Monday, October 26, 2009

Make Them Buy Brioche!

Come now, you rich, weep and howl for your miseries that are coming on you. Your riches are corrupted and your garments are moth-eaten. Your gold and your silver are corroded, and their corrosion will be for a testimony against you, and will eat your flesh like fire. You have laid up your treasure in the last days. Behold, the wages of the laborers who mowed your fields, which you have kept back by fraud, cry out, and the cries of those who reaped have entered into the ears of the Lord of Armies. You have lived delicately on the earth, and have taken your pleasure. You have nourished your hearts as in a day of slaughter. You have condemned, you have murdered the righteous one. He doesn't resist you.

James 5:1-6, World English Bible (a public domain translation)

As I recently stated on this blog, the global “official” economy is tracing out a “phugoid cycle” of collapse driven by the increasing price fluctuations and scarcity of one key resource: crude oil. This process of this collapse threatens the notional wealth of all who are invested in this economy, and especially the wealth of the rich masters of this economy. It should be obvious by now that the governments of the West, and especially the US Government, are therefore being used to prop up the notional wealth of their richest citizens.

But in understanding the actions and strategies of these governments, we need to see just what “wealth” these governments are trying to salvage. What does the notional wealth of the rich actually consist of?

In the West, a large portion of that notional wealth consists of legally binding obligations placed by the rich minority on the vast poor majority. These obligations have value as generators of revenue streams which enable a small elite class to enjoy a lavish and leisurely lifestyle through the labors of their poorer fellows. Examples of this include the following:

  • Intellectual property” the copyrights of which are held as tradeable property, for things like software, published books and entertainment media like music and movies;

  • Market share,” secured by large enterprises driving competitors out of business;

  • Monopoly arrangements, which are the ultimate end of increasing market share;

  • Most importantly, interest-bearing debts owed by the poor to rich creditors, and by the rich to each other;

  • And lastly, fees charged by insurers in exchange for a promise to cover the costs of financially catastrophic events.

These are the primary assets of many of the world's rich people, and some of these rich have no real assets beside these legally binding, revenue generating obligations.

These legally binding obligations are valuable only as long as the poor are either willing or able to honor them. The trouble for the rich is that from 1980 onward, real wages for the working class have been either stagnant or declining, while the things purchased by the working class have gotten steadily more expensive. Some of these things, such as college education and health care, were turned by their providers into “cash cows” whose price appreciated at a rate that far exceeded the rate of inflation. In order therefore to maintain economic activity and to protect their revenue streams, the rich providers of goods and services were obliged to offer these things on credit, forcing the poor consumers of these things to take on ever more debt until there was no way that most members of the working class could ever become debt-free during their lifetimes.

This arrangement worked as long as the members of the working class were able to pay the interest on their debts, the royalties on the intellectual property they consumed, and the fees on the insurance on which they relied. But from 2005 to the present, that ability to pay all of these obligations was eroded – first, by the spike in oil prices caused by constrained supply, and then by the explosion in costs of everything that depended on oil for its manufacture or delivery. This threatened to render many of the assets of the rich worthless, because those assets consisted of contracts between the rich and the working class in which the working class promised to pay a certain amount per year to the rich, and now the poor were no longer able to make their payments.

The truth is that a large number of working class people in the First World, and especially in the U.S. are now flat broke. They have lost incomes, they have defaulted on loans, they are no longer able to pay for insurance, their stuff has been repossessed, they can't afford cable or new flat-screen TVs and they have no spare change to purchase “intellectual property” like DVD's or music. Their obligations owed to the rich are now worthless, because they will probably never be paid. But there is a further threat to the “assets” of the rich: namely, that an increasing number of working-class people are waking up to what's being done to them by the rich, and are trying to create alternatives to dependence on the rich. This threatens such assets as the revenue generated by market share dominance or monopoly arrangements.

