Tag Archives: Crony Capitalism

The real Hunger Games: the Capitalist recipe to maximise profits while ‘having fun’

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By Sky Wanderer

Source: Investment Watch

Introduce a political economy upon the arbitrary axiom that Capitalism is the one and only economic system for mankind, and introduce a narcissistic moral philosophy that you as a Capitalist represent unsurpassable objective moral virtues.

You as a Capitalist hire politicians to implement policy as per your moral and economic philosophy and redefine ‘democracy’ as the political system to sustain Capitalism. Then from such position of self-established authority, abolish unions and all labour-representation, thus force your employees into a race-to-the-bottom contest to compete for jobs by accepting lower and lower wages.

Give decent jobs and benefits to only those who belong to your noble circles. For everyone else reintroduce slavery in the form of “workfare”. The goal is that you pay the lowest wages for jobs done by the fittest slaves, who will survive the contest. If you wish, you can call the contest “real Hunger Games”.

To speed up the process, extend the race-to-the-bottom into global scope so that you will have access to the cheapest and fittest labour everywhere on the planet. Never mind that your slaves will have to live out of a suitcase and every time when you lay them off and labour demand calls them elsewhere, they will have to relocate to yet another continent.

To further accelerate the process, make good use of your 3rd-world colonies, your Mideast colonising wars and your secretly sponsored mercenaries (ISIS). Via your “leftist” assistants, organise a massive refugee crisis to import the cheapest possible workforce via your war-refugees and economic migrants. These migrants are the fittest contestants who – glad just to escape your bombs – will worship you as their saviours and will work for you for literally zero payment. The migrants will not only boost your profits to sky-high levels but will rapidly pull down the overall wages of your domestic employees.

Meanwhile keep increasing the prices so your slaves can’t pay for food, energy, heat and shelter from their next-to-zero incomes. If some of them attempt to survive by taking bank-loans to acquire shelter, education and meet other basic needs, but they can’t repay the loans from their low incomes, you can just evict them from their homes via your banks.

When you made them homeless this way, make sure their ugly presence won’t spoil the beauty of your city. Install pretty anti-homeless spikes, so when they crush onto the pavement they will die, and you can just collect their bodies. To project your capitalist moral virtues into eternity, incorporate the beauty of your anti-homeless spikes into the modern concept of art and beauty.

Introduce private banking to enable yourself to creating new money when you wish. This way you can easily indebt the entire society, soon you can even purchase the whole planet.

Meanwhile dismantle public healthcare, so those of your slaves who are still alive but get sick, will die without treatment. Eliminate (privatise) all affordable public services, destroy the public sphere, abolish all public spaces and welfare benefits. To have a dandy excuse for such policy, make sure to keep the country in ever increasing debt by taking countless £ billions of government loans, and transfer the responsibility of these odious debts onto your slaves. Refer to these debts as the reason for the crisis, then refer to the crisis as the reason for these debts, then refer to the debts and the crisis as the reason for austerity and spending cuts. Then you can increase the public debt again and continue the same loop ad infinitum.

Make sure your very own mainstream media and academia would never reveal the truth that the never-ending crisis and mass-unemployment are due to your private banking and debt- and profit-mongering dysfunctional capitalist system, and keep the real disastrous indicators of the state of economy in secret.

Instead of admitting the truth, use the divide et impera strategy to make your victims blame themselves and one another. To increase the fun, produce reality shows where the still active part of your slaves will blame the disabled and the unemployed, meanwhile make the local poor blame the immigrant poor for the overall misery that you inflicted. Then establish offices where the local poor dressed as fancy clerks will evict the immigrant poor, meanwhile watch how all of them are begging for their lives until they give up and commit suicide.

Enjoy!

Brexit Is What Happens When the Pie Is Shrinking

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By Charles Hugh Smith

Source: Of Two Minds

This process of withdrawal into the relative safety of internally cohesive groups and group identities is intrinsically messy in globalized, multicultural societies.

