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We’ve Been Duped By Wall Street; It’s Time To Fight Back
Wednesday, April 15, 2009 / PowerMax Culture
The elections of 2008 shone a bright light on the central political debate in this country: liberalism vs. conservatism. But while our country was engaged in a widening polarization of political beliefs, the true debate should have been, and should be, directed at something completely different.
To create real progress, the debate should be directed toward the root cause of what ails us today; and that isn’t:
— whether we should raise taxes on the rich vs. extending more tax benefits,
— or creating more entitlement programs vs. letting communities handle those problems…
Those are all symptomatic issues. It’s as if certain realities have become so entrenched, we can’t even put them forth as debatable without being decried as unpatriotic.
When we see the growing disparity in incomes in this country, we can either bemoan the “lack of morality in the rich” or “the laziness of the poor,” or realize that our very system actually encourages a certain percentage of our society to create greater wealth for themselves at the expense of the general populace. Setting about attacking them with higher taxes actually does nothing to address the problem; in fact, it may encourage more of it.
And that system is all about Wall Street, or for more specific clarity, the community created by residents called publicly traded companies.
Where we’ve been duped is in the belief that Wall Street is actually a proper reflection of our collective wealth and/or health of the economy. The truth is that Wall Street itself encourages the development of “phantom wealth,” as coined by author David Korten (http://www.davidkorten.org/) in his illuminating book, “Agenda for a New Economy.”
Wealth that is created only from our imaginations (we must remember that money is simply a symbol we have created for ourselves… on its own, a dollar bill is only worth the paper its printed on), simply transferring digits from one electronic source to another, does not really benefit anyone except the few that take some of the profit from the transaction (which is at the core of the whole meltdown started by the mortgage industry). There is no true resource or product resulting from those dollars rushing around, and that is what helps create the monetary wealth disparity we’re seeing today. It’s not that the American dream of entrepreneurship and individual wealth-making is inherently bad, it’s the way that has been created to make that very easy to do while not contributing anything at all to our society as a whole that is bad for us collectively.
When Liberal and Conservative politicians alike debate about taxes and spending, they’re ignoring the basic structure of this part of our economy. In effect, they’re busy yelling at each other about the best way to apply lipstick to the pig.
In addition, as a result of the Wall Street structure, American corporations especially have been engaged in a mania to get bigger and bigger, often by acquisition. However, my personal experience with companies large and small has led me to create an axiom:
As the size of a corporation increases, the collective I.Q. of the organization drops in direct proportion.
I could give a hundred examples, but perhaps the easiest analogy is to think about making a deal with a sole proprietor on a handshake. Then try that with a Fortune 500 company. Fifteen versions of a legal document that has grown to ten times the size it needed to be later, you might have the same kind of deal… but probably not even then. You can’t tell me that getting more stupid is ever a good thing for a society, but the whole system encourages as much of that as possible.
The thing many of the “elite” don’t want us to know is that most powerful entity in the world is… us: the consumer. We ultimately control which companies are going to fail and succeed, and how vibrant the economy is. For example, as soon as we got pelted with enough news to scare us, we pulled back and stopped buying, and guess what, the economy went into a downward spiral, and the world’s leaders are in a dither.
I submit that we could get our economy back on track, reduce the income disparity between classes and reduce the power wielded by a small minority of Wall Street titans by collectively doing one thing: do as much purchasing as possible from non-publicly traded companies.
Obviously things like computers, where you only really have a choice between Apple and Microsoft, and cars, TV’s, etc. are going to have to be purchased from these gigantic corporations. But think about this scenario: if Americans staged a collective boycott against, say, large publicly traded restaurant chains, and instead swarmed local or regionally owned entities, suddenly McDonalds and Burger King and Subway and Denny’s would have a problem. But the *true* economy would not be affected negatively, because people would still be eating out as often. In fact, the overall health of the country would actually be improved because the power of the few would be spread out to the many. That’s pretty much the whole point of democracy, isn’t it?
As to the effect this would have on the stock market or your 401Ks, if the current economic situation hasn’t told you how tenuous that whole system is, and as a result the value of all of the phantom wealth you thought you had, then nothing will. And of course if this actually happened, it wouldn’t dismantle all industries on Wall Street, because some industries like automotive, steel, electronics and so on need large companies to run them.
