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The Poverty of Nations


There is plenty of wealth to go around in the world, but it’s tied up in too few hands for democratic capitalism to operate efficiently for society at large. Thus, in order to maintain civil order, totalitarianism increasingly becomes a byproduct of this conundrum.

According to Forbes 2011 survey of billionaires, they hit all-time new records for total wealth and numbers  (the total count of billionaires is 1,210), thanks to reverse Robin Hood taxation policies that impoverish government coffers, i.e., Federal Tax Receipts, whilst transferring those dollars, via a doctored tax code, into the pockets of tens of thousands of millionaires and billionaires. The total count of what Forbes refers to as High Net Worth Individuals is 871,000 people worldwide worth over $30 million each, implying total wealth of $26-to>$50 trillion; $26 trillion is nearly twice the size of the U.S. economy.

Wealth creation has increasingly become the key measurement of capitalism’s efficacy ever since Adam Smith’s magnum opus An Inquiry into the Nature and Causes of the Wealth of Nations (1776) aka: The Wealth of Nations, wherein he expounds upon how rational self-interest and competition lead to economic prosperity for society at large, American industry and government have been guided by these free-market principles. For over 200 years, with bumps & lumps along the way, prosperity reigned, and Adam Smith would be smiling. But, for reasons he describes within his own treatise, Adam Smith would be frowning today because of the sorry state of capitalistic nation-states.

Again and again, Smith warned the general public that a true laissez-faire economy could become a conspiracy of business and industry scheming to influence politics and legislation against the best interests of the consuming public.

Smith, the father of economics and the prophet of capitalism is idolized by capitalists the world over; however, he would not recognize today’s democratic capitalism because his greatest concerns about conspiracies scheming to influence politics, undermining his theory, have come to fruition. As a result, capitalism is a failed institution for society at large. Rather, it has morphed into a quasi-totalitarian plutocratic nation-state that resides within a hollow shell of democracy.

Smith’s economic principles depend upon freedom of markets translating into prosperity for “society at large”. His is a broad view of economic consequences. However, economic results, especially over the past three decades, have increasingly narrowed, funneling riches into fewer hands and penalizing society at large, i.e., the broad middle/working classes, accomplished by the political Right’s adoption of neoliberal principles, and these principles have largely been adopted by both political parties. Therefore, both Democrats and Republicans are at fault for the disastrous state of capitalistic democracy and the subsequent evolution into a quasi-totalitarian state ruled by an elite plutocracy.

How did this happen?

Ever since President Reagan and PM Thatcher, in the 1980s, blessed the policies of: (1) deregulation, particularly financial deregulation, (2) privatization, (3) minimalist government, and (4) diminishment of unions, the world of capitalism has spun out of control and into the hands of neoliberal theory & practice, embracing, and enlarging upon Reagan’s and Thatcher’s policies to the point of “sky-is-the-limit” engineering of legislation and policy in favor of only the rich, protected by an increasingly authoritarian state.

Coincidentally, in the mid 1980s, America’s finance, insurance, real estate (FIRE) sector of the economy overtook manufacturing as the major contributing sector to U.S. Gross Domestic Product. Today, FIRE is twice as large as manufacturing.  The upshot is financial interests, as the predominate sector of the economy and working hand-in-glove with neoliberal themes, mold U.S. legislation in their favor.

Additionally, in the eighties, the most significant tax legislation in generations occurred with the Tax Reform Act of 1986, removing numerous tax loopholes and lowering taxes across the board, a reform that was broadly embraced by America. Since then, over 15,000 changes have legislated a Reverse Robin Hood tax code crowned by George W’s tax cuts, designed like a subprime mortgage, i.e., designed to make people see certain good things and not recognize the fine print where the devil is in the details, worth vast amounts to the wealthy but worth very little to everybody else… these changes in estate taxes, top tax rates, capital gains, and dividends, further enrich the wealthy beyond imagination!

As explained by Jacob S. Hacker and Paul Pierson in Winner-Take-All-Politics, Simon & Schuster, 2010, “Step by step and debate by debate, our public officials have rewritten the rules of the economy in ways that favor the few at the expense of the many.”  By gradually making changes over the past 30 years, and supercharged by ‘W’, the rich have been put on wealth-creation testosterones like never before, laying the groundwork for just six members of the Walton family, whose patriarch founded Wal-Mart, to have as much wealth as the bottom 30 percent of the entire U.S. population.

Today, the United States is controlled by a small cadre of super wealthy families, spearheaded by innocuous-sounding tax-free organizations like Americans for Tax Reform, founded in 1985, headed by America’s most powerful conservative voice, Grover Norquist. The entire Republican Party pays homage to Norquist, and he, in turn, takes his marching orders from the wealthy families who operate behind the curtain, the Wizards of Oz of America’s quasi-totalitarian state.

According to Chris Hedges, Truthdig, March 26, 2012, “Totalitarian systems always begin by rewriting the law… The defense of freedom and truth becomes a crime… Citizens are colonized. And it is always done in the name of national security.”

Last year President Obama signed the National Defense Authorization Act (NDAA), which act negates the writ of habeas corpus, the most powerful cornerstone of civil rights since the Magna Carta. Every English-speaking jurist since the 12th century must have turned over in the grave. Subsequently, May 2012, U.S. District Judge Katherine B. Forrest overruled the domestic military detention provisions of the act, an act that was roundly supported by Democrats and Republicans. This is a clear, and extremely troubling, clarion call for how far off course democracy has strayed.

