The withering away of America

The other day, I read a story about a Hedge Fund buying up foreclosed homes in Atlanta, Georgia.   They bought up 4000 such homes on a single day and the story said they are buying more all the time.

Their plan, according to the article, is to hang onto these homes until the price of the houses rise and then they will sell them for a nice profit.  In the mean time, they will rent them.

Apparently, these folks have a lot of money so they can afford to buy these houses up at distressed prices and then be patient until the market turns.

This is one of those stories where you could say these folks are pretty smart.   Or not.

On a smaller scale, many of us, if we had a few extra dollars in the bank and if we saw a reasonable house come up on a foreclosure sale, we might just jump on that opportunity.  We would fix it up a bit, rent it out and wait for its property value to go up and then, at some point in the future, perhaps at retirement time, we’d sell it for a tidy profit.  And it would be all to the good.

Indeed, many of you who are doing fairly well with your finances probably already own one or more extra properties as investments that you are renting out just as the hedge fund folks are.

This is the American way, is it not?  We get ahead by working hard, saving our money and by investing it well.

Some of you, as you are reading this now, are waiting for the “gotcha” fish hook to emerge out of this little story of mine, aren’t you?

Well, sorry, it’s not going to happen.  At least not for all of those Mom and Pop investors among you.  I am decidedly on your side in all of this.  The hard working and smart saving American work ethic is one I embrace.

But, if we go back to the opening of this story and think about those Hedge Fund folks buying up thousands of foreclosed homes, I’ve got some problems there.

More is not always better

This Hedge Fund is buying up thousands and thousands of homes and taking them off the real estate market.

That means less homes are available for those people that want to buy.  And that also means that the prices of the homes that are available for sale will rise given the inexorable logic of supply and demand.

Buyers on the lower end of the economic scale will not be able to buy in this situation and they will be forced into renting.

All of us know that renting, while done by many, is surely not the best way to spend your money.  All you get is a roof over your head and as soon as you stop paying rent, the roof goes away and you have nothing.  The best thing you can do as a renter, is to save money as quickly as possible so you can buy a place of your own and start building some equity.

Stacking the deck

So, here we have a case where a very large entity, the Hedge Fund, is driving the market in a way that highly favors them and disadvantages the smaller folks.

From the Hedge Fund’s POV, as they take more houses off the real estate market and put them away into their investment portfolio, they are causing the prices on the remaining houses to rise. As the prices of the remaining houses rise, less people can afford them and more are driven into the rental market.

And look who is there waiting?   Its the Hedge Fund which has lots of houses to rent. Sweet, eh?   It’s not unlike driving sheep into a pen.

Its sweet on all sides for the Hedge Fund beacuse as more folks compete for the available rentals, the price of rents will rise as well.

The Hedge Fund will always do well with this strategy so long as they pick their locations well.

All they have to know to win is that in desirable areas, the population inexorably rises because people want to live there for the environment and/or the work opportunities.  And in such areas, more people means more homes are needed.

The bottom line here is that the Hedge Fund is using its enormous financial clout in a way that benefits them but not necessarily the rest of us.

Now, small folks with some accumulated savings can invest it by buying one or two extra homes and renting them out as we mentioned earlier and that’s just what the Hedge Fund is doing, isn’t it?   Except they are doing it on a vastly huger scale.

And it is precisely this difference between the huge Hedge Funds of the world and the small folks like us which is the point of what this article is about.

The story of bigger and bigger

A small fellow starts a Mom and Pop business in his home town and it goes well.   The local people like what he’s doing and they buy what he’s got.

He’s smart.  He saves his profits and he opens a second shop across town.  He employees more folks in the second shop. The situation is a winner all around.

He opens more shops all up and down the area of the state he lives in.  More people are employed by him.  He gives money to charities and he support the local Boy Scouts and the YMCA.   The story is getting better and better.

At some point, he shifts from being a family owned business to being a corporation because that structure provides better protect for his family by separating their corporate assets from their family assets.  And perhaps it works better for their taxes as well.