A great many narratives are drifting around the Brexit pool: a return to sovereignty, class war, “controlled demolition,” nothing-but-another-political-Kabuki- spectacle, end of the European Union, etc.

I think it boils down to something much simpler: the pie is shrinking, and the illusion that it’s about to start growing has been shattered. For many communities in the developed world, the pie started shrinking in the 1970s, and has been shrinking (despite the narrative of “45 years of strong growth”) since then.

Labor’s share of the GDP has been declining for 45 years. Occasional blips higher during debt-fueled bubbles quickly fade when the bubble du jour pops, and the decline of labor’s share of the economy resumes its trendline decline.

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Since 2008, the only group who feels the pie is growing is the class that has benefited from the unparalleled expansion of debt and leverage, financialization, globalization and central planning–roughly 20% of the work force, with the top 5% gathering most of the gains in income and wealth, and the top .1% gathering most of the increase in wealth. (See chart below)

For seven long years, the citizenry has been told the economy is expanding and therefore they’re “doing better.” But this narrative is not supported by their actual lived experience. Inflation is woefully under-reported by official statistics, and the rosy “rising employment” narrative is based largely on part-time jobs in hospitality and food services (bartenders, waiters, etc.) that are highly contingent on the spending of the top 10%.

While supporters of the status quo are quick to deride supporters of Brexit, the cold reality is the economic pie is shrinking, and Brexit is a direct result of that reality.

A shrinking economic pie generates widespread insecurity that pressures every status quo arrangement as people circle the wagons in an attempt to protect their remaining slice of the pie from others’ claims for a larger piece of the dwindling pie.

The general media line is that the Brexit vote arose out of anger with the status quo’s inequalities and asymmetries of wealth and power. While this is largely self-evident, it isn’t the most fundamental dynamic at work. I see Brexit as a reflection of our naturally-selected defensive response to insecurity and instability: circle the wagons.

By circle the wagons, I mean our tendency to withdraw into an internally cohesive group with defined membership and boundaries.

The largest such political group is the nation-state, and so it is natural for people with strong national identities to circle the wagons around their national identity.

We can also expect people to circle the wagons around ethnic, religious, localized and economic-social class identities. (Some people might feel more kinship with other fans of Manchester United than they do with any religion, ethnicity or state.)

As people identify themselves as members of the class that has not benefited from neoliberal/globalized crony capitalism, the ruling Elites become the “other,” i.e. “foreigners” with whom we have little contact, people who “aren’t like us”– in effect, an “enemy class” that is inherently opposed to our self-interests.

This process of withdrawal into the relative safety of internally cohesive groups and group identities is intrinsically messy in globalized, multicultural societies. No wonder populations are dividing into camps of increasingly angry people with little interest in compromise. Our instinct is to seek clear delineations of “us” and “them” and to seek the relative comfort of “us,” which in a multicultural nation, can contain quite a mixed bag of people who nonetheless feel a shared identity.

Much to the chagrin of political parties whose success is based solely on “identity politics,” the emerging group identities are not conforming to the political classes’ conventional fault lines. “Us” for many people includes everyone who isn’t a protected insider of the status quo, and “the enemy” is any protected insider of the status quo.

That includes virtually the entire political class, the entire class of state nomenklatura/technocrats, the entire banking sector and the wealthy class that’s benefited so handsomely from the globalized, debt-leverage bubbles and state / central bank support that characterize this era of neoliberal/globalized crony capitalism.

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A Radically Beneficial World: Automation, Technology and Creating Jobs for All is now available as an Audible audio book.

 

Hillary Clinton’s Business of Corporate Shilling & War Making

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Source: Media Roots

As the circus of the 2016 presidential election grinds on, Hillary Clinton has posited herself as the candidate of the people. But not many “candidates of the people” have vacation homes in the Hamptons that cost $200,000 per month, or hang out with the world’s billionaires.