The government bailouts of banks and investment firms are an attempt to re-inflate the assets of the rich, by turning the vast mass of working-class taxpayers into collateral for loans that are now worthless, and to repair the revenue streams of the rich via government confiscation of the labors of the poor. The government has also been employed to criminalize certain alternatives to dependence on the rich, such as the recent “food safety” laws that place huge regulatory burdens on small organic farmers. But as economic activity continues to contract and revenues continue to fall, the rich and their stooges in government are desperately trying to take confiscation to a new level.

This seems to be the motive behind nearly all of the public discussion by the mainstream media and by politicians regarding health care reform in America. Our problem is that most Americans can't afford health care anymore without insurance (it cost less than $100 to have a baby in 1950; it costs $6,000 to $14,000 today), and most Americans can't even afford health insurance premiums anymore, as these premiums are already exorbitant and are continuing to rocket upward. Yet instead of talking about genuine health care reform (as in making health care universally available at a price people can afford), the public debate has been framed as a discussion of health insurance reform. This deliberately misses the point, and is nothing more than a ploy to protect two cash cow “industries” (the private insurance “industry” and the health care industry) and the notional wealth of their owners.

The response of the Congress and the medical/insurance lobby to the health care crisis has been to say, “What? Most Americans don't have access to health care? Then make them buy insurance!” The bill crafted by Senator Baucus and others is a case in point, as it would force all Americans to buy private health insurance or face an IRS tax penalty. This is as dumb as a bag full of rocks. If most Americans can't afford health care, how are they going to afford ever-more-costly health insurance? Will the Federal Government force the people I see next to freeway offramps and sleeping under bridges to buy health insurance?

Ah,” some will say, “but these bills don't place that requirement on the poorest Americans.” However, placing that requirement on people who are already teetering on the edge of poverty will drive many of them over the edge. If people own the places where they live, or own some other asset like a car, yet can't afford thousands of dollars a year for private health insurance, will the Government seize their assets? Why are the Feds trying to fatten the profits of bloated businesses like Aetna and United Healthcare at our expense?

In continuing to impose ever-greater burdens on the poor and the working class, the United States has come to resemble France under Louis XVI, and the history of the U.S. from 1980 to the present has come to resemble the history of France under Louis XVI and his immediate predecessor. During that time, France had a huge national debt, caused by the wars and foreign adventures of the monarchy, as well as the lavish lifestyles of the monarchs. The French debt was so huge that no other European power was willing to loan money to the French monarchy. France also had a system of heavy and unequal taxation, in which the lowest members of society shouldered the heaviest tax burden, while the nobility paid little or nothing. Then there was the unwillingness of anyone in the French government to reform the systems of power and economy to make them more just and equitable. Lastly, there was the contraction of the French economy due to resource scarcity (crop failures and famine) in the 1780's, in which the poor suffered greatly while the rich maintained their exploitation of the poor in order to continue a lifestyle of conspicuous consumption.

The presence of these factors, combined with the lack of any avenue of escape for the French peasantry, led to the French Revolution. The friction that caused that explosion is exemplified by a saying attributed to Marie Antoinette, who is reputed to have heard that the peasantry could no longer afford wheat to make bread, and who said, “Then let them eat cake!” (“Cake” here is literally, “brioche.”)

We in the U.S. have had avenues of escape from the predations of our rich class, but they are being closed off from us. It would be fairly easy to neutralize the rich non-violently by becoming independent of them. Yet when that avenue is closed off, there no longer remains a safety valve for pent-up citizen rage against the rich who rob us. While history doesn't repeat, it does rhyme, as some bloggers have said. I don't think it's wise right now for anyone in our government to be saying, “Then make them buy brioche!” Not unless you want a nation full of people like Ann Minch.

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P.S. Over the last several months I have been following another website that publishes content related to our present global energy, environmental and economic crises. It has come to my attention that some of the things I have said on this blog are taken up by the writers on that website a few days to a few months after I have said them. This is cool, as diverse people often wind up noticing the same things and commenting on them. What's not so cool is that I have found content on that site that sometimes mirrors almost exactly some of the things I've said, yet there's no attribution given. If I see examples of this again, I think I'll write a blog post titled, “What A Coincidence!”, complete with quotes, excerpts and links.

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