Soon, as things continue to grow, the owner opens subsidiaries or franchises and moves into other states.

And for this business and these people, things just continue to go from strength to strength.

Now, the owner knows State Representatives and State Senators on a first-name basis.   He’s invited to sit on various boards for the YMCA and the local hospital.

At some point, his privately owned corporation may go public.  And, if the public offering is successful, he and his family will make a large amount of money and the corporation will get a large influx of cash to fund its further growth.

Now, as a publicly held corporation, it has a board and stock holders and it becomes responsible to more than just the former owner and his family.  Now, it becomes responsible to its stockholders who expect it to make a good return on their investment in the company.

This is all the stuff of magic.   The stuff that every small business owner hopes will happen to his or her business.  It is, literally, the stuff of the American Dream.

Ever onward and upward

The newly minted public corporation continues its growth.  And with the wisdom now of its board of directors and of its corporate officers, (either of which may or may not include the former owner) the corporation becomes a real competitor in the market segment it competes in.

Somewhere along this spectacular rise, it expands out across the nation from its original state and soon it is eying international markets and establishing overseas subsidiaries. And, if the run of success last long enough, it will become an international success.  It will become a global player.

Every national and global corporation you’ve ever heard of has followed this trajectory, unless it was spun off from earlier corporations.  If you trace their roots back far enough, every corporation, or its antecedents, will have begun with one person, one family or a small group’s dream that they too could build something out of their hard work and creativity.  It is a hugely commendable thing to build something like this out of nothing.

But can there be too much of a good thing?

Can there be too much competitiveness?  Too much success?  Too much market dominance?

Yes, there can be, Dorothy.  Absolutely.   Just because bigger seems better here in Kansas, or anywhere else, doesn’t mean it’s always the case.

Businesses can get so big that they becomes monopolies and bullies in their markets And when their competitiveness becomes market dominance, then serious systemic problems can develop.   And those problems mostly affect the small folks.

Remember the U.S. breakup Standard Oil in 1911? Or the U.S. breakup of Ma Bell in 1982?

In both of these cases, the growth of the organizations had led to so much market power that they were in the position to virtually set any price they wanted for their goods. They had grown so strong that they had very little competition left.

So, what limits run away corporate power?

What has always limited corporate power, up until recent times, has been government power.
That was what did it with Standard Oil and Ma Bell.

Now, by many people’s definition, government is suppose to exist to look out for the people’s common good.  See if you recognize this quote:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed….”

The founding fathers of the United States specifically said, “That to secure these rights, Governments are instituted among men….”.

When corporations are small, they are of a net benefit to all of us because of the the products and services they create and provide for us.   But, when they get too large, this net benefit can become a net liability.  And, when things get too far out of whack, corporations need to be controlled and regulated by the government for the common good.

And that’s the way it has worked with our government and corporations in the past.  But things are changing, Dorothy.

To show you how things are changing, let me digress and tell you a short story about the environmentalist movement in the U.S. during the 1960s.

Bear with me, please, even if you are not an environmentalist.  My story is relevant to the overall point of this article which is actually about the corrosive influence of mega corporations and big money on the American Democracy.

In the 1960’s there were numerous movements afoot to get laws passed that would protect the quality of our air and our water. These proposed laws were wending their way slowly through the legislative process at the national level and the corporate world was half attending to all of this but it is probably safe to say they weren’t too deeply worried about it.

Then some things happened that changed the game. There were reports about the utterly disgraceful state of some of the east coast’s rivers.  The Cuyahoga River in particular caught fire in Cleveland.  And the Interior Department was proposing to flood the Grand Canyon.  And then there was the infamous Santa Barbara Oil Spill that occurred in 1969.

Almost overnight the environmental movement, which had been simmering, was galvanized by these events to do something now.   And the bills in the legislature involving clean air and clean water were well positioned to benefit from the public’s new found passion for environmental protection.

As a result, these bills were passed decisively in a strong and undiluted form and became the new laws of the land.

The corporate world had been caught flat-footed by these rapidly moving events.  Things had moved too quickly for them and suddenly there were powerful new laws that put serious limitations on what corporations could and couldn’t do with their waste.

