Conservative Myths – Free Market

One of the basic claims of conservatives and libertarians is that government intervention in capitalism distorts and ultimately inhibits the free market. More importantly, the implication is that the free market would somehow operate more efficiently if it were unfettered. Republicans have claimed among other things that an unfettered free market will cure poverty, solve global warming, reign in the growth of healthcare spending, and give everyone the opportunity to become wealthy.

So let’s dig into this myth as a precursor to a discussion about income inequality.

Markets, free or otherwise, are places where goods and services are bought and sold.

Markets require rules in order to operate. Sellers want to be assured that they are going to get paid. Buyers what to be assured that they get what they paid for.

eBay is a great example. They created their own market free from government regulation. It had anonymous buyers and sellers. Everything, at least in the beginning was priced based on competitive bidding. As long as there was more than one bidder, prices would always settle on what the real value of that product or service was at that particular point in time. Basic supply and demand. But even eBay had to have rules. They had to have a way to escrow payments to make sure that sellers got paid and buyers actually received what they paid for. They have to have a way to resolve disputes if products turned out to be misrepresented. They also had to protect sellers from unethical buyers who might want to blackmail sellers using bad reviews. eBay is as close to free market as you are going to get in this day and age, and they did it through consistent enforcement of a set of rules that were fair to both buyer and seller.

Government provides the rules that allow markets to operate in efficient and predictable ways. Those rules include contracts, bankruptcy, and fraud just to name a few. The notion that markets are somehow fettered by these rules is folly. In fact, it is very much the opposite as we will soon see.

This brings us to the next step in the myth of the free market. That is the notion that the marketplace is the fairest judge of the worth of both goods and labor. That might be the case if the markets were themselves fair, but if people cheat to gain an advantage it raises the real question of how fair that market is going to be.

Here are a few examples.

Insider Trading
Insider trading is taking unfair advantage of information that you may have that is not available to the rest of the market. The expectation of most people familiar with the term is that insider trading is illegal. The fact is, however, that CEO’s trading with their own stock are exempt from insider trading rules. Even worse, companies no longer have to disclose when they are trading in their own shares, whether that is buying back their own stock or when their senior executives exercise their options and then sell the stock. Rules put in place during the Clinton administration treat executive compensation that is performance-based (e.g. stock options) as tax exempt for the company. These rules have created a perfectly legal situation where a CEO can direct his company to buy back a sufficient number of their own shares to artificially drive up the price, and then sell off shares acquired through their executive compensation package before the stock has had a chance to fall back to the normal trading ranges. This is one of the ways that CEO’s of companies underperforming the stock market can still secure windfall profits for themselves. It is not illegal. But it is certainly cheating on the principle that compensation has anything to do with performance. What’s worse, it is not only cheating those who are investing in this company or its competitors. We tax payers are subsidizing these windfall profits that CEO’s enjoy because we make up the difference that their taxes would otherwise supply.

This is just one example of how large companies since roughly the 70’s have tilted their markets in their favor through manipulation of the rules governing the market. It is also an example of how tax rules put taxpayers in the position of redistributing pre-tax subsidies UPWARD in our economy.

Another example was the subject of a three part story in the NYT.

That covers contracts. Companies large and small now include terms of use contracts in all of their online and many of their hard goods packaging. The same language is in many supply contracts as well. Those terms of use preclude the user from participating in a class action suit. Instead the consumer or trading partner agrees to arbitration. The problem is that the arbiters who hear these cases have a built in bias to find in favor of the company. That’s because those who find in favor of the customer quickly find that they fall off the list of arbiters acceptable to the corporations. The result has been that third party arbitrations end up being resolved in favor of the company most of the time. This gives companies wide leeway to behave in predatory ways without fear of consequences.

Here’s another.

Generic Drugs
It is perfectly legal in this country for large pharmaceutical companies to pay producers of low cost generic alternatives to delay producing those drugs. The result is that healthcare costs in this country are artificially inflated because only the higher priced proprietary drug is available. Worse yet, we are the only country in the world that allows this practice. So our drug prices are also the highest in the world. The annual additional cost that the insured and the government bear is estimated to be $3.5B/year. This is another direct subsidy to big pharma.

Cable Monopolies
We also pay more for Internet service that any other country in the world because we have given the cable companies, who dominate the market, a monopoly in most areas. 80% of cable subscribers in this country only have one choice. As a result cable costs 3x more in the US than Europe where consumers have up to 7 providers to choose from.

Big Banks
Too big to fail banks now control 44% of the loans in this country. They are able to offer lower interest rates on those loans than smaller competitors precisely BECAUSE the financial markets know our government will not allow these big banks to fail.

Bankruptcy Law
Similarly the rules for bankruptcy favor corporations and banks over individuals. Corporations can use bankruptcy to walk away from pension obligations or union contracts. Individuals cannot use bankruptcy to walk away from student loan debt.

