Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Friday, January 31, 2014

N Is for Neo-Serfdom, O for Offshore Banking

Neoclassical economics: The school that arose in the last quarter of the 19th century, stripping away the classical concept of economic rent as unearned income. By the late 20th century the term “neoclassical” had come to connote a deductive body of free-trade theory using circular reasoning by tautology, excluding discussion of property, debt and the financial sector’s role in general, taking the existing institutional environment for granted. (See Marginalism and Parallel Universe, and contrast with Structural Problem and Systems Analysis.)

Neoconservatives: Ideologues who oppose government authority and taxation of wealth, except where governments are controlled by the financial and property sectors. Neoconservatives view democratic governments that impose progressive income taxes to finance public infrastructure and other economic welfare as being as reprehensible as the pre-democratic regimes criticized by Adam Smith and other early liberals protesting against governments controlled by autocratic monarchs spending tax revenue largely on the wars and colonial ventures. Neoconservatives in fact tend to support wars to enforce the Washington Consensus throughout the world.

Neoliberalism: The philosophy that public ownership and regulation is inherently less efficient than management by financial operators. The policy conclusion is that the public domain and government enterprises should be privatized and the sales proceeds used to roll back taxes on the highest wealth and income brackets. Unlike the liberalism of Adam Smith and subsequent free-trade economists, neoliberalism endorses an intrusive role of government to protect property and financial fortunes without regard to long-term tendency for the exponential growth of debt to exceed and indeed undercut the economy’s ability to pay. (See Internal Contradiction, Junk Science, Neoconservatives and Social Market.)

Neo-serfdom: The removal of choice from peoples’ lives as interest and rent charges reduce their discretionary income. This expanding rentier overhead is not part of the mode of production, but rather the mode of finance, wealth and economic power. (See Serfdom.)

Nobel Economics Prize: In 1972 the Swedish Bank endowed the Nobel Prize for Economic Science and awarded it to the neoclassical economist Paul Samuelson. The term “economic science” is misleading. In contrast to the natural sciences, it is not evaluated in terms of how realistic its assumptions are, but merely how logically consistent they are, much as one might criticize a work of literature or science fiction. Given mainly to free-market economists of the Chicago School, the award has helped legitimize anti-government economic ideology. (See Learned Ignorance.)
Offshore banking centers: An innovation by the oil industry creating “flags of convenience” to avoid North American and European taxes. The first such tax havens were established in countries such as Liberia or Panama, which used U.S. dollars rather than currencies of their own. The typical ploy was to assign transfer prices for oil at levels that enabled the head office to take its worldwide profits wherever tax rates were lowest. An oil-tanker affiliate registered in one of these havens would buy crude oil cheaply from its parent company’s branch in an oil-producing country, and then sell it to refineries in Europe or North America at a price so high as to leave no profit to be declared.

By the 1960s such havens were proliferating throughout the Caribbean and the South Pacific. The United States set out to improve its balance of payments by replacing Switzerland as the major tax and money-laundering haven for financial and commercial flight capital, as well as for criminals of all stripes, including heads of state and other government officials in client oligarchies.

Oligarchy: Rule by the few, usually the rich, and hence an economically polarized society. The term recently has been applied to the Russia’s “free market” kleptocrats who obtained Russia’s raw-materials resources and other assets under Pres. Yeltsin in 1996 through insider trading. The term has been extended to Latin America and other economies that polarize as wealth concentrates in the financial class at the top of the pyramid. (See Client Oligarchy.)

Optimum: In economic model-building, a position from which one cannot move to improve his or her situation. Most people think of “optimum” as representing an ideal situation. But an Abu Ghraib inmate suspended by his hands over a box with electrodes that will shock him if he moves is said to be in an optimum position, in the sense that any move would only make things worse. An optimum position thus may mean merely the least bad of a basically dysfunctional set of choices. Optimization models rarely recognize policies “outside the box” to create a better set of choices on a society-wide level. In most economies, for instance, freedom of choice for the poor is limited to paying for necessities, often going into debt in the process (see Neo-serfdom). This optimization choice by the poor helps keep them perpetually available for service at the cheapest and most “optimum” rate for employers dependent on minimum-wage labor.

“Other peoples’ money”: A euphemism for bank credit created electronically (formerly “paper credit”).

Over-depreciation: Over-depreciation is a tax credit based on the pretense that buildings lose their value despite the landlord’s outlays on maintenance and repairs, and despite the inflation of property prices. Buildings are allowed to be depreciated over and over again for tax purposes each time they are sold, based on a false analogy with industrial machinery. Landlords (but not homeowners) are permitted to recapture that portion of their original outlay representing buildings or other capital improvements as if their value is being used up in production or becoming obsolete. The depreciation rate is set so high as to offset all the rental income that otherwise would be reported (and taxed) as profit. This accounting ploy enables real-estate investors to take their rental income in a tax-exempt manner.

In principle, over-depreciation is supposed to be reported upon sale as retroactive income earned. But in practice it often is reported as a capital gain, which is taxed at a lower rate than is earned income.

Overhead: That part of national income which is not necessary for the production and consumption processes as such. This category includes economic rent, interest and watered costs, as well as government waste (variously defined).

“Ownership society”: The term coined by the Bush administration for government policies aimed at increasing the power of property relative to wage and salary income. The idea is to expand credit exponentially to inflate prices for stocks, bonds and real estate, requiring a rising number of years for income earners to pay for homes and for retirement income. Corporate profits are increased by shifting away from defined benefit pensions to “defined contribution” plans at which the risk is shifted onto employees.

The political intent is to make employees feel that even though their paychecks are being squeezed, they will gain as stockholders and home owners. The hope is that people will overlook the disproportionate share of assets owned by the top 3% and 10% of the population. (“Sorry you lost your job. We hope you made a killing on your home, so that you can refinance your mortgage or take out an equity loan to keep up your consumption spending.”)

Instead of an ownership society, we are evolving into a society of mortgage debtors, corporate debtors and government debtors. And as far as the supposed savings (“financial ownership”) are concerned, John C. Bogle has observed that instead of the economy being dominated by individual investors , it is being financialized into “an intermediation society dominated by professional money managers and corporations.” This trend “has not been accompanied by the development of an ethical, regulatory and legal environment … The ownership society is over. The agency (or intermediation) society is not working as it should.”

Original Article
Source: truthdig.com/
Author: Michael Hudson

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