Held Bondage by Mega Corporations

Something is definitely out of whack. America abounds in natural and human resources. The Stock Market is surging. Corporate profits are the highest in years. Yet, the 20%+ unemployment rate--the official 8.8% stat plus the unofficial one of people who have stopped looking for work, taken on menial part-time jobs, retired early, or have dropped out of the labor market to go back to school--remains unchanged. Moreover, the cost of living is rising faster than household income, an ominous sign of inflation. So what gives? Where is the economic recovery that politicians and bullish talk-show hosts keep talking about?

The jargon-rich explanations proffered by professional economists on the news media only confound the issue. For an intelligible clue as to what is happening in our economy a better source would be the dean of Capitalism himself, Adam Smith. In “Book 2, Chapter 4” of his iconic The Wealth of Nations (1776), Smith explains how in an open free market economy increased productivity requires a corresponding increase in labor, even when the increase is due in large measure to technological improvements. Machines could replace manual laborers, but only up to a point, because as production increases, workers would be needed to run and maintain the machines. High production and high employment, therefore, go hand in hand. But, on the side of the ledger, beyond of certain point the costs to the owners begin to rise in ever greater proportion. (The law of diminishing returns), and eventually any additional investments in materials, equipment and labor would not be worth the cost.

Casting Adam Smith’s lights on today’s American economy, it would appear that a major reason why productivity is so low, unemployment so high, and wages lagging behind prices, is because the mega corporations that control the economy have, against all free-market principles, engineered it that way to maximize profits.

But even so, one might ask, how could productivity and employment so far below capacity yield high profits? Wouldn’t the big players need to produce a reasonably large volume of products, hire enough workers to make them, and pay them well-enough to buy them, so they can make at least a minimal profit? In other words, where is their money, their billions, trillions coming from if not from actual productivity?

From many sources--stock sales, low-interest borrowing, tax breaks and subsidies, foreign investments, outsourcing production to cheap-labor countries, mergers and acquisitions, derivative trading, default swaps, well-insured speculations--none of which translate into benefits for the average working American or small business. The mega-corporations that control our economy and, thereby, our government have surreptitiously nslaved us.

The larger insight that we may draw from Adam Smith’s 900-page classic is that the “private sector” so revered by conservative ideologues in America is not necessarily synonymous with free-market capitalism.

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