Ivy League Schools
Because wealthy people get big tax breaks to contribute to private institutions of higher learning like the Ivy League Schools. They also secure the guarantee of enrollment at those institutions for their children through “legacy” preference. The problem is that those tax deductions constitute a government subsidy provided by the rest of us tax payers that is estimated at almost $60K a year per Ivy League student. The tax payer subsidies to state schools generated primarily through direct payments rather than tax deductions is about $6K per student. So we are not only contributing to the wealth of the 1% through the tax avoidance strategies of their companies, we are also paying to educate their kids who will learn how to expand this strategy for their benefit when they follow in their parents footsteps.

I could go on for quite a while, but I think that you are getting the point.

There is no such thing as a free market because those who control the market would prefer that it operate in ways that benefit big corporations and disadvantage competition and customers.

The result is a massive subsidy that consumers, small companies, and the government provide in the form of anti-competitive rules and regulations. This upward pre-tax distribution of money is why many corporations spend more money on lobbying than they do on R&D.

Our markets are rigged to benefit the powerful and wealthy. The powerful and wealthy are perfectly happy to perpetuate the myth that they earned their wealth because they were smarter and willing to work harder than everyone else. The data, however, suggest otherwise. It shows that corporations with highly paid executives generally underperformed the market and their competitors.

The real story is that a high percentage of the wealthy and powerful got there because they started out on the inside through the accident of birth, learned the game at the same schools their parents attended and supported, and figured out how to expand their unfair advantages when they had their turn at the wheel.

The reality is that if we were able to stem the tide of this massive upward redistribution of wealth, we wouldn’t need nearly the amount of post-tax redistribution to the working poor through transfer payments. We would be able to pay our bills because the existing tax system would be generating a lot more money. We would be able to fix our roads, educate our kids, and feed our hungry.

Instead we are supporting an oligarchy who claims that they deserve what they stole because the “free market” decided that they should have it. While they are promoting the myth of the free market, they are using their wealth to buy political influence. They use that political influence to warp market and tax rules in their favor.

They say publicly that “government is the problem”, but behind the scenes this government is working just fine for them. That’s because they are getting what they paid for.

30 Responses to “Conservative Myths – Free Market”

  1. Keith says:

    YS) The real story is that a high percentage of the wealthy and powerful got there because they started out on the inside through the accident of birth, learned the game at the same schools their parents attended and supported, and figured out how to expand their unfair advantages when they had their turn at the wheel.

    The reality is that if we were able to stem the tide of this massive upward redistribution of wealth, we wouldn’t need nearly the amount of post-tax redistribution to the working poor through transfer payments. We would be able to pay our bills because the existing tax system would be generating a lot more money. We would be able to fix our roads, educate our kids, and feed our hungry.

    Instead we are supporting an oligarchy who claims that they deserve what they stole because the “free market” decided that they should have it. While they are promoting the myth of the free market, they are using their wealth to buy political influence. They use that political influence to warp market and tax rules in their favor.

    MR) these statements make it very clear why any discussion with you is very difficult. It’s a very jaded view you have. I am particularly interested in the word “Stole.”

    Jeff, there have been many forms of govt of the course of history. It’s very clear ours has been the best ever. If you think any other form would somehow be more fair then feel free to dream. Socialism has never worked, communism has never worked. The cast system has never worked.. Facisism has never worked. I look around the current global and I see nothing I would trade for.

    Also your view of the generic conservative is mostly unfounded. No one suggest we don’t have rules that are t enforced. I know the mantra ” unfettered capitalism” is thrown around… No one, or very very few, actually think that in practice.

    As to big companies and their performance, you might want to listen to what Carly has been saying about that. Big companies become more inefficient when big govt burdens then with more and more regulation. Those regulations the take more and more time and money. Smaller companies can not afford this and it kills them. Dodd frank is the perfect examples. Compliance with those regs for smaller banks, who never made a bad loan, is crushing some of them… But big banks with there armies of lawyers can. Get it? Maybe this is the unfair system you are referring to.

    Share buy backs are a perfectly good use of shareholder money… I always smile when companies I own do it. I never once think the CEO… If I did it would be only that if he’s motivated to get the share price higher then good for him, and good for me, and good for all of the pension plans that are underfunded for all the pensioners of union defined pension plans…. Get it?

    Yes I agree with you, the govt is the referee and there should be one. What we don’t heed is the referee wanting to play the game.

  2. Keith says:

    YS) a high percentage of the wealthy and powerful got there because they started out on the inside through the accident of birth,

    MR) This is even more to the point the colored glasses you see through, or your own bias. It’s really a remarkable statement Jeff. Do you really believe this about the USA?

    I’m your response I’d like to know What is the percentage that you deem to be “high?” Who are they GW Bush? Chelsea Clinton? The Kennedy’s. Bill gates children?

