Politicians Did Not Get Rich From Hollowing Out the Economy

In his inauguration speech Trump said:

For too long, a small group in our nation’s capital has reaped the rewards of government while the people have born the cost. Washington flourished, but the people did not share in its wealth. Politicians prospered, but the jobs left and the factories closed. The establishment protected itself, but not the citizens of our country. Their victories have not been your victories. Their triumphs have not been your triumphs and, while they celebrated in our nation’s capital, there was little to celebrate for struggling families all across our land.

He claims that politicians got rich by off-shoring jobs and driving up trade deficits. This is an instance of a standard Republican lie, that our problems are caused by politicians. In fact, all the profits from off-shoring went to corporate executives and owners of corporations. They made political contributions, sure, but that doesn’t enrich anyone. The gains to citizens were some lower prices at a cost of whatever wars and worse-paying jobs.

The decisions to off-shore and outsource jobs are made by corporate executives and controlling owners. They had many reasons to invest in other countries, ranging from a desire to protect their own businesses from being underpriced by foreign entitiesk, incentives offered by foreign countries, lower labor costs, and access to foreign markets among others.

US policy in both parties since at least WWII has been generally sympathetic to foreign investment for many reasons, not least the belief that nations linked by commerce and trade are less likely to go to war.

Foreign investment is always dangerous. The risks include expropriation, local governments that won’t or can’t stop violence against plants and equipment, lack of protection of intellectual property, and others. Karl Polanyi discusses these risks in The Great Transformation. Hannah Arendt agrees in The Origins of Totalitarianism. In different words, and with different emphasis, they say Western European capitalists solved this problem by enlisting the government to protect them when they invested abroad. The same thing happened here. Thorstein Veblen saw it clearly in 1904:

… [W]ith the sanction of the great body of the people, even including those who have no pecuniary interests to serve in the matter, constitutional government has, in the main, become a department of the business organization and is guided by the advice of the business men. Chapter 8, Principles of Business Enterprises.

Here’s a discussion of the implications of that statement for foreign investment.

Right down to today, capital enlists the support of the government to protect it so it can make profits in other countries, and government responds for its own reasons. We have always used military force for that purpose, but now the primary tool is trade treaties. The recent example of the TPP stands out. It was written by corporations and their lobbyists and lawyers, and supported by mainstream economists. It was opposed by working people and unions and most progressives. It was supported by a bipartisan majority of legislators. It should be noted that it was rejected by Trump and Sanders and disparaged by Clinton.

I won’t try to untangle all the interlocking interests, or to discuss the negotiations between the two camps, government and capital. But Trump’s assertion that Washington politicians got rich off foreign investment is stupid and false. The people who got all the money from from foreign investment are the executives and the obscenely rich people who own and control these corporations.

The incoherence of Trump’s statements in his inauguration speech and in his campaign speeches about corporate overseas investment is displayed in this New York Times article discussing Trump’s meeting with CEOs of giant US manufacturers. The reporters, Nelson Schwartz and Alan Rappeport, say that Trump told the “titans of American business” that they had better move manufacturing jobs here, threatened them with taxes that look like tariffs, and offered rewards like lower taxes and fewer environmental regulations. The reporters say that this is pointless, because taxes and regulations do not determine where corporate investment are made.

The reporters say that the real cause of overseas investment is Wall Street, by which they mean Capitalists, including hedge fund managers, giant Banks, and the richest investors.

In some cases, Gordon Gekko-like hedge fund managers are to blame, but much of the time, it is the drive for bigger returns on 401(k) accounts, pension plans and other retirement vehicles that depend on steadily rising corporate profits and, in turn, a buoyant stock market.

That’s just wrong. Many pension funds are operated by private Wall Street firms through Gordon Gekko-like managers. The largest funds spread management around among several management firms, and invest with hedge funds, and get investment advice from Wall Street firms for the funds they manage themselves. The idea that Wall Street cares about small investors or their IRAs is silly. I’ll just ignore the stupidity of using a movie character when it’s easy to identify the real perpetrators. You could just read this article to find one, Daniel Loeb.

