I have to, every now and then, cede the stage to someone else for an extended riff. Economist John Mauldin, in his newsletter, quotes Roger Bootle in The Trouble with Markets: Saving Capitalism From Itself.
(DB comment: this relates to the difference oft-cited here between positive sum and zero-sum games.)
"Successful societies maximise the creative and minimise the distributive. Societies where everyone can achieve gains only at the expense of others are by definition impoverished. They are also usually intensely violent….
'Much of what goes on in financial markets belongs at the distributive end. The gains to one party reflect the losses to another, and the fees and charges racked up are paid by Joe Public, since even if he is not directly involved in the deals, he is indirectly through costs and charges for goods and services.
"The genius of the great speculative investors is to see what others do not, or to see it earlier. This is a skill. But so is the ability to stand on tip toe, balancing on one leg, while holding a pot of tea above your head, without spillage. But I am not convinced of the social worth of such a skill.
"This distinction between creative and distributive goes some way to explain why the financial sector has become so big in relation to gross domestic product – and why those working in it get paid so much."
"... And of course, it’s not just IBM. ... A recent survey of chief financial officers showed that 78 percent would ‘give up economic value’ and 55 percent would cancel a project with a positive net present value—that is, willingly harm their companies—to meet Wall Street’s targets and fulfill its desire for ‘smooth’ earnings....
"Just as the engineers had predicted, the result was huge delays and runaway costs. ... Boeing’s decision to minimize its assets was made with Wall Street in mind. RONA is used by financial analysts to judge managers and companies, and the fixation on this kind of metric has influenced the choices of many firms. In fact, research by the economists John Asker, Joan Farre-Mensa, and Alexander Ljungqvist shows that a desire to maximize short-term share price leads publicly held companies to invest only about half as much in assets as their privately held counterparts do.”
and: "Over-financialization is what happens when a company generates cash then pays it to shareholders and senior management which m.o. also includes share buybacks and vicious cost cutting. This is one way, as you can see, in which the real economy is excluded from the party!"
One thing is certain - "Supply Side" tax cuts were supposed to stimulate that kind of investment… and they absolutely/unequivocably did not. Ever. Even once.
Exactly as described and predicted by Adam Smith and every sane economist, Supply Side "voodoo" gushers of tax largesse to the aristocracy were spent on rent-seeking and distributive (parasitical) financial carotid-sucking, of exactly the kind Mitt Romney bragged about.
What's their justification. All the financial emphasis and arbitrage has the effect of "helping markets to find the correct price." This is hogwash and it does not happen. But even if it did, perfectly, every time, the fundamental premise is flawed! When financial intermediaries shoulder in to "find the current price" while taking fees and rich commissions, all they are doing is destroying the price differential that is the very basis for buyers and sellers caring to do a transaction, in the first place! Any scientist who knows thermodynamics will tell you it is differences in energy levels that propel living systems. There is a term for entities who flatten such slopes, making it impossible for the actual herbivore or carnivore or other creature to profit and survive. Those entities are called parasites.
== Pitchfork time? ==
Is there a solution? Re-studying Marx (who actually had a lot to say about this) and Adam Smith (who despised market parasites)? Electing a Sanders-Warren ticket, along with a radicalized Congress? Or the blended liberal-libertarian vision espoused by most Silicon Valley types?
Well it is certain to come to one form or another of revolution…unless enough members of our varied elites decide to look to their own long range self-interest by replicating the FDR miracle, when that son of aristocracy fought to rebalance capitalism, thus saving it - and the rich - from the natural consequences of unsapient greed.
== A hint of dawn on the horizon? ==
Just when it seems the parasites are overwhelmingly powerful...
... will wonders never cease? The US Senate has actually passed a forward-looking bill. “The U. S. Commercial Space Launch Competitiveness Act of 2015 recognizes rights of U.S. citizens to own asteroid resources they obtain as property, encourages commercial exploration, and allows companies to explore and recover resources from asteroids, free from harmful interference.”
Note, this legalizes ownership of the harvested material. Not the spatial bodies (asteroids) themselves, which is forbidden under the Space Treaty... opening up a scenario where we might shepherd an asteroid into a useful orbit, take some for processing, then see other powers pounce on it, free and clear. Oh, you will live to see wrangling!
Sure, it’s pro-business. So why am I surprised that a Republican Congress would do this? (And recall that GOP senators are, on average, less stark-jibbering-frothing-loony than GOP representatives (on average.)) I am surprised because most of the billionaires who are backing these ventures to go forth and mine asteroids are Silicon Valley types. Either democrats or else the kind of conservatives who deeply despise the parasitical direction chosen by the masters of today's Republican Party.
Maybe it happened because the Murdoch-Saudi alliance that owns Fox simply has no opinion that far ahead in time. We are benefiting - in this case - from the same myopia that generally makes them enemies of our children.
The Electronic Frontier Foundation called the move a big victory for fair use.
Not perfect, by far. But not.. not… not "the same."