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Posted by on Jun 9, 2011 in At TMV | 5 comments

Sick COW Syndrome Is The Root Cause of America’s Economic Decline

COW is short for concentration of wealth. The ever increasing wealth in fewer hands is perhaps the greatest single factor explaining this country’s economic decline.

While most liberals are quick to characterize a growing COW in a totally negative way, however, this misses the really critical point. It’s not the size of the COW that’s the problem. Not that our COW has gotten too fat. It’s that we have a sick COW.

Wealth concentration is vital to economic growth and general economic well-being. You have to appropriately compensate society’s most talented economic players to have a vibrant economy. Surplus wealth also has to be concentrated in a few hands in order to have the available investment needed to bring new and better products and services into being.

The fact that the COW on these shores is getting fatter is therefore not necessarily a bad thing. Indeed, if we had a healthy COW, if this concentration were actually doing what it was supposed to be doing, it would make everyone’s economic lives and prospects better.

Alas, this concentration is not doing what’s it’s supposed to do. As this COW has fattened, it’s also sickened. The result is an economy that has sickened in tandem.

How do I know this? Need we engage here in a scholastic-style economist debate on the subject, with me pitting my authorities against opponents’ authorities, with the biggest and best authorities declared the winner? Not necessary. A lawyer loses every case, she’s not a good lawyer. A doctor can’t diagnose you properly, he’s not a good doctor. The same common sense, obvious view prevails with COW.

If we had a healthy COW, there wouldn’t be pervasive high unemployment and fewer good jobs for those who are employed. The quality of our educational system would be waxing instead of waning. There would be huge amounts of capital flowing into maintaining existing infrastructure and developing more advanced forms. Newer technologies, especially of the green variety, would be adequately funded. None of this is happening to a sufficient extent, one that makes for growing prosperity for most Americans today, and guarantees future prosperity.

Who, then, is sickening this COW? A number of perps come to mind. But the main sickener is the market mechanism chiefly responsible for allocating concentrated private wealth — Wall Street.

Yes, The Street in its numerous guises is doing a lot of worthwhile allocation. But far, far too much is being siphoned off on self-serving Wall Street games by Wall Street gamesters. Games that don’t lead to a healthy trickle down. The worthless binge stock trading. The trillions sunk into derivative insurance products that do nothing but insure other derivative insurance products. Hedge fund bets that only profit if they impoverish a whole industry or an entire nation. Sickeners of the COW pool that enrich the few without the sort of Gilded Age spinoffs that with all their attendant nastiness at least generated work and a better lifestyles for so many others.

So here’s the thing to keep in mind when it comes the COW. Forget the old class warfare blather. There’s nothing wrong with a lot of a mega-millionaires and billionaires. But there’s something terribly, terribly wrong when the primary mechanism for allocating our national wealth is not being handled by skilled wealth physicians, but by greedy quacks.

Reform Wall Street to save the economy. Don’t kill the COW. Don’t even thin it out. Just heal the beast and we’ll all feel healthier in consequence.

More from this writer at http://blog.wallstreetpoet.com

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Copyright 2011 The Moderate Voice
  • JSpencer

    Good analysis of a systemic problem that has steadily been getting worse. My fear is that we now have a population young enough to accept this as “normal”, when in fact it is the antithesis of what has made American so revered and respected in the past.

  • There’s nothing wrong with a lot of a mega-millionaires and billionaires.

    Agreed.

    They all simply should be taxed at a much higher rate, their own brackets, starting with Rep. Jan Schakowsky’s idea. It begins here: $1-10 million: 45%; $10-20 million: 46%; $20-100 million: 47%; $100 million to $1 billion: 48%; $1 billion and over: 49%.

  • DLS

    Schakowsky wants crazier stuff than ObamaCo and the current Congre-Dems have wanted in general. (She also wanted crazier “reforms” to end federal deficits than the mainstream commission recommendations.) She’s not even smart enough to demand a one-time raid on offshore tax havens (warmonger she would be)

    Progressive taxation is based on envy and resentment almost always, and is the antithesis of the word used to rationalize it, “fairness.”

    Consumption taxes are superior to income or wealth taxes. Class-warriors often fail to grasp that imposing a new consumption tax is the equivalent of the same tax rate on all wealth (assuming it eventually will be spent here).

    Is a wealth tax possible eventually? I’ve long said so (including on here for years now). One more time: People interested in the idea (or who believe it might happen someday and want to know about it) and want to learn more (as well as why some want such a tax) should begin by reading Wolff’s work. (note publisher)

    http://thenewpress.com/index.php?option=com_title&task=view_title&metaproductid=1564

    http://bostonreview.net/BR21.1/wolff.html

    http://multinationalmonitor.org/mm2003/03may/may03interviewswolff.html

    If you really want to do something serious, at least learn about it.

    It wouldn’t surprise me to see a desperate federal government (and some states) impose a wealth tax, using the “estate recovery” policy and tactics as is done now for Medicaid, and which will likely be done for Social Security and Medicare if they are ever means-tested. (At least one member of Congress has even already explicitly referred to “estate recovery.”)

    If still interested, perhaps the next place to go is Responsible Wealth. The stupid new comment system won’t let me add one more link, so I’ll just counsel people to go to:

    Dubya-Dubya-Dubya-dot faireconomy.org/responsible_wealth

  • rudi

    Germany is chugging along and they uber-rich haven’t taken over their country. Even with unions, the middle class shares in growth.
    http://www.nytimes.com/2011/06/08/business/economy/08leonhardt.html?_r=1&hp

    The brief story is that, despite its reputation for austerity, Germany has been far more willing than the United States to use the power of government to help its economy. Yet it has also been more ruthless about cutting wasteful parts of government.

    The results are intriguing. After performing worse than the American economy for years, the German economy has grown faster since the middle of last decade. (It did better than our economy before the crisis and has endured the crisis about equally.) Just as important, most Germans have fared much better than most Americans, because the bounty of their growth has not been concentrated among a small slice of the affluent.

  • davidpsummers

    Unless I misread the point here, which is admittedly possible, this gets to something I’ve noticed. Nobody from either party actually supports our economy how it is suppose to work, ie. people trade good and services to make a profit. Instead we have Republicans that think it only matters if corporations make a profit and Democrats who want the government to run everything.

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