The actual problem is that the federal government let the interests of the rich set our industrial policy with no public input, and actively ignored the interests of US workers and citizens, and sometimes even the security interests of the nation.

I suppose it’s possible that Trump meant that the rich have too much influence in government, and he means to change that. But seriously, can anyone imagine that the Republicans or the neoliberal Democrats will allow Trump to initiate trade wars over protectionist tariffs? Does anyone think that Trump will do anything to harm the interests of the rich, or that Trump doesn’t personally identify with the rich and their interests?

And exactly how is this different from that time President Obama chewed out the banksters over their greed in April, 2009? Nothing changed then. Why should this time be different?

It won’t be different until a solid majority of voters come to grips with the fact that the dangerous elites in this country aren’t college professors or scientists or liberals. The dangerous elites are the rich people who control the giant corporations and the people who support them, in and out of government.

Notre Dame undergrad (math); JD, Indiana University at Bloomington; 1st Lieutenant, US Army.; private practice in corporate and securities law; Assistant AG in Tennessee for consumer protection and securities; Blue Sky Securities Commissioner, Tennessee; private practice, bankruptcy and corporate law.

I have had a lifelong interest in economics. For most of my career, that interest was practical, focused on the problems in front of me. Lately I have been more interested in economics as a theory, especially its impact on the lives of people like those I met in my bankruptcy practice, and on the politics of money in the US. I also enjoy reading philosophers, starting in college and steadily expanding my reading ever since. I wrote at FireDogLake for a number of years.

Generally, I think the problem facing the US is the dominance of neoliberal discourse. I think it clouds the vision, and limits the kinds of problems that can be identified and solved. For example, the existence and danger of climate change can easily be identified in a scientific discussion. However, the problem does not fit the neoliberal discourse because science insists that the pursuit of individual and corporate self-interest will lead to devastation. In neoliberal discourse, the pursuit of self-interest always leads to Eden.

The neoliberal project has two prongs. One is the police function of crushing dissent and alternative views. The police function is provided by government agencies and private and institutional actors. The counterpart is the economic system , which is operated by government and by private and institutional actors. Some of these actors operate in both spheres. I focus on the second prong.

36 replies
  1. Tristan says:

    Well said. These people, the so called elites, aren’t really elite at all. They are just wealthy. In a world governed by the ideals of capitalism, wealth is equated with knowledge and then the power that is appropriated to the wealthy by our unbalanced capitalist system.
    As our nation continues to be striped of those things which provide for a society, society is the foundation of citizenship, which is the foundation of nationhood, we see now the ugly nature of unrepentant capitalism in its search for eternal growth and profit. And how politics, politicians in such an environment, are brought to heal by the succor, the bait as it were, of the pay off. How many times has it be proved by example that these “representatives” of the citizenry are nothing more that prostitutes who are more that eager to service the high paying “John”.
    This capitalist vision of eternal growth and profit is at odds with the well being of humanity and is now finding its limits, or not quite yet. The time of the corporations is upon us, not unlike so many dystopian novels and science fiction stories, which each have augured the future with some astounding accuracy considering the state of things.

    • Gal says:

      i might also add the Hollywood connection of films representing the future but oh not far fetched now:  Elysium  (2013) or recent others of that genre.

       

  2. Mitchell says:

    Oh, for god’s sake: Anyone who believes anything Trump says he’d do… I don’t want to say they’re a fool, but decades in the public eye says the only area where he isn’t all talk is when it comes to his venality. And with this cabinet and Congress, anyone really think he won’t be a doormat for the extreme end of the GOP? Really?

    And of course pols got rich allowing Big Business hollow out the economy. They raise contributions from private interests — not just enough to get elected but enough that they leave office with a healthy surplus, and leave office to lucrative employment by private interests.

