Wednesday, September 09, 2009

The US economy is surprisingly dysfunctional.

Several reasons why America is in an economic crisis.

First, is an excellent article by Anna Burger in Huffington post that describes how the US Chamber of Commerce has orchestrated the uncompetitive structure of large corporations and the way top executives control their corporations even when the shareholders object. Here's a sample
To find the "whodunnit" of our current economic crisis, look no further than the corporate boardroom.

Far from serving as checks-and-balances, today's corporate directors are under thumbs of the CEOs who selected them. With unquestioned power and ever increasing arrogance, CEOs can take unnecessary risks, hide details of bad investments, and pay out excessive bonuses to themselves and top executives regardless of their job performance.

That's how subprime mortgages and credit default swaps were hatched. That's how Bank of America's Ken Lewis kept details of Merrill Lynch's poor health and plans of multi-billion dollar bonuses from shareholders. That's how the initial nine banks that got TARP money could pay out $32.6 billion in bonuses last year despite getting a $175 billion dollar bailout from taxpayers.
Then, also in the Huffington Post is an article by Ryan Grim that shows how the Economics profession is dominated by the Federal Reserve.

The Fed belongs to the banks, and all three work in close coordination to make sure that everyone is speaking on the same sheet of music as they propagandize about the economy.

Then there is Paul Krugman's article in the Sunday New York Times describing just how badly the Economics profession got its recommendations in the run up to the 2008 collapse of the American (and then the world) banking system which nearly threw the world into Great Depression II. (I blogged about Krugman's article last Saturday.)

Then there is the fiction that the economy is somehow self-sufficient and self-regulating. It's not. Power structures determine where and how economic transactions occur, but since power cannot be measured in dollars it gets forgotten when we talk about economics. There was a reason why the discipline used to be called Political-economics before Economics itself became a branch of statistics.

Consider how big business organizations are structured. America's economy is largely controlled by large businesses and those businesses act largely at the behest of wealthy conservative oligarchs. Here is how it works.

Big businesses are controlled by the self-defensive conservative wealthy elite whose main purpose is to protect their social position and the wealth that assures they keep that position. The businesses themselves are controlled by the Iron Law of Oligarchy. To a large extent all the resources are controlled by the top managers, and those top managers determine what their employees do professionally.

Robert Michels explained the iron law of oligarchy. The control and wealth of the corporate organizations are centralized in a few individuals at the very top. The recent extreme pay checks to CEO's is the way the conservative wealthy have manipulated the owners and top managers of large business organizations, especially the centralized media corporations.The media are important, because objections to the way the overall system is organized has to be communicated to the masses if it is going to be changed for the benefit of the rest of us. With control of the big media the oligarchs are able to get out the propaganda that justifies the existing system that works to their benefit and objections to that system are not spread widely.

If there were social justice, the CEO's would only be paid what they are worth - which is not the multimillion dollar pay checks they have increasingly been getting, especially over the last three decades. Those paychecks are designed to align the desires and actions of the top managers of the MSM with the wealthy conservative oligarchs.

This is just a sample of the dysfunctional structure of the American economy, and the super-wealthy like it this way. Since they control the TV networks, the large newspaper chains and the most influential elements of the rest of the media, the rest of us don't hear much about just how dysfunctional the economy and society really is.

Just a few ideas for your consideration.

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