Catch-22s of the Free Enterprize System

Sometimes when I read some of the silly statements that are written about economics, even by so-called experts, I have to wonder. Mostly, I feel that very few look at the big picture. For one thing, they write about such things as "labor" or "business" or "consumers" and so forth as though these things did not consist of human beings and were somehow not related to each other.

Basically economics consist of supply and demand. If you are selling a product or service, the price you will get for it depends upon whether prospective buyers want or need the product; that is the demand. The other factor is the amount of the product or service available. The price goes up when demand is high and supply is low. It goes down when demand is low or supply is high. A good example of this is in my field, writing. The demand for written material is fairly high, but sadly too many authors are producing more than can be sold. So, for most authors, prices for their books and e-books are low compared to the effort put into their production.

The other basic tenet of economics is that profits are based on the monetary value of the quantity of items sold minus the cost of producing the items. For example, if I sell ten widgets that sell for a dollar a piece and the cost of making those widgets including overhead expenses and advertising is ninety cents, my profit is one dollar.

This brings me to the first catch-22 of the free market economy. One of the biggest expenses for most manufacturers and retailers is labor costs. Many businesses will cut costs by laying off people and moving their base of operations to a country where labor

is cheaper. The catch-22 here is that employees are also consumers. With no salary they cannot afford to buy stuff. If many businesses cut costs in this manner, former employees (consumers) can no longer afford to buy what is offered, and you have a recession. That is why the "trickle down" theory of economics does not work. You may reduce taxes for corporations, but what good does the extra money do if nobody is buying their products?

There is a truth that says, "money goes to money." Supposedly, in our economic system everyone has an equal chance to become wealthy. This is ridiculous. People who have money to begin with have a thousand times better chance of becoming wealthier or at least staying rich than a poor person has of even getting mildly well off. The poor have less access to education, don't have connections to people who can smooth their way through life, and are less likely to even get employment since many are minorities who are discriminated against. Also, they are usually unable to present themselves to a prospective employer in a manner that a middleclass or rich person can.

Many conservatives advocate taxing the wealthy less and giving less to poor people. This is a recipe for economic disaster. Very wealthy people must make a real effort to spend their money; usually they save most of it to give to their heirs. Poor people and many middleclass people, on the other hand, spend every penny they can lay their hands on and usually go into debt. Spending is what drives the economy, not saving. 

Even those who advocate a free laissez faire economy don't believe their own propaganda. When a large bank or corporation is on the brink of failure due to bad policies by the people who run them, they are the first ones to cry to the federal government to bail them out, with the claim that such-and-such company is too big to fail.

Another catch-22 of the corporate economic system is that the people who run large corporations are out for their own profit even if the stockholders suffer in the long run. They cook the books and use various schemes to make the company seem as though it is making money even when it is really losing it or making bad investments. Thus their huge bonuses and golden parachutes are ensured. Most of these people came up the corporate ladder not by their ability to manage but by their ability to play office politics.

The final and most important catch-22 is the monopoly power of large banks and corporations. They and their lobbyists have the ears of the people in government, Democrats as well as Republicans. In a sense, they are the government. Politicians need their money to get reelected. They own the media. They hire the best propagandists in the world, the Madison Avenue advertising firms.

We should listen to the words of Thomas Jefferson, the greatest of our founding fathers:  

"Experience demands that man is the only animal which devours his own kind, for I can apply no milder term to the general prey of the rich on the poor."

"Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny."
 

"I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country."