Wealth and State Capitalism
By: Ben Cerruti
Just preceding his recent visit with wealthy west coast executives of several high tech firms and a venture capitalist, President Obama had elevated Jeffrey Immelt, President of GE to Chairman of the Presidentâ€™s Council on Jobs and Competitiveness. Subsequently, he appointed AFL-CIO President Richard Trumka to the Council. These actions are not a coincidence. Trumka has ties with Communist Party USA and Immelt, prior to his previous appointed to be a member of the Federal Reserve Bank of New York, wrote a letter to his shareholders that provides us with an insight as to what is occurring.
In this letter Immelt states “We are in a recession and, at times like these, it is difficult to predict how bad and for how long. We are running GE to ‘weather the cycle’. However, I believe we are going through more than a cycle. The global economy, and capitalism, will be reset in several important ways. The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”
The last sentence of this statement succinctly tells it all. Government as a regulator, creator of industrial policy, financier and key partner smells to high heaven of â€˜State Capitalismâ€™ or as less fashionably said, a form of Socialism.
As has been pointed out previously, being wealthy and having a high annual income is not necessarily the same. Most executives of high tech and venture capital firms hold much of their wealth in ownership of the firms with which they are affiliated. It may be that their annual income is relatively high but it generally is a small fraction of their overall wealth. It stands to reason that they would have great interest in protecting the wealth they have accumulated. It is exactly that motivation in which those wishing to impose Socialism on our society use to achieve their ends.
What affect will this movement towards State Capitalism have on the individual in our society? If the government finances, creates and regulates industry it is more than a partner, it becomes the de-facto owner of it. It does this by controlling the banking system, regulating industry and awarding government controlled business to favored Corporations if not, in essence, owning them. The path of least resistance for private industry is to succumb to the temptation of a secured favored future. The incentive for entrepreneurs of new ventures to bootstrap their enterprises to wealth becomes continuously diminished and high productivity and efficiency cannot survive for long in this environment.
It should be apparent that when Government exerts its power in controlling any aspect of our society it diminishes individual freedom. Encroachment on freedom by the movement towards State Capitalism is already on its way. Look at the Ethanol subsidy to corn grower and regulations restricting drilling for oil and construction of new Nuclear power plants that has caused an increase in food and energy costs. In addition the subsidy for a supposedly environmental friendly electric powered automobiles to create an artificial market for them is a non-productive indirect tax. The power to charge the batteries is derived mainly from coal and oil fired power plants.
By its nature State Capitalism creates a two-class system. One class being the government and its employees partnered with those who control large corporations and people of great wealth. While the other class being those in the private sector. In our traditional economic system the private sector has been the source of funding for the public sector. One must consider that increasing the size of the governing public sector that will include large corporations will accordingly shrink the size of the private sector and its ability to contribute to that funding.
The revenue derived from the inordinate taxation of the income of the highest income earners over time has been shown to be unreliable. Hence it becomes counter productive to business growth and maintenance of high employment. Inevitably it will be taxes on whatever income is left in the entire private sector that will be required, further exacerbating a downturn in the economy.
It is unfortunate to see an apparent public misconception that members of the Federal Government are at odds with large corporations including banks and Wall Street securities firms. The obvious truth is that they are not unwilling bedfellow when their respective interests are complementary.
So what must happen to stop and reverse this movement to take away the freedom our forefathers provided to us in our Constitution? Perhaps we should look at the basic cause of that which we are now experiencing.
In enacting the 16th Amendment in 1913, the federal government abrogated the provisions of the 10th Amendment in usurping powers that should have been “reserved to the States respectively, or to the people. This was done by essentially removing these words in Section 9 of the original Constitution “no Capitation, or other direct, tax shall be laid, unless in proportion to the Census or Enumeration” meaning taxes could not be taken from taxpayers of one State to be distributed to other States. Happening concurrently was the passage of the Federal Reserve Act that allowed the artificial creation of money to supposedly deal with the vagaries of recessions but led to disastrous effects with which we are now living.
Establishing a plan to gradually shut down the Federal Reserve System along with the repeal of the 16th Amendment would be in order. This would take away the means which Congresses and Presidents have used wantonly to serve their own and special interests. Later on, the repeal of the 17th Amendment would allow the appointment of Senators by the respective State legislators providing for complete return of Stateâ€™s rights as originally intended by our nationâ€™s founders. Hopefully, there still exist in our land and in Congress those patriots who have the wherewithal to initiate the process to effect this happening.