Wealth and Power: the Bias of the System

Chapter 2

Wealth and Power: The Bias of the System

The U.S. Economy

·  Capitalism

ü  Adam Smith-style free market with competition among innumerable small competitors.

ü  Capitalists respond to the demands of the market.

·  The present economy is far removed from the ideals of free enterprise and competition among equal private capitalists.

The Concentration of Corporate Wealth and Power

·  Monopolistic Capitalism

ü  Megamergers

o  The ten largest mergers in U.S. history have occurred in the last 15 years

ü  Interlocking Directorates

o  The linkage between corporations through a direct or indirect interlock

·  Transnational Corporations

ü  Move production to low-wage nonunion countries

ü  Lower foreign production costs

ü  Less strict labor safety and environmental protection laws

·  Consequences of Transnational Corporations

ü  Job loss

ü  Control of the world economy

ü  Meddling in other nation’s affairs to protect investments and maximize profits

Concentration of Corporate Wealth

·  Less than 1 percent of all corporations account for over 80 percent of the total output of the private sector

·  One percent of all food corporations control 80 percent of all the industry’s assets and about 90 percent of the profits.

Concentration of Private Wealth and Income

·  Capitalism generates inequality

·  In 2007, the richest 1 percent of U.S. households owned 33.8 percent of the nation’s private wealth. That is more than the combined wealth of the bottom 90 percent.

Income Inequality is Increasing Over Time

Why is the inequality gap growing?

·  Increased tax benefits for the wealthy

·  Changing job structure in the U.S.

ü  Shift from manufacturing to service

ü  The exporting of U.S. jobs

Political System: Links Between Wealth and Power

·  Oligarchy: a government ruled by a few

·  Plutocracy: a government by or in the interest of the rich

·  Democracy: a political system in which the majority rules

Government by Interest Groups

·  Special interest groups hire lobbyists to persuade legislators to vote their way.

·  At the national level, lobbying in 2008 was a $3.3 billion business.

·  Special interest groups violate the principle of democracy.

Financing Political Campaigns

·  Campaign financing is undemocratic.

·  Campaigns are funded by candidates and special interest groups.

·  Contributors gain unfair access to politicians.

Citizens Unified v. Federal Election Commission

·  2010 Supreme Court Decision

·  5-4 ruling struck down the laws of 22 states and the federal government.

·  The constitutional guarantee of free speech means that corporations, labor unions, and other organizations can spend unlimited funds to help elect or defeat political candidates.

Bias of the Political System

·  The concentration of power by the elite

·  The interests of the powerful are served

·  Systemic imperatives

·  Belief in democracy is an advantage to those in power

Bias, continued

·  Subsidies to big business

o  The government benefits the business community with $125 billion in subsidies annually

·  Trickle-down solutions

o  Proponents argue that subsidies to businesses will trickle down to needy individuals

·  Foreign policy for corporate benefit

Summary

·  Billions are spent on each federal election campaign, which sabotages democracy by:

•  Making it harder to solve social problems.

•  Ensuring that the have-nots are not represented among decision-makers.

•  Turning elected officials into part-time workers and full-time fundraisers.

•  Diminishing the gap between the two major political parties.

•  Discouraging voting and civic participation.

•  Giving special interests special access to decision makers.