From democracy through plutocracy and kleptocracy to hypocracy – By Ian Bersten

What sort of democracy do we have when donors with deep pockets determine policy outcomes? Is it right that the most powerful segments of society benefit against the interests of ALL Australians, asks Ian Bersten. THE GREEKS introduced the idea of democracy, which broadly means rule by the people. Most of the modern world is now run by democratically elected parliaments which in theory have all the power which is most often used to benefit the most powerful segments of society against the interests of the rest

The parties of the right largely have policies, which protect the interests of the wealthy and believe in reduced taxes and lower welfare benefits for the poor.

The parties of the left basically try to represent the interests of the workers and the poor and can only do this by getting revenues in the form of taxes from the rich.

The rich have proved themselves to be extremely adept at finding ways to minimise taxes and to keep their wealth intact.

The distribution of power sharing within a country can be illustrated by the Gini coefficient showing the amount of wealth held by the most wealthy down to the poorest. The indices in many countries show that the wealthiest 1% hold much more wealth than the lowest 50% put together.

According to an Oxfam report,

48% owned by richest 1% in 2014, 54% owned by richest 1% by 2020

$1.9bn wealth of 80 top billionaires — equal to bottom 50% of rest of world

$600bn increase in wealth for 80 top billionaires in 4 years — or 50% rise

$750bn drop in wealth for the poorest 50% of the world in 4 years

Not only are individuals wealthy but companies are also extremely wealthy and many of them hold enormous amounts of cash which have been taken out of circulation and deposited in financial institutions. The actual amount is rather hard to pin down but I believe the figure to be somewhere between 7 ½ and $15 trillion. One trillion is defined as 1 million million (12 zeros) and 1 billion is 1,000 million.

Must-see talk by plutocrat on the myth that capitalism benefits all, urging other plutocrats to take up the case of the underpaid.

British Petroleum BP was fined $13.7 billion in civil fines for the oil spill in the Gulf of Mexico. The sum itself was astronomical but was accepted without demur which illustrates that its cash reserves must be enormous.

The common prescription for the problems of the world economy in 2015 is more growth which means more spending. The spending can only come from either the public sector in the form of budgetary deficits or from the private sector which seems to be largely in debt except for the wealthiest.

The wealthiest individuals in the world can only possibly consume a very small fraction of their wealth for their living expenses.

On the other hand, the poorest consume most of their wealth just to stay alive. Total demand would increase if a large proportion of the wealth of the wealthiest was transferred to the poorest who would be likely to spend it immediately. This would create the growth which it so sorely needs.

Many years ago, there used to be a saying, “money was made round to go round and flat to stack”. This may have been an allusion to the fact that poor people lived with coins and rich people had banknotes, which they saved.

Only 50 years ago, there was much less money siphoned out of the economy to be held in cash reserves. It can be said that if all the profits produced in a community are reinvested in the community that there will be growth.  It is easily established that if too much money is taken out of a community there will be a depression. There needs to be much better controls on the levers of power so that we as a community are able to maintain growth by keeping money busy and not idle.

Spending power has been reduced by inflation which favours the increase in value of assets, largely held by the rich and not by the poor who do not hold assets such as homes, land and shares. The increase in the number of billionaires around the world, even in China and India, is staggering.

How did we get to this position? I believe it is through the actions of governments, acting in the name of democracy on behalf of all the people, which turned out to be a combination of plutocracy and kleptocracy.

The main instrument for doing this has been the use of wage controls, which have been used to limit wages for the working class to standards of living that are just enough and not much more, in most countries.

The middle classes in most of the Western world are obviously well off and have largely allied themselves to political parties, which will keep the system working as it is. They have a lot to lose if it collapses.

At the same time, as there have been wage controls there have been very few controls on prices through the whole economy. These are set by individuals and companies based on what they think the market will bear and will help to grow their companies.

Politicians such as Theodore Roosevelt brought in legislation to control the trusts and open up the American economy. Big business, the big end of town and industry at large have tried to limit regulation of their activities. It was only when regulation was lifted on Wall Street that the GFC was brought about by the financial institutions who profited so handsomely from the debacle. Lehman Bros may have collapsed but Goldman Sachs carries on its activities unabated and the rich have become richer. What it means is that free enterprise means freedom to decide for the rich and dependency for the poor. This is inherently unfair.

I have used the word kleptocracy which can be defined as “rule by theft”. I have used the word because the plutocrats have used the argument that wages can only be raised to a level which the economy can bear and then increased by inflation. Over the past 50 years, we have seen executive salaries raised to multiples of the average wage which 50 years ago were unimaginable.

According to the ATO’s tax statistics, if you earned $248,192 or more in 2008-09, you were part of the top 1%. The average income for an individual in the top 1% of taxpayers was $554 185. The median income for that year was $45 200, so the average income for someone in the top 1% was more than 12 times the median.

At the same time, we have seen directors’ fees, bonuses and profits rise enormously. In other words the savings gained from keeping workers’ wages down have been transferred to the plutocrats — the class of people who are getting the very highest salaries and dividends from the economy. They have stolen from the working class for their own benefit. At the same time that they keep workers’ wages down, they support each other in efforts to raise the level of their own emoluments.

If my analysis is correct, a solution does not easily follow. Jack is now out of the box and it will be very hard to get him back in. A revolution of Russian proportions will achieve very much. The solution may lay in ideas that control inheritance. I think it is a tenable position that people can earn as much as they are able to in their lifetime and to be able to pass on to the next generation a portion of their wealth up to some reasonable  limit per individual. There may also be a case for giving tax concessions to companies which control the wages distribution within the company, increasing with the number of employees. It is not right that some individuals possess enough wealth to take care of future generations for hundreds of years and other families can hardly scrape together enough to eke out the day.

In Australia in 2015, we are witnessing a Royal Commission into the sins of the trade unions. The sins are real and could have been more economically controlled by police investigations and convictions. While promoted in the media as being of enormous damage to the economy, they are not nearly as large as the damage done to many more Australians by the virtually uncontrolled banking system where the interest rate for credit cards is a punitive 18%, clearly unconscionable. Two headlines illustrate the size of the problem.

Westpac CEO Gail Kelly now one of Australia’s highest paid executives, earning about $13 million’

Big banks’ profit machine to crank out $29 billion in profit for 2014 financial year’

The impact of the poorly managed Super Fund industry has been far, far greater on the average Australian than the Trade Unions but there is no Royal Commission.

In May this year, Bruce Billson introduced the small business budget with handouts for small business. A few days ago Allan Fels wrote,

The federal government’s decision on Tuesday to “defer indefinitely” the key Harper Competition Review “effects” recommendation is not only inherently bad for competition. It also signals a disastrous incapacity to deliver economic reform in the face of interest group opposition.’ 

The intervention was to intervene when a big business uses its market power to damage or decrease competition.

The question arises whether the left hand knows what the right hand is doing or is this just another example of saying one thing and doing another.

The website for the Liberal Party has the words,

‘It will deliver a strong and prosperous economy and a safe and secure Australia and restore hope, reward and opportunities for all Australians.’

This is proof that the combination of plutocracy and kleptocracy has led to hypocracy — rule by hypocrites. They are well and truly revealed at Question Time in the Sledgislative Chamber when they evade answering questions about their hypocrisy and display their incompetence to deliver a fair outcome to ALL Australians

Source: From democracy through plutocracy and kleptocracy to hypocracy

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