    Know, as probably do you also several people of net worth of $200 million or more… None are from circumstances as you’ve described. NONE!!! I know countless millionaires, a few are as you have described… The percentage would be considered small. I have met have friends who know billionaires, NONE would fit the bill you’ve described. (I’ve met one but he was Russian)

    What did my millionaire friends steal? I’ll start asking that question and let you know their response.

    Jeff you built and sold a company. I have assumed through the years you did well. So, what unfair advantages did you have through life to “make it.” More importantly, since we are hypothetically discussing spiritual wickedness in high places, WHAT DID YOU STEAL, and from whom?

    These are legitimate comments and questions Jeff if I am to participate in the this discussion you started based on you premise. Rich people and those of great influence steal…

    And to easy your mind, is there corruption? Yes? Is it perfect? No. are there idiot CEO’s? Yes. Are there idiot in politics? Yes. Regardless of what form of govt or oversize you have.. There will always be wickedness in high places.

    You sir need to get out more if you feel we are repressed in the USA?

    I should tell you about my very lower to middle class nieces and nephews ages 18-30 and how they have done in the repressed system you believe exists with the game stacked against them. There are 9 of them… All but one of the would be laughing out loud before you finished your first sentence. the other is a starving artist so that one might be interested in your thoughts as a muse for their art form.

    Also just to clearify. Don’t take my word personally. They are not spoken in mean spiritedness. It’s just that my very lower middle class upbringing and that of thousands of friends, raised in all circumstances, simply do not recognize the premise, bias, to which you frame the conversation. Are there winners and losers? Yes. Do others have advantages? You would say yes… I would hesitate to say that. We all have chances. (Except those with very broken homes with terrible parents. The obstical course they run is much different)

    This is why I laught at the gay black student elected president at UofM and the child of great wealth and privilege hunger strike guy. They have experienced no such obstical. The problem is the bar is being lowered daily by these perpetulent children as to what a obstical is. Again you don’t have to agree with this but please understand it. Someone calls you a name so the president of the university losses his job… If the president were black and these same people were called a name would the environment still be considered hostile and would the president be asked to resign?

    Ask Condi Rice about obsticals….

    Wake up and cease the day. Millions of Americans do every day. It hard work and it’s fun…. More importantly you can.

  3. Keith says:

    I’m watching the Dem debate.

    Please join me in demanding Bernie Sanders, and all liberals, stop quoting Warren Buffett line that his secretary pays a higher effective tax rate then he does. Bernie subbed “his secratery” with “nurses and truck drivers.”

    Fact Warren said this several years ago. He was paying cap gains rates of 15% then. Today he pays 23.8%. Also, warrens secratery had to be making several hundred thousand dollars a year to pay a higher effective tax then Warren. Further, name a nurse or truck driver that pays 16% effective tax rates let alone the 24% that would be required today to have a higher effective rate then Warren. So, will you join with me in calling the a premeditated lie. To continue to say this would make him either ignorent or a liar. Which do you think it is?

  4. Keith says:

    Bernie just said ” the business model on Wall Street is fraud.” You say rich people have stolen , are you Bernie’s ghost writer?

  5. Keith says:

    He just redefined the business modal of Wall Street as “great and fraud”

    Did you speak with him during the TV break?

  6. Keith says:

    Bernie blames everything on billionaires.

  7. Keith says:

    Hillary and Bernie are now clearly race baiting. It’s pathetic. The question was what do you say to a young black kid who is hopeless. Each of those two both said casually cops kill …

  8. Keith says:

    As an aside, I’ve been invited to a private gathering at a home in a few weeks. For the small sum of $3,000 I can meet with Hillary and have a picture with her… I’m considering this..

  9. Keith says:

    Does Bernie realize that single payer will provide worse healthcare for most Americans? Union employees have outstanding choices and care.

    Hillary was just reminded she said in 1992 that “the wave of support for single payer will sweep the nation.” Now she doesn’t want it.

    She was fooled into voting to give Bushs war
    She made a bad choice on her email
    She didn’t recall thousands of things she did
    She support conservative positions on gun control in 2008
    She opposed gay marriage defending tradition marriage
    Etc etc etc. does she even know who she is looking at in the mirror?

    Those two made O’Malley reasonable.

  10. Keith says:

    “Obama has spent the last seven years avoiding the world as it is.”

    Regardless of what happened or whether he supported Bushs decision, Obama had decisions to make based on reality. He certainly failed to do so. All he could wrap his arms around was we never should have been there.
    We still have troops in Germany, we are still in Japan, there was nothing wrong with still being in Iraq…

  11. Jeff Beamsley says:

    Don’t like what Obama is doing (or not doing) is Syria? Solution is simple. Congress should pass the resolution authorizing the use of military force in Syria. Why haven’t they done it? Because it is way easier to criticize Obama from the sidelines rather than get the “stink” of an authorization of military force on their hands.