Praise the likes of Chris Hedges as an offset to our spineless press corps and weak-kneed politicians, who, on a daily basis, supplicate for morsels of Newspeak at the White House Briefing Room.  Unfortunately, America’s only defense against a surge towards complete totalitarian control by the plutocrats, the Democratic Party, has proven helplessly weak, and seemingly, frightened by its own shadow, e.g., the democrats completely blew it even when they had control of the presidency and the Congress.

The very fact that Hitlerian enactments like the National Defense Authorization Act are legislated absent out-and-out sweeping objections by the national news, and pass with strong bipartisan support, is clear evidence the country is numb to the threat of totalitarian impulses. A couple hundred years ago, this inane act would have been cause célèbre for revolution.

Throughout history, access to a proper understanding of the state of affaires, when tainted, has always worked in favor of mass revolutions against the prevailing order. The French Revolution, for example, is indebted to Claude Fauchet’s weekly addresses to crowds of 5,000-8,000 people at the Palais Royal, lecturing on Jean-Jacques Rousseau’s 1762 work, The Social Contract with follow up discussions about a more equitable distribution of wealth. The American Revolution is likewise indebted to pamphleteers like Samuel Adams, Thomas Paine, and Patrick Henry, today’s heroes but yesteryears’ street activists.

However, it is improbable that Adams, Henry, and Paine could operate in the same fashion today as they did 200 years ago. The USA Patriot Act would likely stop them dead in their tracks. This Act is riddled with nebulous provisions that leave the doors wide open for the government to take whatever action it deems necessary, depending upon the subjectivity of the enforcer(s).

More than likely, the three Founding Fathers would be classified as terrorists and thrown in jail. Adams’ “Committees of Correspondence,” which served as a shadow government opposed to the British, disseminated seditious information.  Henry was one of the most outspoken exponents of revolution in defense of historic rights. Paine’s Common Sense pamphlets preached revolution and independence. These men, revered as America’s Founding Fathers, prove the adage: “timing is everything.”

Those Founding Fathers, without a doubt, today would register as rapidly blinking lights within the National Security Agency’s (NSA) Utah Data Center, scheduled to open in 2013, which is a heavily fortified $2 billion project of immense secrecy. Its purpose will be to intercept, decipher, analyze, and store vast swaths of the world’s communications. This is finally the completion of the infamous “total information awareness” program created by George W’s henchmen but blocked by Congress in 2003.

The NSA data center will store and analyze private emails, phone calls, Google searches, parking receipts, travel itineraries, bookstore purchases, etc. Plus, it’s The Big Enchilada of spying; the NSA data center is a code-breaker, able to de-encrypt financial information, stock transactions, business deals, diplomatic secrets, legal documents, and any transmission that is encrypted. This is Big Brother come to life. The old insider NSA saying, “Never Say Anything,” is now more apropos than ever before. Most likely, this will put many of world’s terrorists in unemployment lines, but what about average citizens? How do they protect themselves in a hollowed democracy?

Christopher Hedges (Democracy Now interview May 17, 2012 by Amy Goodman) believes taking to the streets and revolutions are inevitable, but as he says, the Stamp Act took place in 1765, ten years before the American Revolutionary War (1775-83.) In other words, revolutions take a long time to develop; however, that was then. Today, revolutions can happen overnight, witness the Arab Spring… spontaneous combustion is in vogue!

Revolution, or not, there is good news as a result of the 2008-09 worldwide financial meltdown. This scrape with Armageddon has focused the attention of the world on the cozy relationship of Wealth, Wall Street, the Fed, Congress, and the Presidency. Collaterally, it has focused attention on inequities and the rise of plutocracy, including neoliberal policies, e.g. austerity, as practiced by the EU and IMF and World Bank, resulting in hundreds of thousands of people in capitals around the world openly demonstrating and sloganeering against Austerity, Big Banks, Wall Street, and the Wealthy.

Capitalism is at war, being fought in the streets.  The massive demonstrations around the world the past couple of years are not for naught. When tens/hundreds of thousands of citizens take to the streets, as in Madrid, Paris, Athens, Manhattan, Hadramout, Moscow, Montreal, Santiago, and London… over time, things happen! People do not stand in the cold, in the rain, in the harsh elements for the fun of it… out of the blue, untoward things happen very unexpectedly!

Thus, capitalism’s bankrupt failure to provide for its citizens at large is on display for the world to see, and this failure is, in large measure, caused by the misallocation of ‘The Wealth of Nations’, leaving ‘The Poverty of Nations’ in its wake.

Whether the nuts and bolts of effective totalitarian control by plutocrats can effectively deal with a degenerating world that is increasingly split into two distinct camps, the rich and the working poor, remains to be seen. Capitalism is not functioning as an institution of socio-economic order for society at large. No, it is failing on all fronts other than with the highest order, the First Estate.

What a strange paradox: Billionaires/millionaires set new all-time records while their capitalist nation-states suffer record debts amidst austerity measures for the middle and working classes.

Is this the Wealth of Nations?

Robert Hunziker earned an MA in economic history at DePaul University. He lives in Los Angeles.

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