It’s hard to know who she is really–while once being a proponent of Donald Trump type positions, like building a wall at the Mexican border, supporting torture, and opposing same-sex marriage until 2013, today she presents herself as the anti-Trump, anti-Republican candidate.

There’s been a lot of outrage about the impression that the establishment has already anointed her as the Democratic nominee, and has carved out her path to the presidency.

But like in 2008, her guaranteed seat on the throne is being derailed by the unpredictable moods of the masses, and millions of young progressive voters. She continues to play her shape shifting game, morphing her positions to try to capture the support for her opponent, but the real Hillary is still inside.

In fact, every layer of Hillary’s career shows why, far from being a candidate of the people, she’s the top pick by corporations to do the real job of any US president: CEO of the Empire.

Digging deep into Hillary’s connections to Wall Street, Abby Martin reveals how the Clinton’s multi-million-dollar political machine operates. This episode of The Empire Files chronicles the Clinton’s rise to power in the 90s on a right-wing agenda, the Clinton Foundation’s revolving door with Gulf state monarchies, corporations and the world’s biggest financial institutions, and the establishment of the hyper-aggressive “Hillary Doctrine” while Secretary of State.

Financial Predators and Parasites Want to Live, Regardless of the Cost

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By Charles Hugh Smith

Source: Of Two Minds

Reform is impossible in a system optimized for centralized power and financial predators and parasites.

The problem with optimizing private gain by any means available is you also optimize financial predators and parasites. The problem with optimizing a system for centralized power (i.e. the federal government and Federal Reserve) is that you also optimize regulatory capture, influence-peddling and the unholy marriage of wealth and power.

Optimization is a key principle of all technologies. Though the political class claims perfection is possible (with just a few more regulations and laws, heh), engineers understand every system is a series of trade-offs. If you want to optimize one output, everything else in the system is rendered secondary.

The master narrative of the status quo is that maximizing private gain by any means available is good because to get rich is glorious: the goal of getting rich motivates entrepreneurs to do wonderful things that benefit humanity while they amass vast fortunes.

This is the happy propaganda story, and we all know the few outliers who are endlessly trotted out to “prove” its truth: Steve Jobs, the Larrys (Ellison and Page) Bill Gates, et al. Nice, but the handful who fulfill the propaganda version of optimizing private gain by any means available only succeeded because there were no powerful vested interests in their way.

What our system actually optimizes is the assembly of vested interests that buy protection of their racket from the state. These vested interests include wealthy individuals, corporations, cartels and public unions.

Want to earn a 1,000% return on your investment? It’s very difficult to do so by producing a good or service. By any measure, the easiest, lowest-risk way to earn a 1,000% return on your investment is to buy political protection with lobbying and campaign contributions.

What we’ve done is optimize financial predation and parasitism. We’ve created enormous incentives for too big to fail/jail banks, financiers manipulating dark pools and high-frequency trading that add nothing to the real economy, public unions guaranteeing their members unbeatable pensions and benefits while taxpayers foot the bill, politicos who enter office with ambition and few financial means who leave office with great wealth, cartels that buy protection from competition from the centralized state and corporations that rewrite the tax code in their favor with campaign contributions.

Now that we’ve created vast menageries of insatiably greedy financial predators and parasites, we’ve created monsters who want to live regardless of the cost to the nation. Parasites prefer not to kill their host, but their ability to fine-tune the process of sucking as much money out of the system as possible without bringing it down is not as well-developed as their greed.

The Global Financial Meltdown of 2008 proved this. The financial parasites and their parasitic partners in the halls of federal power were blind to the risks of collapse their insatiable greed were generating; they continued sucking the maximum private gain out of the system until the moment it collapsed in a heap.

Predators don’t worry about maintaining the flock of sheep or the schools of little fish. They will dive into the swirling school of frantic fish and consume every last one. Financial predators are the same: financial predators will sell a subprime auto loan to every last debt-serf in the flock, until the ecosystem of prey collapses and there are no marks left for their cons.

