Is There a Difference Between a Third World Autocrat and a Wall Street Mogul?
In America we tend to look down on Third World autocrats who siphon their country’s wealth into their personal Swiss bank accounts at the expense of their citizens. But I would argue we have our own class of kleptocrats that in many ways behave the same way – and often with the same result.
I was recently at a seminar in Africa that focused heavily on human rights.
One of the most insightful participants made a powerful argument that autocratic leaders who violate their people’s human rights by restricting their freedom of speech and assembly were even more culpable for human rights violations when they siphon off millions of dollars into Swiss bank accounts and deprived their country’s children of decent health care, education and an opportunity to make a prosperous life.
In fact, every day African children go to bed hungry and are prevented from attending school so they can engage in child labor – while in some countries their leaders live in luxury and personally expropriate profits from the sale of their country’s bountiful natural resources to foreign corporations.
Of course, this is far from true in many African countries. In fact, the gross domestic product in many emerging African countries has been exploding – and the fruits of these increases are being shared with average people through massive new health care programs, new roads to take their products to market, and new educational opportunities. The U.S. HIV-AIDs program has been a huge success – dramatically reducing the prevalence of the disease and giving millions new hope with ant-retroviral drugs.
In many countries, their policies not only expand per-capita Gross Domestic Product, but they are also dramatically reducing economic inequality. In fact, the GINI index of income inequality in some emerging African countries is now lower than it is in the United States.
In those countries that are not so lucky – where inequality continues to soar and wealthy autocrats rule -- stagnation, hopelessness, and often war – continue to be the rule as well.
But what exactly is the difference between those autocrats and some of the wealthiest men on Wall Street – the “Masters of the Universe”?
Those Third World autocrats – or kleptocrats -- have created a system where they can extract huge shares of the country’s wealth for themselves, no matter the impact on their people. They believe they are entitled to kickbacks from concessions -- given by their governments to oil and mining companies – that enable them to spend millions of dollars on jet planes, European villas, and over-brimming Swiss bank accounts. And they do it even though their actions deprive millions of people of an opportunity for a better life.
But in so many ways the gang that makes billions from trades in derivatives and clever investment deals are just like the Third World autocrats. When the financial sector siphons billions from the American – and world – economies, it takes that money from the hands of ordinary consumers whose wages they cut, the workers whose jobs they outsource, the education of our children, the infrastructure that provides the foundation for long-term economic growth.
The fact is that, the financial sector has tripled its share of the GDP since 1950 -- from 2.8% to 8.4%. The Wall Street sharpies have created a system that in the end has the same effect on the prospects of ordinary people as the extortion and graft of Third World tyrants. They’ve just created a system that dresses up their activities in fancy suits and electronic trading systems.
Now, I’m not arguing that many people who work in the financial sector don’t perform useful activities for our economy. Last week I saw a new commodities exchange in Ethiopia that allows small holder farmers (most farmers in Ethiopia) for the first time to sell their products for a transparent price and prepare it for sale through seller co-ops. The effect is to prevent those small farmers from being exploited by buyers on an untransparent, informal market – and it has already raised the average price they receive for their commodities.
Before the repeal of the Glass-Steagall Act that prevented banks from using depositor money for speculative investments, the banking sector made a major contribution to the growth of the American economy, and to the growth of the American middle class. It provided capital for loans to productive businesses based on the actual ability of a business to generate a profit and repay those loans – not the speculative value of a financial instrument. It provided millions of people the opportunity to buy their own homes with thirty-year fixed-rate mortgages.
And I’m not arguing that everyone in our economy ought to have the same income. Financial incentives are a critical powerhouse of worldwide economic growth.
But when a guy like Wall Street’s John Paulsen makes $5 billion of income in one year alone – when CEO pay increases 127 times faster than worker pay over the last 30 years – when America’s corporate elite opposes increasing the minimum wage even though those who work full-time on the minimum wage live in poverty – that is an outrage. In the year Paulsen made $5 billion, he earned $2,400,000 an hour. He made as much as a minimum wage worker ($15,080 per year) every 22 seconds.
