interesting historical analysis of the financial meltdown of 2008.
The viewing coincides nicely with a wave of book reviews for "Capital in the Twenty-First Century", by Thomas Piketty. Picketty has shown that the ultimate conclusion of capitalism is a plutocracy, using 200 years of data. The plutocracy has resulted not in capitalism. Capitalism is dead, due to its own hand, and has been replaced with something else. It's an economic system that allows a small fraction of people (the top 0.1%) to accumulate wealth, invest it and hold it, with little to no risk. Dean Baker calls it "The Conservative Nanny State". Whatever it is that we have now, it isn't going to support a democracy.
Allow me to explain. The movie We're Not Broke, demonstrates over and over again, that cutting taxes will not create jobs. There are tax policy experts on the left and the right in the movie who recognize the problem of a system whereby the people who benefit the most from international tax law get influence and access to the people who pass the laws.
In the movie, you'll hear phrases like "transfer pricing", "tax haven", and "repatriation". All of it is about how the richest corporations are hiding their money from the authorities, legally. The authorities know that it is there, but wealthy corporations have teams of lawyers who can hide the money across borders to keep it from being taxed. It is estimated that there is more than $2 trillion hidden offshore. Our esteemed corporate leaders say that if they can have a tax holiday, they will bring that money back home to create jobs and make investments.
The conservative refrain is to cut taxes, cut taxes, cut taxes. Well, for the last 30 years, we did. How did that work out? The movie goes into gory detail about a natural experiment, the 2004 tax holiday under the Bush administration. The tax holiday temporarily cut the corporate tax from 35% to 5% to allow repatriation of money held offshore.
The results? Shareholders and managers got dividends and bonuses - employees got laid off by the thousands. This is just one tax holiday in a giant game of keep-away, with what was once known as the middle class, in the middle. That was one very expensive experiment, one that former President Bush is quite proud of.
This movie only confirms what I've been seeing and saying: conservative economic policy is not about creating jobs. It's about creating distance and removing risk from investing and holding capital. Consider the rise of monopolies like Comcast, Apple, Google, Microsoft, and the wireless giants, AT&T and Verizon. They sprang up after the Reagan Administration to become giants that no one could touch. Their stocks are valuable because they are monopolies, not because they entertain true risk in the ordinary sense of the word "capitalism".
Today, the Huffington Post reports new estimates are that there is somewhere between $22 trillion and $32 trillion sitting in accounts offshore. If you're wondering where the "job creators" went, they went offshore. Too greedy and selfish to support the society they live in, paying taxes is seen as out of fashion by this cabal of billionaires. Never mind crumbling infrastructure, expensive education and healthcare, with few if any national initiatives to improve the country. They're shorting America and taking their profits now, before it's too late.
I know a few capitalists. They don't have access to a team of lawyers that can reduce taxes to zero as do Bank of America, GE, Exxon and a host of other multinational corporations. Since the capitalists I know are not running monopolies, they entertain a certain risk of losing customers, and rising supply costs. Their concern of paying higher taxes is urgent simply because the titans can bend the laws to their will, at the expense of everyone else. If you own a monopoly, you're not a capitalist, you're a plutocrat and you're not interested in a free society, unless its high society that has the freedom.
With that kind of money being siphoned from the economy, we can easily explain the wage stagnation over the last 30 years that precipitated the 2008 meltdown and the recession that followed. "We're Not Broke" is a well though out analysis of the crisis we face today and offers some very interesting solutions to restore the balance of power necessary to support and sustain what makes this country great: democracy.
When everyone has a voice in determining our collective fate, we all prosper. But you won't hear that from the plutocrats.