Capture
Wikipedia offers an excellent synopsis of Regulatory Capture. In her book, Media Capture, Anya Schiffrin does so for Media Capture. In 1971, soon-to-be Associate Justice Lewis Powell Jr., then a corporate lawyer, wrote a memorandum to his friend Eugene B. Sydnor, Jr., Chair of the Education Committee of the U.S. Chamber of Commerce titled Attack On American Free Enterprise System.
To his mind, the status quo, which he called The American Free Enterprise System, was under threat of destruction by a revolution at the ballot; destruction by democracy. Whether he knew it or not, Powell’s plaint was really about Economic Capture. Powell, though he had majored in commerce at Washington and Lee University, may yet have never realized that such a thing even existed, though it had for centuries. Many American politicians and economists don’t admit to its existence today.
Since before Adam Smith, western economies have been a captive of capital, or more precisely, of wealth. Over the years, much had been learned, many books have been written, about the principles of economics. In the west, these principles were to be applied only if it was in the interest of wealth. It was the threat to the interest of those who held the economy captive that had Powell so exercised. To be fair, in the world into which Powell was born and lived, economics according to capital was gospel. So, the importance of the status quo. In the memo, Powell spoke to the threat to the nation; this, perhaps, was an attempt on his part to look ahead. But, his concern was for that part of the world in which he lived. In that world, any other perspective was heresy.
From his vantage in Virginia, Powell could have looked not so far back in time and made the connection of capitalism to an economy based on slavery; a classic example of an Economy Captured by wealthy interest. From where he stood in history, he could have given the America of 1971 a more objective look; one that might have seen a few of the problems with The American Free Enterprise. 1971 saw the beginnings of some of the greatest changes of all times.
The U.S. Chamber of Commerce, some Americans of great wealth, and the Republican Party took Powell’s memo and ran with it. Still are. In doing so, they shifted more wealth to the wealthiest while lowering the standard of living for the working class Americans. In doing so, they captured the Supreme Court by stuffing it with unqualified right-wing ideologues. To quote Barack Obama, in doing so, they ran the nation into a ditch.
Chamber members loved the mantra, believed that the memo would be good for business. The Chamber, as an ally to the wealthy, was a facilitator of Economic Capture. The wealthy well understood that they did not want to relinquish control of the economy. The Republican Party, bereft of anything good to offer the nation, had collectively decided to do anything in order to give the wealthy their due and be rewarded for doing so. All of them agreed that democracy was OK only as long as it was under their collective control.
From the vantage of the rest of us, our Captured Economy has a checkered past; is particularly ill-suited for the future. Obvious for some time now; the greatest threat to The American Free Enterprise System is The American Free Enterprise System, aka, Capitalism, itself. By either nom, they are responsible for many of the problems we, the world, face(s) today. Most significantly, the Economic Capture of western economies has exacerbated the effects of Climate Change (the greatest challenge heretofore known to man), has, especially since 1971, broadened economic disparity in America, and stifled progress at every turn.
Powell’s 1971 memorandum played an outsized role in the near total corruption of the Republican Party, the growth of the most undemocratic Federalist Society, and the subsequent Court Capture – the disaster that is now the Supreme Court, and much more. The memorandum spawned the Paul Weyrich founded, Joseph Coors funded, Heritage Foundation; a group that led the charge to shrink government. The memorandum spawned the American legislative Exchange Council (ALEC); a group that co-opted state legislatures and help them gerrymander voting districts. Gerrymandering has become a Republican Party favorite for Electoral Capture; another is voter suppression. Voter suppression and gerrymandering are both forms of Electoral Capture; are both abetted by the Captured Court.
From today’s vantage, The American Free Enterprise System, aka, Capitalism, is so yesterday. Today, the Financialists represent wealth as capitalists once did. It isn’t the board rooms of giant corporations that rule the world (PS, it never was their CEOs), it is the billionaire Oligarchs. Oligarchs who made theirs, not in producing goods, but in finance. For some time now it has been the financialists holding the Economy Captive. They do so because it is in their, the wealthiest, interest to do so.
What is so funny is that these “titans of commerce” don’t see that what they have done has actually slowed the growth of what they want most: money. Sure, they are crazy rich, but they only did it by taking from those who did the work of adding value to a rock and creating a game of making money from money. A game of marking numbers on paper (or today a digital spread sheet).
I posted early on here showing that the 1 group who’s income had doubled twice was the 1%. There income actually grew faster than the GDP. They have received undue money. I forget the exact numbers, but the vast majority of people’s income has not doubled in decades.
And yet people think voting does not make a difference.
Daniel:
Precisely. And they fight against adding benefits such as healthcare which adds to productivity. Direct Labor is such a small portion of the cost of manufacturing.
I went back and read your piece. Impressive piece of work from the ancient times.
The “Gamesters of Triskelion” an episode in the original Star Trek now seems prescient. In 1968, when the episode was first shown, the wealthy played games by producing things for an increasingly wealthy populace. Now, that populace is just game pieces in a vicious game being played by brains in a jar using quatloos, a currency totally divorced from any economy, as the betting stakes. There’s a reason a show like Squid Game both has resonance and seems strangely familiar.
