Re-writing the Narrative 101 – Part 3

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I hope that the last two posts have provided a modicum of understanding regarding the neoliberal zeitgeist.  Over the past 35 years, this paradigm has essentially defined the fiscal policy making of Republicans and Democrats alike. While it may have initially been a Republican agenda, it would contaminate the other side of the aisle shortly thereafter. This “liberating” of private enterprise from the bonds of government regulation is etched over a scaffold of macro-economic policy referred to as “supply-side” economics. Academics sure do love to create complex field specific vocabularies for concepts and economists are no exception. But this is not a thesis and for purposes of this commentary, my goal is to simplify. The initial aim of this series was to provide some counter balance to the job creation b.s. usually voiced by free market proponents. Anyone who has ever owned a business will probably agree that hiring new workers is always a last resort. Despite assertions to the contrary, it’s usually conducted ONLY when every ounce of productivity has been wrung from the existing labor force and then, and only then, if the needs of the business are not met, will new hires occur. The idea that private capital places job creation at the top of its to-do list is specious at best.

Essentially the primary thrust of supply-side economics is that maximum growth will result if the barriers such as income and capital gains tax rates are reduced for the suppliers of goods and services. Arthur Laffer’s famous curve was used to buttress the argument for reducing the rates of taxation on the bourgeoisie. The Laffer Curve itself simply illustrates the trade-off between tax rates and the total tax revenues actually collected by the government.  Zero tax = zero revenue, 100% tax = zero revenue (since no one will work if they had to give away all their money). So far, so good. Through some rather fuzzy logic however, proponents argued that the optimal point of revenue collection would be at a lower rate of taxation on the suppliers since the economic effects would off-set any decrease that resulted due to the lower rate. If you cut the amount of revenue collected for mandatory societal necessities (missiles, defense contractors, big oil subsidies, Medicare, etc.) from money that people (and corporate ones also) make on investments,  you’ll make it up because these folks will invest more. The omitted portion was where this increased investment was to be done. NAFTA didn’t happen overnight.

In homage to the great facilitator of the spurious 80’s economic policy, the term “Reaganomics” was coined. Reaganomics or trickle-down economics is best summed up by the horse and sparrow theory, that “if you feed the horse enough oats, some will pass through to the road for the sparrows.” The increased investment and lower tax rates were also supposed to yield a reduction in the prices of goods and services. Thus everyone benefited.

Hindsight is 20/20 and if the last 35 years have taught us anything, this shit don’t work bro.  Just like the increased investment, the lower prices never occurred. One of the flawed fundamental assumptions of economic theory is that all actors are rational. Did the benefit gained by the holders of capital as a consequence of deregulation, privatization, elimination of barriers to trade and reduced taxes actually result in lower costs of goods and services? A resounding “HELL NO!” is the appropriate response. These irrational s.o.b’s bolstered their respective positions behind private gates and acted quite illogically by ramping up CEO and top tier compensation packages to absurd levels, and using the plunder to buy politicians and peddle influence. But to think that the benefit of lower input costs were somehow reaped by the consumer is a bit of a stretch.

As far as the demand side of this relationship, well I am sure that you are all living through this nightmare. Factories have moved overseas en masse, the prices of goods and services continue with the normal increases linked to inflation and salaries when adjusted are lower than real wages of the 1970s.  There’s one thing missing though. Something just doesn’t seem feasible about the explanation thus far. If the producer class is benefiting from increased business and profits, yet salaries have stagnated, how are the goods being purchased by the working class? And here you have the grand artifice of the entire arrangement – little plastic cards with long strings of digits. GOTCHA!! Why increase the costs of production via a rise in wages when we can structure the relationship to compel servitude? Through a series of lobbying efforts, the banks could also legally charge interest rates higher than Gino down at the butcher shop.

Several weeks ago I posted an article on the censorship practices of the TED and TEDX directors. If you’re interested you can view it here.  I get the impression that job creation is another “hot” topic and articulating certain positions is not always encouraged by the TED decision makers. I’ll conclude this series with the following censored talk by venture capitalist Nick Hanauer.

One love,

HJ

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About H3nry J3kyll
Vincit omnia veritas (using an obscure Latin heraldry motto makes one seem kinda learned and distinguished).

6 Responses to Re-writing the Narrative 101 – Part 3

  1. Erik Andrulis says:

    ” this shit don’t work bro. ”

    Just stop right there and I think you nailed it.

  2. Henry Jekyll says:

    lol Now if only we could get our friends on Capitol Hill to listen to reason. Thanks for stopping by bud.

  3. skywanderer says:

    I wholeheartedly agree that this shit – the most precise non-quantitative indicator as to the current randist/Reagan /Thatcher-kind or neoliberal form of capitalism – doesn’t work. The saddest thing of all is that it was (un)designed on purpose to NOT work, therefore what we try to prove on our blogs (am trying to do the same) the agents of this destructive venture are already aware of. Imo this is why Nash was awarded a Nobel prize: his theory showed the way how to destroy free markets when they are left unregulated. Government interventions only accelerated same process meanwhile did a damn good philosophical job to discredit the concept of state as such, thus to abolish the thought of elected governments and give a green light to the pre-existing self-elected global government to freely finish what they started.

    • Henry Jekyll says:

      I agree that it is naive to assume that the masters of the universe are unaware of the ramifications of their decisions and policy. I also like the application of game theory to the behavior of oligopolists within the market. The “state” is in essence a collection of individuals and I think that as long as the sole measure of a man is his status as a consumer then this collection of individuals will eventually devolve into exactly what it is today regardless of the aspirations at the outset. Discrediting the decision makers in the state becomes all too easy when re-election is the primary concern. Individual self interested men do not make decisions in the spirit of humanity, each seeks to bolster his status within the societal pecking order.
      Thanks for sharing your thoughts Skywanderer.

  4. janineyork says:

    Thank you so much for breaking this down and making so much sense of how senseless this policy is. I enjoyed all of the videos from the TED Talks as well. I feel so much more intelligent now, haha. This is one of my new favorite blogs!! Greed is at the root of the most heinous human behavior from environmental damage to animal cruelty to wars and everything in between. If somehow more people could figure this out and become enlightened to their worth, (and that it has nothing to do with the number of digits in their bank accounts), we could break free of this grand scheme and find the truth in our worth. Keep fighting the good fight! This shit does work bro, at least for me!!

    • Henry Jekyll says:

      Thanks for the kind words Janine. I appreciate you taking the time to comment. I think you’ve hit the nail on the head regarding greed being the driving force underlying much of the problems confronting mankind. I like the phrase “break free of this grand scheme and find the truth in our worth.” Therein lies the solution.

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