And they couldn’t complain too openly about all of this because, after all, the new laws had widespread public support.  The corporations couldn’t be seen in that political environment as opposing laws that protected the public commons from those who would abuse the air and the water for their own profits.

And about the same time that big business was realizing their vulnerability to such laws, the environmentalists were realizing that passing good environmental laws that just applied to the U.S. wouldn’t be sufficient, if the rest of the world just continued on as before. So, most of the people who were big players in the U.S. environmental movement shifted their efforts from being U.S. centric to being globally focused.

But never again

But, the business world is anything but stupid.   They had learned their lesson the hard way and they resolved to never again be caught sleeping nationally or internationally.

And, indeed, they’ve kept this promise to themselves.   Since those fateful days in the 1960’s and 70’s, when the Clean Air and Clean Water acts were passed, very little else of environmental significance has been signed into law within the U.S. or internationally because of effective and well focused resistance from the world business communities.

The only notable exception to this trend would be the Montreal Accord, which was ratified in 1989.  This international accord limits the production and use of Chlorofluorocarbons (CFC) which were decisively shown by scientists to be the smoking gun that was destroying the world’s Ozone Layer.

For those who might be interested in this type of history, I learned a lot of this from reading the books of James Gustave Speth, Dean of the Yale School of Forestry and Environmental Studies.  Speth is, and has been, one of the foremost actors in the U.S. and International environmental movements for many decades now.

The two books of his which I’ve read are, Red Sky at Morning – America and the Crisis of the Global Environment (2004) and The Bridge at the Edge of the World – Capitalism, the Environment, and Crossing from Crisis  to Sustainability (2008).

But now back to the main plot line

So, here’s how the story continues to unfold after the seminal events of the 60’s and 70’s:

The large corporations, whose bottom line’s were impacted by the new environmental laws, learned their lesson.   Now they could not just dump their industrial wastes into the rivers nor put just anything they wanted to up their smokestacks.  And those changes to what they could and could not do were going to cost them money and lower their profits.

Stung badly once, the corporate world began to pay attention to the environmental laws that were wending their ways through the world’s legislatures on their way to possibly becoming laws. And now, the corporate world began to put on the quiet full-court press to dilute or defeat such laws preemptively to protect their bottom lines.

These battles have mostly been fought in the smokey back rooms of the political world but sometimes they have erupted into public view.

Who doesn’t remember the Tobacco Industry executives testifying in front of Congress in 1994 on TV, no less, that smoking cigarettes was not harmful to public health?

They were prepared to, and they did, lie and say anything they could to deflect congress and the people’s will from diminishing their profits.  The Tobacco Industry spent an enormous amount of money on dis-information campaigns trying to deflect the law makers. But eventually Congress, with the input of scientific data on the effects of smoking, saw through their smoke screen and national laws were passed to lessen the dangers of smoking to the American public.

But the corporations have won many of these battles as well.

For instance, have you ever wondered why we cannot read on the  labels of the food we buy exactly what is in it and where it came from?

I could cite many examples where the corporate world has prevented the passage of laws to protect their own bottom line profits.

For a long time now, corporations have fought via their lobbyists in our legislatures to defeat or to water down bills that will impact their bottom line profits.

And regardless of the PR and the advertisements they put out which attempt to make them all look like our cuddly responsible corporate friends, these mega corporations and extremely high net-worth individuals, like the Koch brothers, are simply all about profits with little or no concern for the public good.

We’ve drifted from what the founding fathers envisioned

Do you remember the idea of one-man-one-vote that we all learned about in school?

We are not all equal voters.  It is obvious that mega corporations or very high net worth people with big money behind them can inordinately influence which laws are passed and which are not through lobbying.

Some of you will say, “Well, it’s always been that way in politics.”    And, probably, you are right.

But I’m not happy about it.  Maybe I was corrupted by watching Jimmy Stewart in the 1939 movie ‘Mr. Smith Goes to Washington‘ too many times.

