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Corn: Economy needs reform from complexity, corruption

POSTED: May 21, 2010 1:00 a.m.

It is a somewhat disheartening truth that technical advances are the most visible signs of human production today. The forward march of mechanical tinkering produces more and more efficient ways to raise food, move about, talk to one another, shelter our bodies, organize our time and dominate each other.

This last desire, to rule, must be part of our most primal nature, for throughout history it often commands the most resources and energies of mankind. In the age of machines, this tendency is manifest in the development of innumerable forms of weaponry, alarms, surveillance tools, incarceration camps, databases to track offenses and media outlets for political propaganda.

Dictators around the world know instinctively that to win and maintain power they must gain the allegiance of security forces and win control of the broadcast media. America's nexus of power differs from the dictatorial mostly in its more layered and diffused structure. The American system centers not on an individual, but on powerful commercial institutions and the elites who run them.

To highlight the inbred nature of these elites it is worth noting that 28 percent of Fortune 500 CEOs who have an MBA received it from just one school: Harvard.

Over the last three decades, these American elites have concentrated on nothing more diligently than the deregulation of financial markets and the growth of that sector of the economy.

For 30 years, as many as 30 percent of the graduates from our top universities have sought their fortunes on Wall Street. And it was on Wall Street that our educated elite produced its most spectacular failure.

During the long run-up to the crash, financial markets were taken underground and freed of oversight, financial capital was concentrated in a handful of bloated banks and credit was recklessly expanded. Financial sector profits grew from 8 percent of total business profits in 1980 to as high as 41 percent in the current decade. The bankers effectively cannibalized the American economy.

Taken together, these developments meant a financial collapse was not only likely but certain. No matter for those in charge. Thanks to the bonus system, the individual profits to Wall Street's managers were historic in size. Just a few years of skimming from this scheme meant never having to work again.

One aspect of their financial program, however, was extremely popular with the larger public: the expansion of credit. In fact, world markets are again roiling at the specter of riots in Greece, which are driven by the loss of such credit. In that country, citizens were extended massive amounts of credit, both privately and through its extensive welfare state.

The prospect of now having that credit pulled away is driving a violent call for that government's overthrow. It seems the mob wants loans, and it wants them now.

Is America so different? How much of our own public rage is animated by fear of losing access to loans, whether in the form of individual credit cards or bond-funded benefits from the federal government?

Whatever the root cause, the hysterical fury being fanned by the political media must eventually find an outlet.

If there is justice in the world, then it will mean the purging of the privileged class which now runs our economy. After this badly needed housecleaning, a workable reform program will again be possible.

If the American system is to remain close to its ideals of equality of opportunity, freedom of expression and local autonomy, then the complexity of the economy will have to be decreased and decentralized away from Washington and away from an entrenched cartel system that supports only two or three major players in every industrial sector.

America's geriatric welfare state will have to be incrementally dismantled in a sensible fashion that does not abandon an older generation that is largely dependent upon it. At the same time, the commitment to current entitlements should not burden the young too much, since they will clearly not benefit from them.

The military industrial complex will also have to be drastically cut back. We can no longer afford to fund an Imperial fantasy, which according to Chalmers Johnson supports a galaxy of 847 bases around the world and directly employs 2.5 million persons.

These simple but difficult reforms once again can unleash the entrepreneurial spirit for which our country is so famous. They also can gradually unburden the state from entitlement giveaways and liberate untold resources for more productive public investments.

A new generation will be required to take on such a grand program, one not tainted by three decades of incompetent economic management, military hubris and runaway charity. For the system can no longer be managed. It is too corrupted by complexity. It must be broken down and redesigned.

And for this, the country will need a kind of thinking now neglected by those in charge, one which is less focused on the system's various parts, its multiple layers and interlocking players. The new approach must instead be more inclined to design a simple and harmonious framework as a foundation.

As the parable says, we must dig deep and lay the foundation on the rock, so when the storm comes, the whole house will not be washed away.

Jesse Corn is a Gainesville native and a Forsyth County resident. His column appears biweekly on Fridays and on gainesvilletimes.com.



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