    There should be public debate on this with all elected representatives going on record to either support or oppose committing additional forces in the middle east. It is very easy to be hawk in this situation when the President is the only guy facing any political consequences. This is partisan politics at its worst. You should know better.

  12. Keith says:

    Don’t be concern Jeff, Bernie Sanders will win the Presidency. As he stated the other night Climate change causes terrorism and he will stop climate change.

  13. Keith says:

    Please don’t take this as a “see I told you so.” It’s not. Just a temper reading on a given day by one entity… Again this is a long long gain with the outcome still years away from being known.

  14. Jeff Beamsley says:

    There are obviously a couple of ways to read this, so I’m going to try to be as objective as possible.

    I think the summary of the article is contained in this paragraph.

    For one thing, exchange customers are switching plans frequently in search of the lowest possible premium, and keep entering and exiting the system in an unpredictable way. Perhaps most worryingly for insurers, United Health reports that people on exchange plans have been using much more care than expected. This is particularly true for those who join during special enrollment periods rather than during open enrollment. These are people who join due to a qualifying life event, lose their plan, face a qualifying hardship, or have a change in family status. According to UnitedHealth, they have costs 20 percent higher than expected, and that’s helping drive losses.

    In other words, UnitedHealth isn’t making as much money as they thought they would make. That’s because Obamacare is making it EASIER for consumers to comparison shop and United Health presumably doesn’t offer the cheapest policies. Obamacare is also requiring insurance companies to accommodate customers who lose their coverage for essentially reasons beyond their control (get a divorce, lose their job, etc.) and that bothers UH too. Turns out that most of those who are seeking plans as a result of some hardship really plan to use their insurance, rather than simply go to the emergency room and then not pay their bills.

    The way that I read this, Obamacare is working for those who are signing up just fine. It is not as profitable a venture for UnitedHealth as UnitedHealth had planned. But obviously somebody else has been willing to offer insurance at a lower rate than UnitedHealth, so apparently they don’t share UnitedHealth’s concerns.

    I guess I’m having a hard time feeling sorry for UnitedHealth. If they are truly losing money, then they should raise their rates. If that causes them to lose market share, perhaps they need to figure out why their competitors are able to offer cheaper plans. This is in fact how the marketplace is supposed to work.

    Would you really feel better if UnitedHealth announced that they had just had the most profitable year in their history and they owe it all to Obamacare?

    I can appreciate that some may look at this and say that this is the beginning of the collapse of insurance exchanges, but those exchanges will collapse only if there are too few insurance companies to create the sort of competition that UH is complaining about. Clearly that isn’t the case.

  15. Jeff Beamsley says:

    Regarding the link between global warming and a breakdown in civil society, Bernie was referencing a study recently released by the National Academy of Sciences detailing how a drought in Syria turn civil unrest into a full fledged revolt.

    Here’s an article on the study that was recently published in Scientific American. Clearly not a political article.

    Since we both agree that the climate is changing and only disagree on the cause, I would think that you would not have a problem with this research.

    Pretty simple. Drought drove people from the country to the cities. The cities were already stressed from the influx of refuges from other conflicts. Food became scarce and expensive. Desperate people began acting in desperate ways because the Syrian government was not addressing their needs and was unable to keep the peace.

  16. Keith says:

    That’s painting with an awefully wide brush Jeff. It’s evil. Evil will exist in a beautiful climate. Evil exists everywhere but this is radical Islam… I have Muslum friends by the way and it’s what they call it also.

  17. Jeff Beamsley says:

    You objected to my statement that many wealthy got there through the accident of birth.

    I’m going to deal with income inequality in more depth at a later point, but this statement was made in the context of the free market. Specifically the conservative myth that the free market is the best way to determine individual worth. The way the thinking goes, and you stated yourself, the wealthy EARNED their wealth by being smarter and harder working than everyone else.

    While there are certainly those who can attribute their success to those factors, my claim is wealth is NOT an accurate measure of individual worth, work ethic, or intelligence.

    Here are just a few facts to support the claim that success is often much more of an accident of birth than the exclusive result of individual success.

