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Tuesday, November 8th, 2011

Occupy the world and take back our money

It’s funny to watch all the howling going on among the wealthy and the financial institutions about the transaction tax, as though them being forced to pay anything at all would bring the world to a shuddering halt.

The economy is broken and we need a better one. Pure capitalism simply doesn’t work anymore. Capitalism is touted almost like a religion nowadays, as though it was the only moral and right way to manage an economy. The funny thing about that is that Adam Smith, the founder of modern capitalism warned against its dangers should it become the dominant force in society. He presumed that religion and common sense would act as a counter-force to the sheer unbridled greed of pure capitalism. Sorry, Adam, that dog don’t hunt no more.

The transaction tax wouldn’t be a huge burden. The one being argued about in Europe is only 3 basis points or $3 on every $10,000 traded. It would certainly have an affect on the volume traders, because they make a lot of their money by trading huge volumes.

A financial transaction tax is not a novel idea. Actually, the U.S. had such a tax from 1914 to 1966, when the tax forced investors to pay a small fee every time they executed a trade. It was intended not only to raise revenue for the government, but also to deter excessive speculation. Congress has flirted with the idea of resurrecting the tax in some shape or form ever since it went away back in the 60s, but there has never been enough support for one.

A transaction tax might depress the economy somewhat, but maybe that’s a good thing. The economy as its structure right now is a rigged game that only benefits a few.

We need to come up with some way of decoupling the health of the economy from the health of Wall Street corporations. We also need a new economic model that doesn’t depend on growth. If we can’t achieve a better system we’ll wind up in a situation where a few uber-wealthy people have eaten the world while the rest of us starve in the dark.

The fat cats and the politicians don’t get it. They didn’t understand what was behind the Arab Spring, they don’t understand the Occupy Wall Street movement either. Its a simple matter of inequity.

There’s a famous psychological experiment that revolves around two subjects and a fixed amount of money. If both subjects can agree on how the money is divided up, they get to keep it. The kicker is that one person is in charge of deciding how the money is split, but the other person has veto power on whether the division takes place. If they can’t get together they both lose.

This experiment has been tried with people from all societies and all economic classes and the results are pretty universal. Somewhere around the 70/30 mark people start to dig in there heels. If things go much farther than that, the deal is off. It works both ways, too. If person A says he’ll take 20% and give the other person 80%, person B will protest and try to move things back to something more equitable, even though it costs him. There seems to be a brain structure devoted to fairness in these kinds of situations.

If there is, then the people in power have brain damage. There’s another brain structure in charge empathy. Serial killers have damage in that area and that part of the brain doesn’t light up when they inflict pain on others. Bankers and stock brokers must have similar damage to their equity brain structures.

That’s what the occupy movement is about, basic equity. There’s something they got wrong though. They say “we are the 99%” when actually, they are the 99.9998%. Those are the figures in Canada, anyway, and the same situation is probably true throughout the western world.

The wealthy have privilege but no responsibility. We have 61 billionaires in Canada. Their combined wealth is $162 billion. Our national debt is only 33 billion. If they were all equally wealthy they would each have $2.7 billion and if they gave up 1/6 of their wealth they could clear our national debt. Something is very wrong with that picture.

There’s a myth going around that says we have to leave the wealthy in peace because their investment of their wealth into the economy is what makes growth possible and ensures a healthy economy. Its definitely time to kick that old chestnut to the curb.

Actually, that used to be the case. Corporations used to re-invest almost all their profits back into the economy. That was the situation in Canada until the 1980s. But it isn’t the case any more. Now the profits are paid out in dividends, salaries and bonuses, and very little is actually invested. Long term growth has been sacrificed for short-term dividends. One more problem that arises when the health of the stock market gets confused with the health of the economy.

The most interesting thing about that is the timing of the change. The reduction in re-investment has grown as corporate taxes have been cut. Businesses used to pay taxes of 36%. Brian Mulroney’s government began cutting the tax rate in 1988. That tax rate will be 12% at the end of 2011. Its almost like a disease broke out when government began cutting taxes. The businesses got a taste for extra money, and that demand for more and more short-term payoffs is being reflected in the lack of investment. Whatever the reasons, the trends speak for themselves.

We need to develop some new rules of thumb that guide us in economic issues. One might be that people who have acquired more than a specific amount of wealth have to begin underwriting some of societies expense. Maybe the Labatt family should have to fund education in Canada, or the Bronfmanns have to contribute some percentage of their wealth to child care. Or maybe those 61 billionaires could agree to fund the health system.

We’ve been told that times are tough and that we have to tighten our belts and slash programs. That’s a big cartload of horseshit. There’s more money flowing now than there ever has been. The only reason we’re in trouble is because a few movers and shakers have gotten their grubby mitts on the levers of power and rigged things so that all that flow is diverted into a small number of buckets. Quite simply, if the money wasn’t there, they wouldn’t have it.

Those sixty-one billionaires own twice as much wealth as the rest of us combined. Its not because they are necessarily smarter and it certainly isn’t because they contribute more or have greater responsibilities. Something has to change. It will change. That kind of change isn’t restricted to the middle east.

Here’s a final, possible rule of thumb. Make it illegal for any employee of a company to earn more than 100 times the wage of the lowest paid worker in the company. That would be a step in the right direction.

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Category: Daily Rant
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