    • Paul says:

      When we don’t know who are principals or owners of an LLC registered in Deleware, some people will be always able to speculate.  The Panama papers pointed to leaders of governments hiding their assets from disclosure through the same means.

  3. Michael says:

    “exactly how is this different from that time President Obama chewed out the banksters over their greed in April, 2009?”

    IIRC (and I believe I do), droves of “the banksters” simply refused to attend that event.

  4. bevin says:

    From the revolving doors in Washington, to the Think Tanks full of talking but empty heads spouting propaganda, to the TV anchors with half an eye on the campaigns’ ‘media buys’, to the heavily endowed chairs in Universities, to the legislatures full of bought and paid for lobbyists masquerading as Senators and Representatives of the people, the influence of corporate money at every level of government is hard to deny.
    It is a very old calculation: it is cheaper to buy a legislative majority or a Chief Executive than it is to negotiate with Unions, untramelled by Taft-Hartley (Happy 70th!) and its progeny, or to deal with anti-monopoly movements.
    Or to refuse to pull down barriers protecting labour against cheap foreign competition.
    Much of what Trump says is wrong and ought to be criticised loudly but on this matter-that the Political Class has waxed fat protecting corporations and capitalists as they broke Unions, moved jobs into Dixieland and overseas and stopped paying taxes- he is, like the famous stopped clock, right. And his point should be echoed not nit-picked.

    • John Casper says:

      Republican Presidents Eisenhower and Reagan agree.

      “Today in America, unions have a secure place in our industrial life. Only a handful of reactionaries harbor the ugly thought of breaking unions and depriving working men and women of the right to join the union of their choice. I have no use for those — regardless of their political party — who hold some vain and foolish dream of spinning the clock back to days when organized labor was huddled, almost as a hapless mass. Only a fool would try to deprive working men and women of the right to join the union of their choice.” —Dwight D. Eisenhower
      http://laborquotes.weebly.com/presidential-quotes.html

      Reagan: “These are the values inspiring those brave workers in Poland, the values that have inspired other dissidents under communist domination, who have been willing to go into the gulag and suffer the torture of imprisonment, because of their dissidence. They remind us that where free unions and collective bargaining are forbidden, freedom is lost… They remind us that freedom is never more than one generation away from extinction. You and I must protect and preserve freedom here, or it will not be passed on to our children and it will disappear everywhere in the world.  Today, the workers in Poland are showing a new generation how high is the price of freedom, but also how much, it is worth that price. I want more than anything I’ve ever wanted, to have an administration that will through its actions, at home and in the international arena, let millions of people know, that Miss Liberty, still lifts her lamp beside the golden door.”

      http://bloggingblue.com/2015/03/ronald-reagan-collective-bargaining-freedom-video/#comment-146867

       

  5. seedeevee says:

    “This is an instance of a standard Republican lie, that our problems are caused by politicians.”

    This is nonsense.

    “But Trump’s assertion that Washington politicians got rich off foreign investment is stupid and false.”

    So is that and this:

    “Does anyone think that Trump will do anything to harm the interests of the rich, or that Trump doesn’t personally identify with the rich and their interests? ”

    Does every politician get obscenely rich off of it? Of course not. Most members of Congress are obscenely rich. — https://ballotpedia.org/Net_worth_of_United_States_Senators_and_Representatives

    Every politician says the other politician or his/her supporters cause all of the problems.

    Pointing the finger at corporations instead of the ACTUAL PEOPLE that vote on or adjudicate the laws is a fine conspiracy theory and – while better than the “Putin did it” fables – lets the public off of its accountability.

    Do you actually think that the “rich” are looking out for the other “rich”? They are not. They are all trying to eat each other and come out on top. If there is a bigger group of sociopaths than the rich I’d like to see it shown. They like it all the better to see their competitors fail. To prove their superiority. Don’t you think Trump would like to see all the rich bastards that went against him fail? I do.