I would also submit that there are only cultural downsides to companies like AIG, Citi Group and McDonalds getting as large as they are. We have the detriments of their existence proven by the fact that the government has to spend billions of our money to keep the first two afloat, with the latter simply making us fatter. Speaking of which, I was chatting with an executive of a confectionary company recently, who told me that the price of chocolate has doubled over the last year or two simply because the industry has been consolidated into a few dominant players. If paying more for your chocolate doesn’t get you riled up, maybe nothing will.
We were recently very proud to receive one of four annual “Torch Awards” from the Better Business Bureau for Community Involvement. How often do you think a Best Buy or Home Depot or even your local Apple Store would even be considered for an award of this type? All the money you give them flows to the home offices and the Wall Street elite.
Since I’m trying not to make this an overlong article (some might say “too late!”), I have to gloss over a bunch of points that lends credibility as to why this is a movement that should gain momentum. But just ask yourself, why did the economic bubble really burst in 2008? The answer has to do with our system whereby a very small group of people was able to create these huge engines of wealth for themselves, and an unwary public, and irresponsible politicians on both sides of the aisle, have let them do it.
So ask yourself: would you rather enrich the stockbrokers, the financiers, the bankers and the ultra-wealthy when you put your dollars into the economy, or would you rather benefit hard-working entrepreneurs of smaller companies, your neighbors, and others who are busy creating real wealth from their efforts, not just paper phantom wealth only a few people get to enjoy?
Since we’re not a publicly traded company, one might think the above message is a bit self-serving. But this has a lot to do with exactly why I have no interest in turning us into one. I know that I’d be one of the few beneficiaries; none of our employees would truly benefit (there aren’t many experienced and dedicated workers who would say that working for a large corporation, with its politics and policies and bureaucracy, is better than working for a company like ours, which has about 200 employees). Plus, we’d be buying into the system that is slowly corrupting the economic prosperity of this great country of ours. I’m to the point where I wouldn’t even consider working for a publicly traded company, no matter what.
Just think about it. If you’re politically or socially aware, you probably donate money to causes you believe in. If you stop and think about whom you’re benefiting when you spend your money with large chains or corporations (ultimately, hardly even the shareholders… mostly the traders and financiers and Wall Street power brokers) vs. smaller, closely-held companies, whether in your communities or over the web, the extra few bucks you might spend that you might have saved buying at Wal-Mart, Best Buy or Costco, might just be more effective dollars at enacting real change than donating to a political cause.
Something to think about next time you’re ready to buy anything.
April 17th, 2009 at 10:01 am
Great article! May I suggest to you a look at an organization called the Foundation for Economic Education—a non-profit with a great publication (monthly) supporting many of your excellent points, cheap and endorsed by hundreds of leading economists here and abroad!
April 20th, 2009 at 2:00 pm
YOUR ARTICLE IS GOOD BUT DOESN’T HIT ON THE CRA’S THAT WERE FORCED DOWN BANKS AND FANNIE MAE AND FREDDIE MAC THROATS - THOSE WHO TOOK LOANS BASED ON FALSE INFORMATION GIVEN AND SIGNED FOR BY THOSE WHO LIED ON THEIR APPLICATIONS ARE NOT BEING CHARGED - MY NET WORTH WAS CUT DUE TO THIS AND CAUSED THE FINANCIAL FREEFALL SO WHY SHOULD I HAVE CONFIDENCE IN ANY PART OF THE GOVERNMENT AND SPEND MY MONEY AT THIS POINT? TRUST IS A WORD YOU CAN’T USE WITH THE CURRENT ADMINISTRATION WHEN THEY ARE SPENDING OUR FUTURE AND RAISING TAXES TO GET THEM OUT OF A HOLE THEY CREATED. AMERICA WILL CONTINUE TO FAIL DUE THE LACK OF LEADERSHIP FROM THIS “CHANGE” AND I AS A FEDERALIST CONSERVATIVE REFUSES TO BACK THE IDIOTS THAT HAVE BEEN PLACED AT THE HELM - THE SHIP IS SINKING AND OBAMA IS DRILLING MORE HOLES INTO IT TO GET IT TO SINK FASTER - DIVIDING AMERICANS BY THEIR BELIEFS IS NOTHING BUT A TACTIC TO DESTROY AMERICA - OBAMA IS NO UNITIER BUT SIMPLY A DIVIDER AND WILL SPLIT AMERICA TO A POINT OF ITS FAILURE - I AM WAITING FOR THE FALLOUT AND I BET IT WON’T BE GOOD - OBAMA IS BAD FOR SMALL BUSINESS AND IS BAD FOR BUSINESS AS A WHOLE - SUPPORT TEA PARTIES REGARDLESS OF YOUR PARTY IF YOU WANT AMERICA BACK TO PROSPERITY
