Massive wealth inequality in today’s America isn’t the result of free-market running its course. It’s about corporate elites rigging the system for the last 50 years to transfer wealth from American people into their own pockets, not by offering better products and services but by financial and legal trickery.
American Government is a corrupt, puppet government with a singular goal that is to serve the rich. The tug of war between the Republican and the Democratic parties isn’t about who gets to serve the interests of the people of America but about intra-elite competition. The only thing each party cares about is to make its own tribe of elites richer and more powerful.
No politician in both parties cares about the remaining 99% of the population of America. The people of America receive lip service during the election campaign before each election but when the election is over, it’s back to the business of making the rich and powerful even richer and more powerful.
Since both parties have been serving the interests of the elites for the last 50 years, they became masters of their craft of protecting the rich. They got so good at doing what they do that the American Government’s first response to the coronavirus pandemic was to immediately print trillions of dollars and hand them out to the corporate overlords as if protecting the already protected class has anything to do with fighting a deadly disease.
Earlier and more effective government response to the coronavirus pandemic could have saved tens of thousands of American lives but since the politicians and bureaucrats in the American Government were busy getting their panties in a bunch in a rush to save the precious assets of the elites before anyone else, they wasted critical hours and days until they could start taking the necessary measures to contain the pandemic.
By the time they made sure that the already filthy-rich got $434 billion richer, the coronavirus was wreaking havoc on American people, infecting and killing them by the thousands. Even when more than 40 million Americans lost their jobs during the pandemic, the stock market kept on breaking record after record as if the economy is roaring.
The Devastating Results of Corporate Plunder for the People of America
50 years of corporate plunder stripped Americans of their health, wealth, and hopes for a better future.
Here’s the state of the people of America as of this writing (July 2020):
- Massively declined standard of living. It was already bad in 2016 when a survey found that 7 in 10 Americans have only $1,000 or less in their savings accounts. Also in 2016, the number of near-poor Americans – living below twice the poverty line – was a whopping 95.2 million. Now it’s even worse, as tens of millions of Americans are jobless and tens of thousands of small businesses went out of business due to the coronavirus pandemic. Wages of middle-class workers have been stagnating and those of low-wage workers have been declining for the last 50 years1 despite the ever-increasing cost of living.
- Poor health. Life expectancy in the United States has fallen way behind all other developed nations2 despite the increase in health spending per person in America by 6-fold between 1970 and 2018 (adjusted for 2018 dollars).3
- Skyrocketing “deaths of despair”. Suicide rates are the highest in the United States they’ve been since World War II4 and increasingly more Americans are dying every day by drug overdose5. Antidepressant use is so high that health experts describe it as “astounding.”6
- The insanely high cost of living. The cost of housing (both buying and renting), schooling, healthcare, taxes, fees, food, childcare, dining, etc. have risen astronomically during the last 50 years7 despite stagnant or declining wages in America due to the insatiable greed of the elites hellbent on skimming every dollar out of the pockets of the people of America.
- Astronomical levels of household debt. Americans are unable to make ends meet due to declining or stagnating wages and the ever-increasing cost of living. American consumer debt has risen to an insane level of $14.3 trillion by the first quarter of 2020.8
- The enormous wealth gap between the elites and the rest of America. Income inequality has risen to historically high levels that the top 0.1% commands as much wealth as the bottom 90%.9
- Stifled upward mobility. The American Dream, the idea that any American citizen regardless of social class or circumstances of birth can rise to the top with enough hard work, is long dead because the top 1% ultra-rich elite dug moats around their winnings so that no one else can possibly compete with them.10
How Did Corporate Overlords Game the System?
The destruction of the American people didn’t happen in one day. Ultra-rich corporate elites have been rigging the game in their favor for the last 50 years.
Here is how the skimming machine of the elites works:
Corporations Took Possession of the American Government
Once priding itself to be “by the people, for the people”, American Government evolved into a shell of its former self to be “by the privileged few, for the privileged few.”