So, here we have the picture then of why the corporate world exerts so much of its financial muscle on lobbying in our nation’s capital.   And the ugly truth is that it is to protect their own profits.  And all of that power, which is being exerted to shape the nation’s laws, have little or nothing to do with the common good as the fathers of our nation intended it.

Ah, but don’t despair – it gets worse

It gets worse? Yes, it does. This battle between the various forces in our society for who gets to make the laws is an ongoing thing. And like any ongoing battle, the strategies and the rules change as new opportunities are realized.

At some point, the large corporations and the mega high net-worth individuals realized that they could better influence which laws get made and which don’t not by lobbying – but by influencing who gets elected to make the laws in the first place.   Why hack at the branches if you can go for the roots, eh?

So big money has begun to pour huge sums into getting folks elected who will be sympathetic to the needs of business – rather than to the needs of the people.   And lets be clear, again, about what those ‘needs’ are.

The needs of business are to have their way cleared of ‘unnecessary’ laws so they can increase their profits.

This process of gaming the system in American politics with big money has gotten quite advanced.  And amazingly, most of the American public hasn’t noticed.

Big business isn’t stupid by any means. They know that they can still have their gains rolled back at the ballot box if people were to get aware of and upset about what’s going on.

So, you won’t see them promoting their side of this battle by saying things like, “The rich have every right to get richer regardless of the consequence to ordinary citizens.”

Instead, they push themes like, “We need less government regulation and interference.  Such interference prevents small hard working Mom and Pop entrepreneurs all over this great country from reaching their full potential.”

They purposely, and cynically, associate themselves with the small and medium size business community and make it seem like these folks and big business have common cause.

And there’s just enough truth in what they say sometimes to make it plausible.

But the cynicism of why they are doing it is breathtaking. They don’t give a rat’s behind about the small and medium Mom and Pop folks other than to use them as a foil to distract the public’s attention from their devious gaming of the American political system.

Back near the beginning of this piece, I made a point to say that I applaud the Mom and Pop small and medium sized entrepreneurs of America.  And I meant it. The are the engines of creation in this country. They make the country better.

But, the really big corporations, those whose sole motivation is to maximize their profits and minimize their costs, and the really high net worth individuals who never think they’ll have enough money, these folks are of a different breed altogether.

The signs that they are making inroads into controlling our legislative processes for their own benefit are all around us.   But, these signs are largely hidden by the immense PR smoke screens they are putting up to confuse the public.

In this context, the ‘Citizens United‘ decision by the Supreme Court a few years ago to grant corporations the same rights as people was huge.

So, what is a corporation anyway?

I’ll tell you this – they are not our neighborhood fuzzy responsible community friends.

Consider that a large corporation is an entity that exists solely to maximize the investment returns of its stockholders. This is a simple cold hard fact. They have only one motivation and that is profit maximization.

They have zero motivation to consider what’s good for the nation or for the public unless the issue begins to interfere with their profits.

And, if some public concern does begin to impact their profits, they’ll make superficial changes and unleash a storm of PR designed to make us think that they are on our side and they have our best interests in mind and they are part of our community and they share our values and etc. and etc. We’ve seen it all. But few of us have recognized how deeply cynical it all is.

If this was a real person who had such a single minded focus, most of us would think they were a dangerous unfeeling psychopath walking among us.

But now, according to the Supreme Court, these entities can move among us with the same rights as sovereign citizens.

And the limits of how much they can donate to political campaigns have largely been lifted.

So, what causes do you think that these newly minted mega corporate ‘citizens’ donate money to?   The only ones they care about, of course. And that’s getting folks elected who will not pass laws that will interfere with their right to maximize their profits.

Their audacity knows no limits

This corporate philosophy, of not hacking at the branches if you can go for the roots, is expanding in a frightening manner internationally now.

There’s something called the TPPA, the Trans Pacific Partnership Agreement.   It has been under negotiation since 2005 and currently 11 nations from around the Pacific Rim are involved.

The stated purpose of the TPPA is:

… to enhance trade and investment among the TPP partner countries, promote innovation, economic growth and development, and support the creation and retention of jobs.

