classical economics
for analysis,  forecasting
and policy design

Corporations, Politics

CORPORATIONS, POLITICS
and the MIDDLE CLASS
By Wayne Jett © July 29, 2010
    Without political rights, the middle class would not exist. Without corporations, middle class standards of living would be lower. Corporations are the invention and tool of the middle class, which explains why corporations are constantly assaulted by the dominant mercantilist elite. But then, many mistakenly think corporations are the mercantilist elite.
    Until commoners won political rights, they had no need for corporations because they had no capital and no right to compete in business against the mercantilist elite. The hard-won political right to compete eventually produced profits and accumulated capital.
   
But lifetimes of unprecedented success still left entrepreneurs with meager working capital relative to the great mercantilist monopolies. The concept of corporate shares exchanged for capital with limited liability for shareholders enabled middle class entrepreneurs and investors to compete with the dominant elite on a somewhat level playing field for the first time.
Why Mercantilists Hate Corporations
    This did not escape the attention or enmity of the mercantilists. By 1900, mercantilist spokesmen railed about evils of corporations and limited liability for the “investor class.” Mercantilists were not helpless, of course, as they had tremendous political influence and they dominated the financial sector. Using these two formidable weapons, mercantilists preyed upon corporations and corporate investors, regardless of middle class progress.
    Predatory conduct by mercantilists against corporations includes manipulative trading practices with corporate shares. By moving share prices up or down artificially, mercantilists deprive shareholders of just reward for their investments and, in effect, take corporate profits for themselves. This was done by “watering stock,” insider trading and other “jiggling” practices in the Twenties and Thirties, and by naked short selling, credit default swaps, energy swaps and high frequency trading during the past decade. Every billion taken in illicit “trading profits” detracts that much from corporate performance and investor rewards, making corporations less beneficial and less attractive to the middle class investors.
Another “Surprise” of Financial Reform
    In this context of political and financial dominance by mercantilist elite, learning that Congress prescribed only a two-year “study” of naked short selling by the Securities & Exchange Commission in its heralded “financial reform” legislation was not really a surprise. Now we find that Congress simultaneously exempted the SEC from existing obligations to disclose its activities to the public.
    Congress did nothing to rectify the SEC’s many short-comings in failing to protect middle class investors from the Pequot Capital insider trading and manipulation fraud, the Bernard L. Madoff fraud, or the collapses of Bear Stearns, Fannie Mae, Freddie Mac, Lehman Bros., AIG, Washington Mutual and others. Instead, Congress chose to bar investors from demanding information from the SEC under the Freedom of Information Act. On the very day President Obama signed the financial “reform” bill into law, the SEC filed a pleading in court arguing the agency had no duty to disclose documents as demanded by Fox Business News. The public never knew of this provision of the Dodd-Frank Act until the SEC disclosed it in court – but obviously the SEC knew of it. This is proof positive the “reform” bill was written by Wall Street and its SEC lackeys to jab thumbs into eyes of ordinary investors.
    Recall this was not done to middle class investors by “big corporations,” but by financial predators best classified as mercantilist elite. Their capital vastly surpasses the resources of mere business entities and serves no business plan – only their interests as they define them.
Political Rights via Corporations
    With the mercantilist elite and their practices in mind, consider the current contest involving “political rights for corporations.” The McCain-Feingold “campaign finance reform” law enacted in 2002 limited the manner in which corporations may assist political campaigns for federal offices. History teaches that the special limits on corporate participation in political contests must have been inspired by the party which hates corporations and has influence in Congress on such matters: the mercantilist elite. After all, the elite have many avenues other than corporations for exerting influence in political contests.
    On January 21, 2010, the U. S. Supreme Court struck down the McCain-Feingold limits on corporations by a 5-4 ruling in Citizens United vs. FEC.  Who screamed first and loudest against the Citizens United ruling? That would be Senator Charles Schumer, who represents the mercantilist elite of Manhattan. Schumer’s uproar was followed promptly by President Barack Obama chastising justices of the Court during their ceremonial attendance of his State of the Union address to Congress.
    One might think corporations are kings in Manhattan, considering the New York Stock Exchange trades so many corporate shares there. But the opposite is the case, because financial mercantilists are kings in Manhattan, and corporations are their prey - more like sides of beef hanging in a meat locker.
    Senator Schumer brought legislation to the Senate floor on July 27 to place new political limits on corporations. Despite defeat of his bill by Republican filibuster, Schumer says he will be back “again and again and again” until corporations are stopped from influencing federal elections. The pattern of conduct remains intact: the mercantilist elite despise competition from corporations, either in business or in politics. Politics, of course, is where the mercantilist elite do their utmost to undercut the political and economic well-being of the middle class.
The Ruling Cabal
    This brings to mind the talk surfacing of a “ruling class” in America.  Unfortunately, so far, the discussion misses the mark in two important respects. First, those described as comprising a “ruling class” are mere functionaries or servants of the true rulers. Second, the rulers of the U. S. exert power which flows from the barrels of vast stores of looted capital, and are so few they resemble a cabal more than a class.
    The ruling elite devote their influence to their objectives, using political ideologies only as tools to those ends. They are neither socialist nor fascist and yet their functionaries may be either, as necessary. In the process, they prevail in determining federal policy “again and again and again.”
    Only a few years ago, discussions here of intentionally destructive economic policies and regulatory complicity in major financial crimes were likely viewed by some as over-the-top or even extremist. Today, a serious intellectual writes of total disintegration of the U. S. government (and the Constitution) by the year 2017.
    Before leaping to the conclusion that Dr. Roberts may be wildly absurd (or overly optimistic), consider only a few of today’s headlines: (a) California’s governor signs another executive order that all state employees be furloughed three days per month to defray the budget impasse with legislators; (b) the Congressional Budget Office says federal deficits “will cause debt to rise to unsupportable levels;”  (c) major life insurance companies use deceptive practices to deprive families of soldiers killed in action of the full value of insurance benefits;  (d) former president Clinton and his wife will be hosted by the family of billionaire George Soros as they celebrate the Clinton daughter’s wedding this weekend, as the cost of the event is estimated in the millions; and (e) President Obama is entertained on “The View” morning television show while Boy Scouts of America celebrate their 100th Anniversary Jamboree without him, and the First Lady plans the president’s birthday party at which guests will pay $30,000 each to attend. 
     The year 2017 as the time-line of our national demise may not have been chosen entirely at random. Perhaps coincidentally, 2017 is the year declared by a percipient witness to be the deadline by which the three governments party to the North American Free Trade Agreement (NAFTA), as insisted by the mercantilist elite, secretly agreed to meld together as a single constituent of the new world order.
A More Taxing Environment
    A final point is to be noted. Within the past two weeks, former Federal Reserve chairman Alan Greenspan supported allowing the 2003 tax cuts to expire at the end of this year. Then current Fed chairman Ben Bernanke advised such a major tax increase will weaken the economy further. Then current Treasury secretary Timothy Geithner declared tax rates should be raised on at least those with earned income exceeding $250,000 annually (the upper middle class).
    In this regard, history records that, at least a dozen years before the advent of the federal income tax in 1913, the mercantilist elite espoused a heavy, graduated tax on earned income and a confiscatory death tax as preferred means of stripping assets from the hated, “irresponsible” middle class. This fact, standing alone, fully justifies enactment of the Fair Tax Act (HR 25) repealing the federal income tax, payroll taxes and estate/gift taxes. But, of course, the mercantilist elite oppose doing so. ~