    1. Malcom Gladwell wrote a whole book called Outliers trying to figure out why some people are successful and others aren’t. His basic conclusion is that it is a confluence of factors. The most important is being in the right place at the right time with the right skills to take advantage of a market opportunity. Bill Gates, whom I worked with in the early days of Microsoft, is a good example. He was the son of wealthy parents. They sent him to an exclusive expensive private school. They and other wealthy parents paid for computer time for their kids at a time when very few people in the world had the sort of access that these kids had. The result is that these kids became expert programmers at a very early age because they had lots of time and didn’t have to support themselves. The microcomputer revolution hit when Bill Gates and Paul Allen were in college. They were able to found a company that filled a vital need in an emerging market because they were at the right place at the right time with a set of skills that very few people at the time had. More importantly they were the right age to take advantage of a very unique opportunity. Those a little younger than them did not end up founding software and hardware companies, they ended up working for them. Those a little older than them did not end up founding microcomputer companies, they went to work for existing mainframe and mini companies like DEC and IBM. What Gladwell found is that the billionaires that the microcomputer revolution spawned were all born within 5 years of each other. That is an accident of birth.
    2. Thomas Piketty has written an important and widely quoted book on income inequality- “Capital in the 21st Century”. In it he estimates that 12% of those born in 1970 will inherit an amount of money equal to or larger than the LIFETIME earnings of the lower 50% of their same birth cohort. That is an accident of birth.
    3. A report analyzed the Forbes 400 billionaires list in 2012. Forbes said that 30% of those in the list inherited their wealth and 70% earned it. 30% is a significant percentage who have benefited from an accident of birth. The report dug into the number a little more to determine how many were really “self-made”. By their estimation, only 35% are completely responsible for their fortunes. 22% came from backgrounds where their parents could afford good schools and their families help fund their startups. Mark Zuckerberg is an example of this group. His parents sent him to an exclusive and expensive boarding school (Phillips Exeter) and were able to afford to pay for his education at Harvard. 11.5% inherited a medium sized company or got more than $1M in inheritance. Donald Trump is an example of this group. He inherited his father’s real estate business. 7% got money or assets worth $50M. This includes the Koch Brothers. 21% inherited money or assets worth $1B or more. That include Bill Marriott and Forest Mars, Jr. This doesn’t say that all of these people aren’t smart, talented, or hard working. What it does say is that their wealth was not the result of their being smarter, more talented, and more hard working than the person who didn’t have the ADDED benefits of being born into a wealthy family.

    I’m also not saying that every person who has done well is unethical.

    What I AM saying is that we do not have free market. The market we do have has been warped by the wealthy and powerful to give them an unfair advantage. I’ve provided plenty of examples of how pre-tax money is being funneled away from worker and investors and into the hands of CEO’s and corporations to reward influence rather than productivity.

    Another example is Stephen Cohen, founder and CEO of SAC Capital Advisors. Cohen is worth an estimated $10B and paid himself $1B salary in 2005. How could his investors justify such largess? Because he made all of them a lot of money. How did he do it? HE CHEATED. He was the largest insider trading organization on Wall Street. He paid well for the information that he got and used that information to gain an unfair advantage in the market. This isn’t speculation. He and his firm were investigated by the SEC in 2012. Eight of his employees were found guilty of insider trading. Cohen was never charged but his firm paid a $1.8B settlement of the case. That is not an insignificant amount, but when you consider that Cohen reportedly personally signed off on all of the payment for insider information, the fact that he is out of jail and was able to keep his personal fortune is testimony to the power of wealth and influence.

    The people who ultimately paid the bill for his insider trading were all of the investors who did not have access to the information that he did.

    The societal cost to this sort of activity is a breakdown in the trust that our institutions are in fact fair. If the easiest way to be successful is to cheat, and the only risk is whether or not you can become sufficiently wealthy that your employees take the fall for you, then we become a corrupt society. Who you know is more important than what you know. Success in some ways goes to the highest bidder rather than the hardest worker.

  18. Keith says:

    For you reference… We seem to be talking about different folks. Here are who everyone on your side rails against. Also if you look at the state by state numbers you’ll understand the lunacy of $15.00 hour blanket statement. In some states or cities, it’s nothing. In others it more then enough to live on…

    I’ll answer you response by Monday or Tuesday hopefully.

  19. Keith says:

    So a question I’m going to need answered is –

    Who’s the rich?

    What’s a fair tax rate?

    Also I have never said, or will I ever, that wealth and money are related. Nothing further from the truth. I’ve also never said the wealthy earned it by working hard and those who aren’t didn’t. I did say they they earned it.

    This was all in response to you comment that said “a high percentage got wealthy…….” So the question is begged what’s a high percentage. You also said they STOLE it. To which I asked who you stole yours?

    You latest response is point to a couple of folks. Did Sam Walton steel? Michael Jorden? Tiger woods? Elton John? President Obama? Allan Mually? Zuckerburg dud… My friends, Dave, Mark, John, Dean, Bart, Bobbie, Scott, Gene, Charlie, Bill, etc,etc,ext (only scratching the surface ) all with porfolios from a few million to $300 million plus. These are the guys you are painting a wide brush with.

    Tell me what income equality means to you?

    Each of them needed an opportunity to achieve success. Anyone could have worked as hard, many do but never, or will they ever get there. Don’t ask me why, ask God.

    My friend Christen is a very beautiful and talented singer. She’s ten years into trying to make it big. She hasn’t. She’s probably worked harder then most who have made it. Are you suggesting simply because someone works hard the reward should be automatic? Should Christen get millions just to make it equal?