Today’s American Government exists for protecting the privileged few — Wall Street bankers, elite lawyers, corporate oligarchs, and high-level knowledge workers including CEOs, the richest people in America.
The prevalence of political money has been instrumental for corporations in getting their preferred candidates elected and their army of lobbyists in Washington enables them to shape government policy.
Political money allows the corporate elites to put their favored candidates into office. The only difference is which tribe of elites gets to put more of their men in congress. American people choosing to vote Republican or Democrat is akin to choosing between polio and cancer.
Remember that this process has been going on for the last 50 years, which means that no matter whether it’s the Republicans or the Democrats running the government, it’s always the people of America who get the short end of the stick. The real divide in America isn’t between Republicans and Democrats. It’s between the ultra-rich elites at the top and everyone else.
Regardless of if they are Democrats or Republicans, all the presidents of the United States since John F. Kennedy did almost nothing for American people. In fact, they did harm by letting the elites crush American people with complete impunity provided by the American Government.
Why Did Corporations Take Possession of the American Government?
Because it’s the easiest and fastest way to wealth.
A corporation, by definition, is only interested in maximizing its profits. In a free-market economy, the job of maximizing profits has to be done by creating superior goods and services.
But this, of course, is not the readiest road to wealth. Getting rich in a free-market would require producing better goods and services than your competition but the existence of competition drives down prices and profit margins.
The easier way is to own the government which in turn protects you from competitors so that you don’t even need to bother with the difficult task of producing superior goods and services for more profits. It’s easier to swindle the people of America and siphon off their money via legal and financial engineering.
Legal and financial fraud being illegal could be a problem but not when you own the government. Fraud is illegal for more than 99% of the people of America but not for the ultra-rich elite because they are the ones who get to make the laws.
How The Elites Get Richer by Financial Engineering
Financial engineering is the tool that the elites use for manipulating the financial markets in a way to direct the flow of money into their pockets.
The biggest financial engineering tool of the elite, the stock market, is their primary skimming machine where trillions of wealth transfer from the people of America into the pockets of the rich takes place.
The elites don’t even have to worry if the machine malfunctions every once in a while because in such a case the American Government steps in and bails them out with taxpayer money, as we’ve seen in the financial crisis of 2008 and the coronavirus crisis of 2020. It’s always the people of America who end up footing the bill.
Stock buybacks, which was once illegal, was made legal upon the will of corporations because it allows the CEOs of the corporations to buy the stocks of their own corporation to artificially increase their own stock price so that they can be paid millions for creating profits (which are not real profits, mind you, but they count as profits since they also legally changed the definition of profits to account for the stock price.) Stock buybacks ostensibly increase profits but no value is created in the process whatsoever. It’s just a financial engineering tool to transfer wealth from the people of America into the pockets of the rich elites.
Other tools of financial engineering include the creation of funds, mortgages, bonds, stocks, derivatives, securities, and new ways of trading them, which allow the rich to get richer without even having to bother with the consequences of their mistakes because while their gains are capitalized, their losses are socialized. If the risks they take pay off then they gobble up the profits. If the risks don’t pay off and they lose, they are bailed out by the American Government with the pretense that they are too big to fail.
For example, the mortgage crisis of 2008 was one of the consequences of bankers trying to get rich by high-risk financial engineering which drove the economy to a massive disaster but the elites still got out unscathed thanks to the Government bailing them out with taxpayer money. The rich banker elites were the ones who played with risky financial instruments but it was the innocent people of America who were forced to foot the bill.
For the last 50 years, the elites engineered and perfected a skimming machine that cannot fail. Heads the elites win, tails the people of America lose. As we’ve already mentioned, the skimming machine that they perfected with 50 years of effort works so well that the elites managed to get $434 billion richer even during a global health crisis since the immediate reaction of the American Government to the coronavirus pandemic has been to print trillions of dollars and hand it out to the elites.
How The Elites Get Richer by Legal Engineering
Legal engineering is the tool that the elites utilize for manipulating the laws to maximize their profits without having to produce superior goods and services. Legal engineering also provides them with legal protection so that they don’t go to jail for their fraudulent activities.