May 6th, 2009 at 8:28 am
I just read a report that shows the US with 20.2 square feet of retail per person… as opposed to 2.3 for Sweden, 2.5 for the UK, 2.3 for France, and 1.1 for Italy. And we have a lot more population than those countries. I mean, my word, Americans need to wake up and stop supporting the huge corporations that are shoving ten times the amount of stuff that we need down our throats! The bottom line is that there are multiple reasons not to support big corporations. One of them is illustrated here, with PowerMax willing to state opinions right on their website. Whether you agree with them or not, it’s a heckuva lot better than the vanilla pudding you get from the big corporations…
July 10th, 2009 at 6:36 pm
Very good article, particularly pointing out how much of the American wealth this past decade has resulted from non-producing activities - sort of like taking out bigger and bigger second and third mortgages because real estate prices were going up. Only to have professional financial managers investing and insuring products that no one understood and no one was regulating.
And here we go again, with the health care debate. It would be convenient to require private health care insurers to make sure everyone in the US was covered because “government is so bad, bloated and can’t do anything right”. People are being convinced it’s better to spend 3x’s more in the form of premiums than to spend less through taxes of any kind. And of course, this universal requirement comes at a time when private health care insurers have lost a huge market share because people can’t afford or don’t find good value in the product offered.
The Orwellen phrase is “preserving free market choices”. Huh? Free market doesn’t have anything to do with a ‘guaranteeing there is a market’ any more than the 2003 tax credit of $30k to buy SUV’s and Hummers guaranteed GM would make smaller cars or TARP would be used to ease credit.
Yet just as all these things demonstrate that industry driven policies do not work and are not “capitalism”, it’s the healthcare debate that painfully displays just how little say voters have in Congress. There has been no voice of the public invited.
In 93, Wm Kristol published a memo to Republican’s admitting 79% wanted a “public run” healthcare system like Medicare. At the time, Kristol advised not to get in debates about the merit of such a system because that would only lead to concessions and compromise when the whole idea needed to be erased. Catch-all phrases were to be used instead; rationing, socialized, free-market, class-war, …
There was no remorse about not representing voters. The reason used for needing to quell any suggestion of healthcare reform was the allegiance to Republican ideology and not allow Democrats to be seen as “protectors”.
Little has changed since then except the development of a small group of Democrats known as “Blue Dogs” that have taken the Republican ideology in sheep’s clothing. I know I was mislead by them. They also don’t believe voters have the ability to self-govern.
You state that this is not political warfare, yet these powerhouses have eliminated any say-so by voters in major policy issues. This is reflected in media that finds the latest celebrity news (”good news”) more important than asking questions and print press releases verbatim. Then complain that they are loosing viewers and readers. At no time do they look for clues with the way they are doing business. At no time do they think that laying off 75% of investigative reporting staff might have been the wrong answer.
The markets are not self-regulating. The fact that people are not buying product anymore does not lead to introspection on the part of mega-corporations anymore. What it leads to are more lucrative lobbying measures and contracts such as Walmart getting FEMA’s only contract.
Lobbying for regulated market share or capital using Congress is far more productive than any advertising or PR campaign. Visa has been willing to block some legal retail purchases, effectively killing companies that “gave the customer what they wanted”
Just as software start-ups can be killed in deep pocket nonsense lawsuits and devices are intentionally disabled from fully functioning - very anti-capitalistic in theory.
Consumers voting with purchasing power can’t keep up with how fast corporations are finding ways to eliminating consumers from having choices - including access to information and voting. Unless there is a much larger action from the grass roots level, we might as well kiss Bill Kristol’s ass.