Kalesburg:
I do not recall that episode. Even so, Star Trk was pretty remarkable in how it addressed particular social issues.
I found my article. I published it here in 2008. I used numbers from 1933 to 2007. This was the conclusion the meat of it:
Using 1976 as the center point of the range because it is the low point of the share of income for the top 1%, there are 5 times that GDP doubled for an average of 8.6 per doubling. This during the time that income share was becoming more equal. As income became less equal over the next 32 years, there are only 3 doublings of GDP or once every 10.6 years. Also, the time between doubling is increasing to more than during the prior 43 years.
Now, for the class war aspect. In the first 43 years, the top 1% saw their income double only 3 times (1 every 14.3 yrs) compared to the bottom 99% seeing theirs double 4 times (1 every 10.75 yrs). During the next 32 years, the top 1% has experienced 4 doublings, one every 8 years compared to the 99% experiencing this only twice, one every 16 years.
Here is the link to my posting. Income distribution and GDP, it matters – Angry Bear (angrybearblog.com)
Sen Whitehouse, Scheme 16
Ken:
Just listened to all 17 minutes of it. I also wrote about the EPA being blocked in West Virginia, here Cooking the Planet.
On opioids also in West Virginia where a District Court decided against Cabell County and Huntington.
The courts are stacked against people and Congress delegating authority. The ruling on Opioids is complete BS. The evidence was there on over shipments.
https://www.huffpost.com/entry/joe-manchin-negotiations-chuck-schumer-climate-change-tax-hike_n_62d0cc24e4b04aa0fe65a238
Ken:
I read what Joey did . . .
I would like two minutes alone with Manchin. He is lecturing to us while looking down from his houseboat “Almost Heaven” anchored in the Potomac. West Virginia is far from being almost heaven ranking near the top as an opioid hotspot, at the bottom few for places to live,
and livelihood, losing population, no cities greater than 60,000, low income, oldest population, it is a shitbox and he is doing little to help West Virginia. It isn’t even West Virginia coal mining he is supporting.
Just a greedy good old boy. One high spot on “Almost Heaven” being Lindsay Graham getting Covid from floating around the bay.
He has done nothing special other than play a little high school football and run track. He is not XMilitary. He is not helping WV’s population. He lied in the Senate about the circumstance causing a young, pretty, blonde woman to die from a fentanyl laced opioid. He is almost tied with McConnell for people I would most like to have their attention for a 2-1/2 minute (increased by 30 seconds) segment like I did with Stabenow at a fund raiser and Durbin on an elevator after “Showdown in Chicago.”
I am afraid they would lock me up for my protesting the politics of these politicians.
Waste of two minutes.
Yes, but a feel-good measure.
Manchin’s ‘thinking about what to do’ is thinking about how to build some plausible excuse for doing what he is going to do. His ‘it’s inflationary because it’s not paid for because I won’t increase taxes on the rich’ sails right over the media’s head every time.
Ken:
I do not disagree with you on Manchin. To Manchin’s whine on taxes, by 2027 those taxes will return. trump’s tax bill was passed under reconciliation and has not balanced yet. It never will as it is applied to the wrong place. Someone has to answer him with just those facts. Manchin and Sinema both voted against it, the same tax breaks they are refusing to rescind today. A bit of Dayen on the topic:
The Pro–Trump Tax Cuts Caucus
Manchin can not build a plausible excuse to maintain trump’s tax breaks. He never will. This is sunk cash invested in a minority of <1% of taxpayers. There is nothing coming out of maintaining these breaks for them as it solely enriches them. There is no productivity gains to be had here. We have not seen $dollars coming out of these tax breaks supporting the nation. That is the story here and Manchin needs to own it.
This is the rest of the story which I know you already know that goes by the wayside. Manchin won't tell it and neither will Sinema.
You must already know this and I am speaking to the choir here.
I just do not understand how the Democratic party has not jumped on Whitehouse’s wagon. He’s doing the work, presenting it in easy to understand manor which should make for great ammo in any campaign against the Republicans.
What he is talking about is what I believe many people “sense” as a general problem in the function of our government. That sense that government is not working for “me”.
We only hear Senator Whitehouse talking about this. What he is talking is what populism is about. It is what creates a movement.
Democracy is hard work.
No better example of Regulatory Capture than the financial crisis. 6 years of the Bush administration and Rep trifecta in Congress led to the total emasculation of Federal Regulatory groups that allowed the fraud. They even went as far as to stop state regulators from regulating national banks doing business in their states. The OCC made that ruling, and took it to the Supreme Court to insure the national banks were unfettered by state regulators.
William Black, who was an important part of the prosecution of the S&L fraud, gave a great interview on this. To sum up, when he started the S&L investigations, they had over 30,000 criminal referrals from regulators to follow. Despite the fact that the housing fraud was 70 times the size of the S&L fraud, there were almost no criminal referrals from any of the regulatory agencies.
Link.