Instruments of legal engineering include engineering corporate mergers and takeovers, creating tax shelters, engineering new regulations (related to consumer products, employment discrimination, worker safety, and the environment), fighting anti-trust laws, and defending antitrust or consumer protection claims.
The biggest benefit of these legal engineering operations is that they allow the corporations to get richer by creating monopolies (which should be illegal in a country with a non-corrupt government). Monopolies are extremely profitable because the lack of competition allows them to charge higher prices for lower quality goods and services.
We’ve seen in the previous section that the cost of living is astronomical in America. Everything is too expensive. One of the reasons for this is that the American Government is too corrupt to prevent the elites from forming monopolies.
Almost all industries in America are controlled by a few powerful corporations all of which enjoy extremely high profit margins (despite providing inferior and expensive services). The industries of telecommunications, technology, agriculture, aviation, credit cards, banking, food, hospital systems, pharma, media, beer, and many more are all controlled by monopolistic corporations.
Good luck if you want to create a small business and compete with these behemoth corporations that also receive government protection on top of their enormous market share.
The entire system is rigged to transfer an ever-larger share of the national wealth from the people of America into the pockets of the top 1% of the ultra-rich elites of America.
The Underlying Reasons for Civil Unrest, Protests, and Riots in 2020 America
Nowadays, America is shaken by civil unrest, protests, and riots, which is not surprising for those who study historical trends.
Most people attribute the recent civil unrest, protests, and riots to the recent outbreak of the coronavirus pandemic but the conditions that laid the ground for social unrest had been brewing for the last 50 years.
History tells us that the ever-greedy ultra-rich elites getting richer and richer by exploiting and crushing the people of America was eventually bound to cause civil unrest. The question wasn’t if civil unrest would occur but when.
Peter Turchin, a scientist who studies historical dynamics, predicted in 2010 that America would suffer a period of major social upheaval beginning around 2020, which goes to show that the current civil unrest in America isn’t simply the result of coronavirus pandemic.
Turchin based his prediction on three crisis indicators; declining living standards, increasing intra-elite competition, and the weakening of the state, all of which are present in the United States of America of 2020.
Just as coronavirus pandemic was the catalyst rather than the cause of the current economic crisis, the murder of George Floyd was the catalyst rather than the cause of civil unrest, protests, and riots of 2020.
Why Unfair Income Distribution Causes Civil Unrest
To a degree, income inequality is expected and understood in a capitalist economy since some people are more skilled than others, some take risks that pay off and some others are risk-averse, etc.
What’s unacceptable is when the rich don’t get rich by receiving compensation for their contribution to the economy but by exploiting others.
People get mad when they watch the ultra-rich unfairly get richer and richer when the rest of the people are struggling to make ends meet. People get mad when Federal Reserve, a government institution which is ostensibly supposed to protect the people, picks winners and losers with winners always being the ultra-rich and losers always being the rest of the people of America. People get mad when there’s a global crisis and the rich get $475 billion richer thanks to free money printed out of thin air by the government.
I saw the following video on Chris Martenson’s blog which showcases how primates respond to unfairness. Scientists conducted an experiment where they rewarded two monkeys unfairly. One of them gets grapes (a delicious, high-calorie treat) and the other gets cucumbers (a bland, low-calorie treat) for performing the exact same task. Watch what the monkey that gets the cucumber does when it notices that the other monkey gets grapes:
We’re primates by nature and primates hate to be treated unfairly. No wonder why people revolt when they see the elites gorging on grapes and the rest of the people are supposed to settle for cucumbers.
The Frustration with the Lack of Opportunities for Upward Social Mobility
In his 1991 book Revolution and Rebellion in the Early Modern World, Professor Jack Goldstone argued that “the country becomes vulnerable to a political crisis when the elites tighten up the path to mobility to favor themselves and their children (like increasing the cost of university); dampen wage growth and claim a greater share of economic gains for themselves; and resist taxation so that government is starved of needed revenues.”