Whooo-ee.  That sounds good, doesn’t it?

Folks in most of the countries involved in these negotiations have no idea these negotiations are even going on, much less the details of what’s actually being negotiated.

You see, the negotiations are being carried out in secret.  In many cases, they are being kept secret from even from the legislators of the countries negotiating.  Specially appointed government trade negotiators are conducting these negotiations and these folks are appointed people – not elected people.

It gets even more incredible.

In the U.S., which is the most dominate of the countries involved, the vast majority of the House and Senate membership are blocked from knowing the details of what’s being negotiated while representatives from a number of large U.S. corporations are allowed to sit in on the negotiations – as they occur.

Yes, you heard that right. Our elected representative are locked out and the mega corporations are sitting in as advisors to the negotiators.

Why the h*** would that be, you say?

Well, from the few documents that have been leaked from these secret negotiations, it turns out to be evident that only about 30% of these agreements actually have anything to do with free trade.  While the majority of what’s being negotiated has to do with protecting corporate rights and profits!

I know, many of you at this point in this story think that I must have drunk the bad kool-aid on this one right?

Well, you’d be wrong.  This is no straw man.

There’s ample documentation of what’s going on out there and of what’s intended to happen, if the corporations get their way.

Proof?

Here’s a statement by Ron Wyden, a U.S. Senator from Oregon expressing his deep frustration as how little, as a U.S. Senator, he’s been able to find out about what’s being negotiated.

In a floor statement to Congress Wyden said, “The majority of Congress is being kept in the dark as to the substance of the TPP negotiations, while representatives of US corporations — like Halliburton, Chevron, Comcast and the Motion Picture Association of America — are being consulted and made privy to details of the agreement.”

And here’s a recent article that appeared in the New York Times by Joseph E. Stiglitz, a U.S. Nobel Prize winning economist, about what he thinks the TPPA is really about and what’s wrong with it. I encourage you to read this.

http://opinionator.blogs.nytimes.com/2014/03/15/on-the-wrong-side-of-globalization/

This is huge, my friends.  Just Google the TPPA and you will find a ton of commentary on the Internet about it.   And then you might also reflect on why you never hear about this sort of thing on your evening news?

Just a bit more on the TPPA and then I’m going to wrap this up.

One of the worst aspects of what’s being proposed in the TPPA is that corporations will be able to sue sovereign nations – if those nations pass laws that diminish the profits of the corporations.

Yes, you heard that right.

Imagine that a country passes laws mandating that cigarette packs sold in that country have to have plain labeling and carry pictures of what happens to folk’s lungs when they smoke. Such a law would be passed for the good of the people, yes?

Or, perhaps they pass a law that no mining will be allowed in their national parks.  Again, this is a law passed for the good of the people of that country.

But, of course, the profits of the cigarette manufacturers and those of the mining companies would be decreased.

Under trade agreement law, as it would stand post-TPPA, the corporations involved could sue the countries that passed such laws to recover their lost profits.   And these law suits would be not be held in the courts of the countries involved but rather they would be decided by a three man international tribunal which would not be beholding to any country.

Hard to believe, isn’t it?  And all of that is going on around you in secret.   In secret even from your legislators.

When I tell folks that the large multi-national corporate world is infiltrating and taking over the sovereign functions of national governments as their latest strategy to increase their profits, some people look at me like I’m a nut case.

Make up your own mind

Pay attention to the news, now that you are aware of all of this.   Keeping watching and see what you think.

Ask yourself if mega corporations, solely obsessed with profits and utterly indifferent to the welfare of the people or of the nation, should be considered to be people and allowed to walk around unchecked in polite society?

Ask yourself, if a corporation is suppose to be a person, if you’d actually associate with a real person that had such nasty and mercenary personal attributes?

Or even more to the point, given how things are going, ask yourself what you think about living in a country where the “Government of the people, by the people, for the people, shall not perish from the Earth” is, in sad fact, withering away before our very eyes and being taken over by mega corporations and the very greedy.

These are not idle questions in the world today, my friends.

-dennis

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