    I really don’t know to conclusion of what you all are after. I suppose you simply want to take away the ability of bill gates parents sending their so. To a private school unless they also pay for a kid who can’t afford it.

    Again if income inequality is a problem then by definition it can only be corrected by income being equal.

    Nothing is equal in life and nothing is fair. Yet, this is the best system. You won’t find equality anywhere….

  20. Jeff Beamsley says:

    I’ll deal with income inequality in a future post.

    The purpose of this post was to address the myths that there is a free market and that this market is a best arbiter of winners and losers both corporately and individually. The corollary is that in a free market, the guy who makes $1B/year must have done something to earn it.

    I am not trying to define, at least in this post, “wealthy” or even “rich”.

    What I think I have proved are the following things.

    1. Markets REQUIRE rules in order to operate. Conservative suggestions that unregulated markets operate best is just wrong. What they are really saying is that INDUSTRY should be the ones setting the rules rather than government.

    2. Corporations and the wealthy have purchased political influence and used that influence to warp the rules governing their markets so that they operate in ways beneficial to them. This bias does not benefit the industry, the economy, or consumers. Worse these ill gotten gains are usually at the expense of tax payers and investors.

    3. SOME of the wealthiest individuals in this country accumulated their wealth by cheating the system. Both legal and illegal insider trading by CEO’s and heads of large financial companies have made those individuals fabulously wealthy. Their wealth comes at the expense of investors who did not have access to the same information. It also erodes the trust in our economic system.

    4. Wealth in this country is becoming much more an accident of birth rather than the result of hard work. That is again because the market is becoming less of a meritocracy and more of an oligarchy.

    Just to make things clear, I believe in the concept of meritocracy. I believe that we should have a society were hard work is fairly rewarded and those willing to take risks should get greater rewards than those unwilling to take the same risks.

    I am also not advocating a war against the rich. Once I get through these myths, I’ll spend some time suggesting what I think we should do. Here’s just one example of how other countries have dealt with the same challenges. In Australia, investors have the ability to force an entire corporate board to stand for re-election if 25% or more share holders reject a CEO compensation plan two years in a row. The result is that in Australia CEO pay is only 70 times more than the average worker compensation.

    In contrast, in 2103 Oracle shareholders rejected Larry Ellison’s $78M compensation plan. The board passed it anyway because Ellison controls Oracle’s board. They are beholding to him rather than the shareholders that they are supposed to represent.

    What I am seeking to prove is that, because of conservative myths about regulation and personal responsibility, market forces no longer pick winners and losers. Markets are rigged to reward those on the inside at the expense of everyone else who is on the outside.

    I think I’ve proven my first point that markets are rigged to benefit the wealthy. If you have credible sources who dispute any of the examples I’ve shared, please post them. What you have posted so far fails to do that.

  21. Keith says:

    YS)I think I’ve proven my first point that markets are rigged to benefit the wealthy. If you have credible sources who dispute any of the examples I’ve shared, please post them. What you have posted so far fails to do

    MR) you haven’t. Not even close. I have hundreds of friends who are financially wealthy. None have stolen it and none to my knowledge earned it due to a rigged system, accident of birth. Jeff, respectfully you are painting with a very wide brush. You are parroting the words of your sides position. It’s not based in fact. Look around your own world. Where do you see crooks who have stolen? Sorry. I’m not with you. You are discussing so few people. No system is perfect. Sorry.

  22. Jeff Beamsley says:

    Sorry, but your motivated reasoning is showing again. The result is that you are refusing to even address the facts that I have shared to prove my points. Your only response is your own anecdotal evidence and your belief couched as “logic”.

    I know that this is difficult for conservatives. You have a particular view of the world and it is very difficult to deal with the possibility that this view is flawed. Worse, you distrust the sources that ANYONE is going to provide to support a different view. When all of that fails, you either try to change the subject (discuss income inequality) or potshot the data (many of my close friends are wealthy and they are not crooks).

    I’ll try this one more time, and please don’t respond with the list of wealthy people you know who are good citizens. I did not say all wealthy people are crooks.

    My point is that a “free” marketplace is not a fair distributor of wealth, or even the best system for distributing wealth. The reason is that those who have wealth are able to change the rules under which markets operate. The way that they change the rules is to contribute to the political campaigns of those who are willing to change the rules.

    At some point in the future, I’ll provide some suggestions on what we should do to restore fairness to the market. Right now, just dealing with the myth that an unregulated market is fair.