In a previous post dissecting the reasons for the death of the American Dream, we had established how the meritocratic elite dug moats around their gains to consolidate them and destroyed the avenues of upward social mobility for the rest of the population. It turns out that this lack of opportunities for upward social mobility frustrates the public, ripening the circumstances for a political crisis, which is exactly what’s currently happening in America.
Elite Overproduction that Leads to Intense Intra-Elite Competition
Turchin’s model that accurately predicted in 2010 the current civil unrest in America, factors in another contributor to social crises which is called “intra-elite competition”.
Intra-elite competition occurs when there are more elite aspirants than positions for them to occupy. Moderate intra-elite competition is always present in society but intense intra-elite competition sets the stage for social and political instability.
We previously had talked about the polarization and paralyzation of the American Government and how it contributed to the death of the American Dream. Democrats and Republicans in Congress are in constant bickering since both parties are more interested in preventing the other party from having a victory than serving the interests of Americans.
The reason behind this polarization is that while the number of elite aspirants has grown in America, the number of seats in Congress has stayed the same, which led to stiff competition among the elites for a limited number of seats in Congress.
The number of multimillionaires in America has quadrupled between 1983 and 2107 while the rest of the Americans got poorer. When these millionaires reach elite status, they start to seek political power, the supply of which has not been increasing proportionately to the increase in the number of elites.
Factor in the increasing number of college and MBA educated people clamoring for elite positions and America has a problem of “elite overproduction” that leads to an intense intra-elite competition which in turn contributes to social and political instability.
Erosion of Public Trust in Institutions
There is a strong tendency for societies to render themselves crisis-prone when the existing configuration of institutions has exhausted its potential.
—James Dale Davidson
That the American Government abandoned its citizens didn’t go unnoticed by the people of America which is evident by the dramatic decline in public trust in government from its peak of 77 percent in 1964 to 20 percent five decades later.
American people’s trust in the mass media has been declining as well for the last 50 years from its already low levels of 68% in 1972 to 41% in 2019.
Why Are Corporations Supporting The Protests and Riots?
Students of human nature are already aware that human beings are not exactly known for being rational. So far, the protests and riots are following an irrational path as people don’t exactly know where to channel their anger.
You see many giant corporations appearing to side with the protestors which also seems to be irrational on the surface but I think it’s a calculated move because it’s in the best interests of corporations to distract the people from noticing the reals reasons behind their misery: corporate plunder.
By supporting the left-wing activists who currently are the frontrunners of the protests and riots, corporations are trying to pit the people of America against each other so that their plundering of the country goes unnoticed. Far-leftist activists act as useful idiots for the corporations but it’s doubtful if corporations can successfully distract people off their plunder and manage to pit Americans against each other.
I expect protests and riots to intensify because there’s no easy fix to the problems of Americans that took 50 years to pile up.
The financially bloated bubble of the economy is bound to pop. People will get angrier when coronavirus unemployment welfare eventually expires and evictions due to unpaid rent start to mount.
The sharp decline in tax revenues at all levels of government during the pandemic will lead to cities, counties, states, and the federal government to seek ways to extract taxes from the already out-of-money citizens which in turn will trigger more civil unrest.
The upcoming election will not rescue American people as no matter who’s elected, it will be more of the same system that’s been failing for 50 years and exhausted its potential.
I’m not worried though about communism (or socialism for that matter) to prevail in America because communism is basically an inferior version of the same system in western countries.
I’m currently reading an interesting book called The Sovereign Individual which predicts the demise of the nation-state so if the authors are proven to be correct, the welfare state will disappear and everyone will be on their own as there will be no nanny state for some people to rely on.
History tells that the pendulum will eventually swing in favor of the honest and hardworking people but the transformation will be painful.
Be sure to read:
- America’s Tailspin: How Meritocracy Killed the American Dream
- Coronavirus: Human Biases, Your Circle of Control and 3 Ways to Benefit from Staying Home
- Be a Better Man in 30 Days Program, Chapter 2: Take Control of the Direction of Your Life