  6. martin says:

    “It won’t be different until a million+ armed voters finally come to grips with the fact that the dangerous elites in this country aren’t dangerous if they’re dead.”

    There..fixed it. After all, even these corporate and financial terrorist bastards know it’s coming…sooner or later, and they are getting scared. I guess Piketty’s warning is beginning to set in…

    http://www.newyorker.com/magazine/2017/01/30/doomsday-prep-for-the-super-rich

    They’re fooling themselves.

    Meanwhile, that scumbag of scumbags Jamie Dimon jokesnot… “Make Elites Great Again!!!!”
    https://www.buzzfeed.com/miriamelder/davos-make-elites-great-again?utm_term=.ulDKn93P3#.bh7yNGA1A
    He’s in the top 10 list.

  7. greengiant says:

    “The actual problem is that the federal government let the interests of the rich set our industrial policy with no public input”   The interests of the rich have been to offshore their assets and income and to hide under carried interest taxation law to minimize taxation.   Tariff less trade has resulted in effective trade wars that have stolen jobs from the US, ( Japanese TVs in the 70s)  in addition to the off shoring and automation.   At this point I think a value added tax is the only way to level the playing field and actually tax US and foreign entities on their US income.

  8. jerryy says:

    Dear Ed,

    I wonder if you are not using too broad a brush to paint your picture. Take for instance the example of the current Senate Majority Leader Mitch McConnell, whose net worth is estimated to be over (US)$22 million. Not too bad for a guy that has worked in government pretty much all of his life.

    Biography

    McConnell was born in 1942 in Tuscambia, AL, but was raised in Louisville, KY. He earned his B.A. from the University of Louisville in 1964 and his J.D. from the University of Kentucky Law School, Lexington in 1967.[6]

    Career

    Below is an abbreviated outline of McConnell’s professional and political career:[2]

    ▪1985-Present: U.S. Senator from Kentucky

    ▪1979-1985: Judge-Executive of Jefferson County, KY

    ▪1974-1975: Deputy U.S. Attorney for Legislative Affairs

    https://ballotpedia.org/Mitch_McConnell

    And from: http://www.wnd.com/2015/01/mitch-mcconnells-sellout-follow-the-money/

    “McConnell has received hundreds of thousands of dollars from Chinese-Americans, many with ties to mainland China, and between $5 million and $25 million from the family linked to Beijing’s Red mandarins.”

    Hyperbole in the last bit? Maybe, but it is based on fact. How many others in government political positions are doing the same? Those looking for a trade war with China though … ehh maybe it will not have the fireworks they want.

  9. Karl Kolchak says:

    The $200 million in corporate bribes paid to the Clintons for cramming neoliberalism down the Democratic Party’s throat would seem to have made them rich, but maybe my standards of wealth just aren’t high enough.

  10. dakine01 says:

    The dangerous elites are the rich people who control the giant corporations and the people who support them, in and out of government.

    In other words, #TrumpleThinSkin’s cabinet…

  11. earlofhuntingdon says:

    The reporters say that this is pointless, because taxes and regulations do not determine where corporate investment are made.

    Oh, my.  This is from the same PR playbook that has economists contending that assumptions don’t matter and that fraud is negligible and would not affect their economic conclusions or the policies based on them.

    This false assertion will be news to Brexit negotiators and the plethora of business executives who are worried about changes in tax, duties and customs charges and how changes in them might affect their decisions to invest or to maintain their investments in the UK and EU.

    It will be news to the growing number of CFO’s, who have turned their domestic and international tax departments into profit centers, and the “experts” and lobbyists they employ to influence tax policies in the US and abroad.  It will be news to the CEOs who have listened to those “experts” and and CFOs, who tell them that their bonuses, er, their corporate profits, will go up if they reincorporate offshore without having to move themselves or their corporate offices outside of Greenwich and NYC.