This is why our system is well and truly doomed: we have optimized the system for vast menageries of insatiably greedy financial predators and parasites, and now that they exist and have gained power, they want to live and prosper regardless of the cost to the decimated prey and the nation. By optimizing centralized power, we have optimized the protection of financial predators and parasites by the all-powerful central state and bank.

Reform is impossible in a system optimized for centralized power and financial predators and parasites. The predators and parasites will gorge themselves until the system collapses.

 

The Rise of “Criminal Capitalism”

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By James Petras

Source: Dissident Voice

About 75% of US employees work 40 hours or longer, the second longest among all OECD countries, exceeded only by Poland and tied with South Korea. In contrast, only 10% of Danish workers, 15% of Norwegian, 30% of French, 43% of UK and 50% of German workers work 40 or more hours. With the longest work day, US workers score lower on the ‘living well’ scale than most western European workers. Moreover, despite those long workdays US employees receive the shortest paid holidays or vacation time (one to two weeks compared to the average of five weeks in Western Europe). US employees pay for the costliest health plans and their children face the highest university fees among the 34 countries in the Organization for Economic Cooperation and Development (OECD).

In class terms, US employees face the greatest jump in income inequalities over the past decade, the longest period of wage and salary decline or stagnation (1970 to 2014) and the greatest collapse of private sector union membership, from 30% in 1950 down to 8% in 2014.

On the other hand, profits, as a percentage of national income, have increased significantly. The share of income and profits going to the financial sector, especially the banks and investment houses, has increased at a faster rate than any other sector of the US economy.

There are two polar opposite trends: Employees working longer hours, with costlier services and declining living standards while finance capitalists enjoy rapidly rising profits and incomes.

Paradoxically, these trends are not directly based on greater ‘workplace exploitation’ in the US.

The historic employee-finance capitalist polarization is the direct result of the grand success of the trillion dollar financial swindles, the tax payer-funded trillion dollar Federal bailouts of the crooked bankers, and the illegal bank manipulation of interest rates. These uncorrected and unpunished crimes have driven up the costs of living and producing for employees and their employers.

Financial ‘rents’ (the bankers and brokers are ‘rentiers’ in this economy) drive up the costs of production for non-financial capital (manufacturing). Non-financial capitalists resort to reducing wages, cutting benefits and extending working hours for their employees, in order to maintain their own profits.

In other words, pervasive, enduring and systematic large-scale financial criminality is a major reason why US employees are working longer and receiving less – the ‘trickle down’ effect of mega-swindles committed by finance capital.

Mega-Swindles, Leading Banks and Complicit State Regulators

Mega-swindles, involving trillions of dollars, are routine practices involving the top fifty banks, trading houses, currency speculators, management fund firms and foreign exchange traders.

These ‘white collar’ crimes have hurt hundreds of millions of investors and credit-card holders, millions of mortgage debtors, thousands of pension funds and most industrial and service firms that depend on bank credit to meet payrolls, to finance capital expansion and technological upgrades and raw materials.

Big banks, which have been ‘convicted and fined’ for mega-swindles, include Citi Bank, Bank of America, HSBC, UBS, JP Morgan, Barclay, Goldman Sachs, Royal Bank of Scotland, Deutsche Bank and forty other ‘leading’ financial institutions.

The mega-swindlers have repeatedly engaged in a great variety of misdeeds, including accounting fraud, insider trading, fraudulent issue of mortgage based securities and the laundering of hundreds of billions of illegal dollars for Colombian, Mexican, African and Asian drug and human traffickers.

They have rigged the London Interbank Official Rate (LIBOR), which serves as the global interest benchmark to which hundreds of trillions of dollars of financial contracts are tied. By raising LIBOR, the financial swindlers have defrauded hundreds of millions of mortgage and credit-card holders, student loan recipients and pensions.

Bloomberg News (5/20/2015) reported on an ongoing swindle involving the manipulation of the multi-trillion-dollar International Swaps and Derivatives Association (ISDA) fix, a global interest rate benchmark used by banks, corporate treasurers and money managers to determine borrowing costs and to value much of the $381 trillion of outstanding interest rate swaps.

