Ok, readers,
US Person is now
bullied into another year of high impact blogging!
PNG starts the new year with a continuation of the those "poisonous fairy tales" that caused daddy to lie:
- Corporations are governed by their shareholders. In fact shareholders are paid little attention by top corporate executives except when they want to gather proxy votes for the annual meeting. Shareholder suits to force changes in corporate in policy or structure are not very successful because they are expensive to organize and difficult to win, since most shareholders are only interested in investment return and not governance. A legally entrenched management has a huge advantage over stockholders. Corporations are therefore operated and policy determined by top executives in conjunction with their board of directors who have the power of removing them. But because of stock investment plans given as compensation, CEOs often dominate their boards too. In addition boards of directors in major companies are interlocked, meaning only a relatively small elite control corporate policy making and planning across entire sectors of business. Mega-corporations are definitely not democracies, but private authoritarian states unto themselves; antithetical to democratic governments who ostensibly should regulate their activities for the greater good. When corporations are so powerful they become the overlords of government and effectively make law, the fascist state rises.
- Speculation is good for the economy. Whenever the public begins to demand accountability from Wall Street speculators, the same bromides are applied to deaden their pain. Hedge fund and big bank executives claim they are providing a public service by "creating liquidity", "making markets", and providing economic opportunity. Even when the criminal plutocrats admit they are are violating such laws as Section 906 of the Sarbanes-Oxley Act, which requires the executive certify the accuracy of their company's documents submitted to regulators, they go unpunished. The financial plutocrats are the new "untouchables". Why? Because they control government regulators by paid political influence. Speculation, as Marx pointed out, becomes an end in itself leading to the misallocation of capital. It drives up commodity prices. The Federal Reserve concluded not long ago that speculation in oil has an upward effect on gasoline prices. Speculation also drives up food prices. In 2010 there was a record spike in food prices of staple farm products, widely believed to be caused by grain speculation. Of course financial instruments and their derivatives play a legitimate role in commerce. Companies are able to plan their costs and revenues because of modern financial markets. When those markets become an end to themselves because of declining ordinary profit rates [chart below], the rest of the nation suffers, not benefits from their "irrational exuberance" The big four banks are estimated to control 96% of the 3 trillion OTC derivatives traded in 2009! That is just the known market in derivatives, how much undisclosed derivative trading is taking place is anybody's guess. The fact is it continues unabated and unregulated even after bad debts associated with derivative trading took down Lehman Brothers and almost the entire global economy in 2008. Those fortunate enough to have retirement accounts invested in the stock market casino may ask: my 401K is doing great, why should I care if a few fat cats go scott-free? US Person suggests they ask the pensioners in Detroit that very question.
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| Dumenil & Levy: US profit rates 1870-2008 |