    It will be news to Wal-Mart and others, who determine which countries to invest in based, in part, on their labor and employment practices.  (Wal-Mart has left more than one market owing to demands that it permit employees to unionize.)  It will be news to the Wal-Mart, Cabelas, other big box stores, and mall developers who pit communities against each other to see which will offer the most tax givebacks and labor incentives to persuade them to build in their towns.  And it will be news to the legion of economic hit men who scour the globe looking for the locations with the least – or most pliable – health, environmental, workplace, fiscal and other regulations.

    In short, these reporters – and their editors – need to take a primer in the rules by which taxes and foreign and domestic investments are made.

  12. Evangelista says:

    This statement: “elites are the rich people who control the giant corporations and the people who support them, in and out of government.”  says what Trump is quoted at the beginning of the article saying, with the addition of “the rich people who control the giant corporations”.

    “[T]he people who support them” “in and out of government” back and forth through the revolving doors, are the people Trump’s statement referenced.

    Either Trump’s statement was correct, but incomplete, or Trump and Walker, both saying the same thing, are both wrong.

    There is no doubt that there exists an Elite-Government “symbiosis”, meaning, in plain language, racketeering.

    To ignore the racketeering, or to sweep it aside and deprecate it, to make a political attack against a political opponent even though the opponent is, in the instance, on the same page, is putting politics at the head of an agenda.  The result is what we read in Walker’s essay, a lot of verbage that advances the political agenda (maybe), at the expense of advancing against the problem.  It is turning the problem from a problem to a political football.

    The racketeers love this kind of “cow-pie scrimmaging”:  It takes the action off the field, out of their way, where it won’t interfere with their racketeering.

    • greengiant says:

      How does one tell when Trump is not lying,  when he is not in an alternative reality.   Visibility is not his MO.   Confusion is.  I think anyone who believes anything Trump says or wastes the energy to remark on it in any non negative manner  is a mark.

  13. Anon says:

    I think that several of you may be missing the broader point. Trump’s claim as stated is that politicians enriched themselves while bankrupting us. Thus he presents it as if they do so in a vacuum or solely for the interests of government. That is false. Ed’s point if I take him correctly is that this was not something done by and for politicians but by and for moneyed interests who have been all too happy to use “government” so long as it serves their ends.

    It is of course true that individual politicians have been rewarded handsomely for serving those same interests, that is how you buy loyalty. Mitch McConell stands to make 5 million the day his wife is confirmed as transportation secretary.

    But putting the blame on “The politicians” as if they exist in a vacuum only serves to aid and abet this process by misdirecting people from the true reasons and by allowing people to expend energy replacing them with other, more loyal servants. Or, as in this case, to replace “the politicians” by the rich themselves.

  14. Teddy says:

    Joe Lieberman, to cite but one example, worked as a public servant his entire lifetime and retired a multi-millionaire.

    How did that happen, do you suppose?

  15. Mike says:

    “The actual problem is that the federal government let the interests of the rich set our industrial policy”.  Yes.  But how did that happen?  By politicians making laws.  Are you suggesting that politicians don’t end up personally richer – at least after they leave office – by servicing the interests of the wealthy and their corporations?  Somehow — and I’m not saying in a way that isn’t perfectly “legal” — bright-eyed politicians  arrive in D.C. and years later, they’re rich.  I can’t prove a causal relationship between career politicians’ personal financial interests and the enthusiasm of their “client service”, but the correlation seems pretty clear.  It seems far-fetched to assume that self-interest doesn’t play a role.

    • Paul says:

      Yes sir, politicians let the lawyer lobbyist write the laws, or ALEC to create policy to benefit their needs.  How do politicians satisfy their needs or security?  Votes?, maybe but Ed needs to think of c instead of only a and b.  Those lawyers are smart.  Politicians are just PR flunkies.  They can hide it for them and you and I are just stating the obvious.  Ignorance is bliss I guess.

    • John Casper says:

      Mike you wrote,  “It seems far-fetched to assume that self-interest doesn’t play a role.”

      Correct.