The Financial Times (5/23/15, p. 10) reported how the top seven banks engaged in manipulating fraudulent information to their clients, practiced illegal insider trading to profit in the foreign exchange market (forex), whose daily average turnover volume for 2013 exceeded $5 trillion dollars.

These seven convicted banks ended up paying less than $10 billion in fines, which is less than 0.05% of their daily turnover. No banker or high executive ever went to jail, despite undermining the security of millions of retail investors, pensioners and thousands of companies.

The Direct Impact of Financial Swindles on Declining Living Standards

Each and every major financial swindle has had a perverse ripple effect throughout the entire economy. This is especially the case where the negative consequences have spread downward through local banks, local manufacturing and service industries to employees, students and the self-employed.

The most obvious example of the downward ripple effect was the so-called ‘sub-prime mortgage’ swindle. Big banks deliberately sold worthless, fraudulent mortgage-backed securities (MBS) and collateralized debt obligation (CDO) to smaller banks, pension funds and local investors, which eventually foreclosed on overpriced houses causing low income mortgage holders to lose their down payments (amounting to most of their savings).

While the effects of the swindle spread outward and downward, the US Treasury propped up the mega-swindlers with a trillion-dollar bailout in working people’s tax money. They anointed their mega-give-away as the bail out for ‘banks that are just too big to fail”! They transferred funds from the public treasury for social services to the swindlers.

In effect, the banks profited from their widely exposed crimes while US employees lost their jobs, homes, savings and social services. As the US Treasury pumped trillions of dollars into the coffers of the criminal banks (especially on Wall Street), the builders, major construction companies and manufacturers faced an unprecedented credit squeeze and laid off millions of workers, and reduced wages and increased the hours of un-paid work.

Service employees in consumer industries were hit hard as wages and salaries declined or remained frozen. The costs of the FOREX, LIBOR and ISDA fix swindles’ fell heavily on big business, which passed the pain onto labor: cutting pension and health coverage, hiring millions of ‘contingent or temp’ workers at minimum wages with no benefits.

The bank bailouts forced the Treasury to shift funds from ‘job-creating’ social programs and national infrastructure investment to the FIRE (finance, insurance and real estate) sector with its highly concentrated income structure.

As a result of the increasing concentration of wealth among the financial swindlers, inequalities in income grew; wages and salaries were frozen or reduced and manufacturers outsourced production, resulting in declines in production.

Employees, suffering from the loss of income brought on by the mega-swindles, found that they were working longer hours for less pay and fewer benefits. Productivity suffered. With the total breakdown of the ‘capitalist rules of the game’, investors lost confidence and trust in the system. Mega-swindles eroded ‘confidence’ between investors and traders, and made a mockery of any link between performance at work and rewards. This severed the nexus between highly motivated workers, engaged in ‘hard work, long hours’ and rising living standards, and between investment and productivity.

As a result, profits in the finance sector grew while the domestic economy floundered and living standards stagnated.

Financial Impunity: Regulatees Controlling the Regulators

Despite the proliferation of mega-swindles and their pervasive ripple effects throughout the economy and society, none of the dozens of federal or state regulatory agencies intervened to stop the swindle before it undermined the domestic economy. No CEO or banker was ever arrested for their part in the swindle of trillions. The regulators only reacted after trillions had ‘disappeared’ and swindles were ‘a done deal’. The impunity of the swindlers in planning and executing the pillage of hundreds of millions of employees, taxpayers and mortgage holders was because the federal and state regulatory agencies are populated by ‘regulatory administrators’ who came from or aspired to join the financial sector they were tasked with ‘regulating’.