You hear the Right Wing – and many of the “wise men” in Washington – go on about how we have to cut back government investments in education, health care and infrastructure in this “time of scarcity.” But they forget to mention that the per-capita Gross Domestic Product of the United States continues to increase. We are wealthier as a society today than at any other time in our history. The only difference is that all of that growth has been siphoned off into the hands of the wealthiest 2% of Americans – most of that growth to a tiny sliver of the population.
The big Wall Street Banks are doing everything in their power to prevent the implementation of the provisions of the Dodd-Frank Wall Street Reform Act that was explicitly intended to reign in Wall Street abuse. Just this week President Obama met with top bank regulators to press his case that they must resist the financial class and implement the provisions of the law as they were intended.
And you see that same crowd doing everything in its power to create what they call a “union free” environment that prevents Americans from exercising the human right of collectively bargaining over their wages and working conditions – all so they can continue their kleptocratic ways.
Oh, they say, this doesn’t make us the moral equivalent of Third World dictators who use the power of their states to siphon millions. Really? Right now, the billionaires who finance America’s Right Wing are desperately trying to use their control of the U.S. House to blackmail the country in a desperate last-ditch attempt to stop ObamaCare so part of America’s bounty is not used to assure that every person – every child – even those who were born with pre-existing conditions – can have access to health care. Instead, everything they do is directed at lowering the taxes they pay to the government, even though they already pay less per dollar than they did in 1950.
Of course by shipping jobs overseas they are not only undercutting the incomes of the American middle class, they are often using precisely the powers of those dictators to make their profits from the sweat of Third World workers who make a dollar a day, and labor in unsafe buildings that could collapse and kill them at any moment. They respond that those are just the cold, hard realities of the “market.” Or to put it another way, they do everything they can to rake in as much money for themselves because they can – the same rationale used by those Third World dictators.
“Just the way the market works,” they say. But whatever system you have set up to justify your ability to make billions off the labor of others -- even when it means they can’t put food on the table or give their children education or health care -- is every bit as morally corrupt, is every bit a violation of human rights – as the Third World autocrat that lives in splendor while his people live in squalor.
Markets are marvelous mechanisms to allocate resources and risk. But without strong governments that set the rules for fair competition, without government programs that assure education, health care and infrastructure development that only the public sector can provide, without unions that demand that workers receive a fair portion of increases in productivity -- the “private market” left entirely to its own devices leads inevitably to inequality, economic stagnation and gross violations of human rights.
In many ways, most important is the human right to collectively bargain for wages and working conditions. Human beings are not commodities to be bought and sold at “market” prices. They are the one and only point of the economy.
Without unions, investors will always seek out the cheapest labor because their only goal is to maximize returns. That is just the way the world works. And the net impact of that process in a world with billions of people moving to cities from the land and looking for jobs, is to allow the rich to get richer and everyone else’s standard of living to stagnate and drop.
That has been what has happened in the United States over the last 30 years – and it is what happens today in Third World countries that are governed by kleptocrats whose only goal is their own financial gain instead of the advancement of their people.
On the other hand, where the kleptocarats have lost power – where countries have forward-looking modernizing leaders, and strong unions backed up by social movements that demand transparency, accountability, and investment in health and education -- there has been massive progress in the last decade.
One of the great lessons of Third World development is that economic growth happens from the bottom up, not the top down. Where the fruits of growth are shared widely because of producer co-ops and strong unions, programs that provide health care and education, and through cash subsidies to poor families (especially women), the engine of consumer demand drives economic expansion and investment. Where it they are not shared, economic growth stagnates.
For everyday Americans to once again be able to look forward to giving more opportunities to their children than they themselves experienced in life, America must rein in its own kleptocrats on Wall Street and end the descent into economic inequality that threatens our future.