    1. Markets require rules to operate. I think we both agree on this.
    2. Market rules have changed since 1970 to benefit corporations and wealthy individuals. The examples I’ve provided are changes in CEO compensation rules which legalize insider trading, tax rules which give corporations tax breaks for performance based compensation, use contracts which prohibit participation in class action law suits, pharmaceutical companies paying to delay the release of competitive generic drugs, the US cable monopoly, too big to fail banks getting a better investment rate than smaller banks, bankruptcy law changes that exclude student loan debt but allow restructuring of pension plans, and Ivy league tax benefits. If you disagree, please post something that suggests that the current market has some other bias, or is not biased at all.
    3. SOME of the wealthiest individuals have made their money by cheating the system. This includes CEO’s who have used a combination of insider trading and stock buy backs to ARTIFICIALLY inflate the value of their options. It also includes CEO’s who ARTIFICIALLY inflate their compensation by jiggering the peer rules used to measure compensation.

    I’ve provided a couple of examples of billionaires who were crooks. I can certainly find some more if that makes you feel any better. Since there are only 500 or so billionaires in this country, it doesn’t take too many crooks to demonstrate a pattern. Here are 10 more courtesy of Time. That takes the percentage of crooks up to 2% and these are just the ones who got convicted.,29569,1903155,00.html

    Here’s another list of the biggest insider trading scams.

    What may be more telling in supporting my point about CEO’s cheating their shareholders and investors is the recent study that says CEO pay DOES NOT track company performance. In fact, the opposite is true. The higher the CEO pay, the worse the company is performing. More precisely, company performance goes down in terms of both stock performance AND accounting measures within three years of big CEO raises. This is direct evidence of repercussions of CEO’s manipulating the stock price for their own benefit.

    4. Wealth is increasingly an accident of birth. I shared data regarding billionaires that suggests that only a small percentage started with nothing. You combine that with Malcomb Gladwell’s research which suggests that “billionaire success” is often the result of being born at the right time as well as being born into a wealthy family. The inevitable conclusion is that most of those who acquire extreme wealth were more lucky than good. There is nothing wrong with being lucky, but if it is indeed luck that is primary factor, then our policies should reflect that fact rather than suggest that the free market provides everyone equal opportunities.

    So my challenge remains. If you have proof that you would like to share from reliable sources, I’m happy to discuss them with you. In the absence of any credible proof, my position stands and I’ll move on to the next subject in my list of Conservative Myths.

  23. Keith says:

    The only thing I responded to was you comment of “a high percentage .”
    I merely wondered what a high percentage is. To me it’s certainly a very large number.

    You are now changing your comments which I greatly appreciate.

    You are discussing the 500 or so billionaires. You are now at 2%. That is not a high percentage so younger still grossly exaggerating. You are also now confining the discussion of monetary wealth to billionaires. I would disagree with this also.

    I agree people cheat. They do in all walks of life every day. CEO in many cases are incentivize to do so. The bank execs that got huge bonus after being bailed out with cheap browsing and investing in higher paying interest bearing notes was sickening. Truly.

    Like a good liberal you are however wanting to change everything for everyone because of a few. 2% of 500. The old saying seems to be true, a consecutive doesn’t believe in God and they don’t go to church. A liberal doesn’t believe in God and laws must be passed to be sure there is no public mention of God. Or, a conservative doesn’t like beef they don’t eat it. A liberal doesn’t like beef and they see to it laws are passed that it’s never served in places they eat.

    Jeff, step back and look what you’ve done. You reduced the conversation to billionaires and further to 2% of them. That’s 10 people. I’ll allow you 50 billionaires. Then you mock me for saying I have hundreds of friends, antodoltal you said, who are wealthy and have not stolen. I’ve provided more evidence then you, Or facts if it doesn’t offended you. I even invited you to look around you own sphere and see what you see as evidence. I’m sure you know many folks who are financially wealthy. Let’s call that $2 million. How many stole it. So when you discuss thoughts I listen. Trust me I do. I also look around my world and and apply those same thoughts. I also understand my world isn’t the whole world. But when not one of hundreds if not thousands of friends and aquantiences who do not match what you’ve said, I’ll feel free to comment. What I didn’t know in this case is you were talking about a group so small as 2% of billionaires. A very small exclusive group. I also told you I’ve personally met one, who was Russinan and he absolutely who fit the bill of what you described.

    Maybe our differences can be found in the old sayings I mentioned.

    Jeff nothing is fair nothing. Even when you provide your comments on who not should be I will be able to tell you how someone will scam the system.

  24. Jeff Beamsley says:

    Let’s see if I can summarize.

    I made four points. You only object to one aspect of one point.

    That aspect was the number of wealthy people who cheat. We agree that 2% of the worlds wealthiest people actually got caught cheating. I think that we agree that number of wealthy people who cheat is far higher than that, particularly if you are willing to accept that some cheating (like kiting your stock prices, cherry picking your board, or jiggering the compensation review process) is perfectly legal.

    As far as facts, you provided none. You asked me to do your work for you.