      Why didn’t you just say you agreed with Ed?

      You wrote, “But how did that happen?  By politicians making laws.”

      Before politicians can makes law, they have to get elected.

      It’s more than “making laws.” It’s helping the elites capture the regulatory agencies designed to promote democratic capitalism and replace it with socialism for the elites.

      It’s capturing the media to prevent the 99% from figuring it out.

  16. Ed Walker says:

    1. I need to be more careful in my titles to posts.

    2. Thank you Anon for your careful reading.

    3. A fair number of politicians get rich in ways I think are corrupt to the bone, as others have noted above. I should have made this clear, given the title. But that’s not the central point I wanted to make.

    4. There is more to be said on this point, but I don’t want to put it in a comment. Short version: Trump must be rejecting the bipartisan concensus that entwining economies is a good thing that prevents wars and such. Blaming politicians deflects attention from the culprits who exploited a sensible policy for their own profits.

    • dakine01 says:

      Yeah, I do think politicians getting rich is a side effect of the business manipulation – trickle down if you will – but not the overall goal.

    • Rick says:

      Unfortunately for American workers, entwining our economies with all of the poorer nations of the world has resulted in the complete loss of union bargaining power and a corresponding stagnation in real wages for anybody outside the Circle of Wealth.

      • John Casper says:

        Rick,

        Along with exporting our manufacturing base, it was the U.S. crushing collective bargaining rights in our trading partners that all but destroyed U.S. unions.

        If foreign workers earned fairer wages, they could afford to buy U.S. exports.

        President Reagan understood how critical collective bargaining rights were.

         
        “These are the values inspiring those brave workers in Poland, the values that have inspired other dissidents under communist domination, who have been willing to go into the gulag and suffer the torture of imprisonment, because of their dissidence. They remind us that where free unions and collective bargaining are forbidden, freedom is lost… They remind us that freedom is never more than one generation away from extinction. You and I must protect and preserve freedom here, or it will not be passed on to our children and it will disappear everywhere in the world.  Today, the workers in Poland are showing a new generation how high is the price of freedom, but also how much, it is worth that price. I want more than anything I’ve ever wanted, to have an administration that will through its actions, at home and in the international arena, let millions of people know, that Miss Liberty, still lifts her lamp beside the golden door.”

         
        http://bloggingblue.com/2015/03/ronald-reagan-collective-bargaining-freedom-video/#comment-146867

  17. Rick says:

    People pointing at millionaires as if they are the “rich” are missing the point. A multi-millionaire isn’t truly rich these days. Yes, a person can retire on $22 million, but he won’t have much real influence. And that’s what the truly rich want. You have to up your sights a couple orders of magnitude to see the truly wealthy these days.

    There seems to be a great misunderstanding about whether politicians control the economy or whether the economy controls politicians. Generally speaking, the power flows downhill from the wealthy. So the point here appears to be that the wealthy are the ones who sent all the manufacturing jobs abroad, destroyed the unions, and are generally undermining our democratic institutions. I know that sounds Marxist, but it’s also true.

    If we want to fix our government, at a minimum we need to know who’s doing what, and why. Sadly we live in an age of profoundly powerful disinformation. The disinformation has taken over our media to the point where our President is currently somebody who actually believes all the nonsense that’s put out by Fox News.

  18. Bob In Portland says:

    It’s true that the great increase in wealth over the past three decades all pretty much went to the people who had been accumulating wealth prior to the rise of the neoliberals.

    But that doesn’t mean that politicians aren’t getting anything out of it. They get their cut, they get their egos fluffed through the media.

    One family that seems to have done especially well have been the Clintons. I would suggest that the Clintons, having done much of the heavy work in making the Democratic Party the favorite of the 1% inside the Beltway has translated to vast wealth for the family. There will be future Clintons hobnobbing with the elite.

    I suspect that the Clintons were long groomed to serve the elite, and perhaps to give the voters an alternative to the Bushes.

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