In his preaching on the need for a new capitalism that will power social and economic prosperity in the West in the decades ahead, economist and Nobel Peace Prize laureate Dr. Joseph Stiglitz has described the malevolent market power today’s trillion-dollar corporations possess.
These are super businesses that have the power to control consumer prices, the supply of goods and services, and consumer demand far beyond the borders of the countries where their headquarters are based and owners originate.
Corporations today seek raw power, and not simply market productivity. This is termed “rent seeking.” Rent seeking is control of markets and the societies where those markets operate, not simply by economic and commercial means, but by any means necessary. That means political and social control. Think the United States military industrial complex: powerful businesses that drive US defence and intelligence policy.
The primary aim of the modern corporation becomes not simply profitability. It is about total control of the market environment, including political and social control. Corporations today influence and change the political infrastructure for the purposes of control. Growth and innovation have taken a back seat. Political power is viewed as far more potent than mere commercial power.
The challenge is that the concentration of political and social power at the pinnacle of the wealth pyramid has driven social inequality and suppressed the social, economic and political power of the western working and middle classes.
The result of social and wealth inequality has been low productivity, anaemic demand, and low economic growth.
Why? Because when the middle classes and those at the lower end of the social and wealth pyramid — the majority of the population — have spending power free of debt, the growth of the economy has historically been stronger than when wealth is in the hands of a tiny minority that has traditionally been frugal in its spending.
When the majority of the population suffers fear of unemployment, low wage employment, and rising debt, the macro economy grows anaemically, if at all.
On the other hand, if the power at the top of the pyramid has been grabbed by the 0.001 percent that has built its wealth to astronomic proportions to an extent where this group controls three quarters of global wealth, any return to greater equity becomes a “climb to the summit of Everest.”
Consequently, the one organisation with the power to stop this takeover of the world by the super wealthy and their corporations is truly democratic and representative government.
In the progressive capitalism model, the task of government is to work on the side of the consumer and working man and woman, and to encourage workers to come together for a better deal. Government is on the side of the struggling majority, not the super wealthy minority. Governments must invest in human capital to boost economic productivity; drive infrastructure investment that opens the door to competition; and intervene when super corporations become a social menace.
The preceding may appear utopian, but it is necessary if the world is to avoid the upheaval and even tragedy that wealth inequality may drive.
Rising anarchy, public anger and devastating migration patterns point to a world in upheaval. Only governments backed by enlightened masses can avert the pending disaster.
The great limitation in the pursuit of progressive capitalism is the “how to.”
What will be the agent of change? It will not be big business, which stands to lose its power and privileges. It certainly will not be the one percent who have seen their already astounding wealth increase to an even greater level. And it will not be the ruling politicians on the right mainly, who need powerful corporate friends and allies to remain in power.
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