    The basic question is whether free markets exist (they don’t), whether the rules government markets over the past 50 years have changed to benefit the wealthy and powerful (they have), whether the wealthy have taken advantage of these rule changes to enrich themselves at the expense of others (they have), and whether wealth itself is any indication of extraordinary skill, talent, or determination or is the biggest factor luck (it’s luck).

    As I promised, I’m on to the next discussion.

    I don’t think that we will make much more progress on this one.

  25. Keith says:

    I objected to one because it’s your premise I object to. Here’s what I you believe from your own words.

    YS)The real story is that a high percentage of the wealthy and powerful got there because they started out on the inside through the accident of birth, learned the game at the same schools their parents attended and supported, and figured out how to expand their unfair advantages when they had their turn at the wheel.

    The reality is that if we were able to stem the tide of this massive upward redistribution of wealth, we wouldn’t need nearly the amount of post-tax redistribution to the working poor through transfer payments. We would be able to pay our bills because the existing tax system would be generating a lot more money. We would be able to fix our roads, educate our kids, and feed our hungry.

    Instead we are supporting an oligarchy who claims that they deserve what they stole because the “free market” decided that they should have it. While they are promoting the myth of the free market, they are using their wealth to buy political influence. They use that political influence to warp market and tax rules in their favor.

    They say publicly that “government is the problem”, but behind the scenes this government is working just fine for them. That’s because they are getting what they paid for.

    MR) so if I agree with your premise then I can discuss the rest with you. I disagree…The comment you made about the “high percentage of the rich”
    Is the basis of your agruement that something is wrong and needs changed.

    Generally “the rich” is how liberals refer to the top 1%. Using that as the bench mark 320 million people in the USA x’s 1% =’s 3.2 million. This is the number I was thinking as I read your first comments and I took exception to. Again I have hundreds if not a thousand or more friends and aquatiances who would fit this bill. They have stolen nothing. Your comments simply don’t apply to them. So I asked you who the wealthy was. You can back with a study of the Fortune 500. Ok let’s go with that. You came back with the Fortune 500… Wow no one but you makes that statement. You also changed your langue to the “wealthiest. So now we have 500 divided by 320 million =’s 0.00000156%. Hum. That’s a pretty small sampling. Then you showed the results of a study that suggest 10 of those 500 fit the bill of what you are rallying against. That’s now 10 people out of 320 million. Maybe I’d be better off showing it this way 10/320,000,000. (Sorry my calculator doesn’t enough places to the right of the decimal) This is who you’ve written your article about and because of these 10 you want to change the whole system. Do you see how silly your premise is now Jeff? Will your solution involve just the 10/320000000 or will it involve far more then that? Just like the ACA a very small portion of the population had a problem but a very large percentage are effected by it. (Remember the line? A conservative doesn’t believe in God he doesn’t go to church. A liberal doesn’t believe in God and there will be no public mention of God)

    Do I think some things are wrong? YES!!!! We could make a few small adjustments.

    You however have said repeatedly “capitalism failed over the last 40 years. It’s time to change it all. ” “the system is rigged.” Etc etc etc.

    What I want you to take away from this are the following facts. I’ve offered 1,000 or more data points. I even asked if any one you knew with a high net worth had stolen it. You offered 10/320,000,000 and that’s good enough for you. Fact I provided more data points. Fact your premise is flawed. Fact your conclusion should be dismissed and never discussed.

    Sorry my good friend.

    And you’ve never answered my question. You sold your business and I assumed did very well. Naturally, following your logic it begs questions. Who did you steal from and what unfair advantages did you have? I bet the answer is you didn’t steal anything and you had no unfair advantage. Your own story argues against your blog. Interesting to say the least.

    Your are railing against human nature Jeff or dare I say sin. In any environment or within any set of rules you create there will be sin. Humans will take advantage of others. The banks sold loans they shouldn’t have for there advantage. Guys bundled loans for their advantage. People took out loans they knew they should never take FOR THEIR ADVANTAGE!!!!To what ever extent.

    Hillary will win because she married Bill. (Hope I’m wrong) rail against that influence by accident if it occurs. GW became president because because of his dad. Thank goodness Jens not going to be able to pull it off.

    For you to point to 10 people and say it’s all fixed and want to change everything is admirable but silly as whatever rules you change will soon be taken advantage of. The current rules are the best there have ever been in recorded mans history.

  26. Keith says:

    The content of this link is from before Reagan. You see Jeff, your thoughts are not new. Your side always thinks things are unfair. They always think the rich should pay more. Just like republicans who can only say “lower taxes” the “rich should pay their fair share” rings just as hollow.

  27. Keith says:

    The goal isn’t even hidden anymore. “Give me money.”

    Tax the rich. See Jeff on any issue the answer is first and foremost “tax the rich!” It’s instinctive…

    So think with me my friend. If President Obama goes along with this mess, who will pay the USA’s share? Where will he get the funds?

Leave a Reply