Most of the high officials appointed to lead the regulatory agencies had been selected by the ‘Lords of Wall Street, Frankfurt, the City of London or Zurich.’ Appointees are chosen on the basis of their willingness to enable financial swindles. It therefore came as no surprise on May 28 2015 when US President Obama approved the appointment of Andrew Donahue, Managing Director and Associate General Council for the repeatedly felonious, mega-swindling banking house of Goldman Sachs to be the ‘Chief of Staff’ of the Security and Exchange Commission. His career has been typical of the Washington-Wall Street ‘Revolving Door’.

Only after fraud and swindles evoked the nationwide public fury of mortgage holders, investors and finance companies did the regulators ‘investigate’ the crimes and even then not a single major banker was jailed, not a single major bank was closed down.

There were a few low-level bond traders and bank employees who were fired or jailed as scapegoats. The banks paid puny (for them) fines, which they passed on to their customers. Despite pledges to ‘mend their ways’ the bankers concocted new schemes with their windfalls of billions of Federal ‘bailout’ money while the regulators looked on or polished their CV’s for the next pass through the ‘revolving door’.

Every top official in Treasury, Commerce and Trade, and every regulator in the Security Exchange Commission (SEC) who ‘retired to the private sector’ has ended up working for the same mega-criminal banks and finance houses they had investigated, regulated and ‘slapped on the wrist’.

As one banker, who insists on anonymity, told me: ‘The most successful swindlers are those who investigated financial transgressions’.

Conclusion

Mega-swindles define the nature of contemporary capitalism. The profits and power of financial capital is not the outcome of ‘market forces’. They are the result of a system of criminal behavior that pillages the Treasury, exploits the producers and consumers, evicts homeowners and robs taxpayers.

The mega swindlers represent much less than 1% of the class structure. Yet they hold over 40% of personal wealth in this country and control over 80% of capital liquidity.

They grow inexorably rich and richer, even as the rest of the economy wallows in crisis and stagnation. Their swindles send powerful ripples across the national economy, which ultimately freeze or reduce the income of the skilled (middle class) employees and undermine the living conditions for poor working-class whites, and especially under and unemployed Afro-American and Latino American young workers.

Efforts to ‘moralize’ capital have failed repeatedly since the regulators are controlled by those they claim to ‘regulate’.

The rare arrest and prosecution of any among the current tribe of mega-swindlers would only results in their being replaced by new swindlers. The problem is systemic and requires deep structural changes.

The only answer is to build a political movement independent of the two party system, willing to nationalize the banks and to pass legislation outlawing derivatives, forex trading and other unnatural parasitic speculative activities.

James Petras is author of Extractive Imperialism in the Americas: Capitalism’s New Frontier (with Henry Veltmeyer) and The Politics of Empire: The US, Israel and the Middle East. Read other articles by James, or visit James’s website.

Our Spoiled-Brat Economy

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By Charles Hugh Smith

Source: Of Two Minds

By insuring spoiled brats/vested interests never face the consequences of their actions and choices, we guarantee failure of the entire system.

Spoiled brats do not take kindly to being called out as spoiled brats. Since economies are aggregates of individuals, we can anticipate howls of outraged denial at our economy being identified as spoiled rotten.

 

The two essential characteristics of spoiled brats are 1) a complete disregard for the burdens of those paying the bills and 2) a childishly self-absorbed sense of overweening entitlement. Spoiled brats have no sense of fiscal discipline. Indeed, it is their defining characteristic. They want what they want, and they want it now, regardless of the cost to others or the system as a whole.

In America’s Spoiled Brat Economy, no vested interest is ever allowed to fail. Lost billions gambling with borrowed money? Just throw a K Street temper tantrum and threaten to close all the ATMs when you go broke, and voila, Mommy and Daddy (the federal government and Federal Reserve) come rushing with trillions of dollars to make all the bad things like well-deserved bankruptcy go away.

That tens of millions of savers must be robbed of hundreds of billions of dollars in lost interest to rebuild your banks’ profits and balance sheets–the sacrifices of others are of no concern to spoiled brats.

What does not allowed to fail bring to mind? How about coddled children who are crippled by helicopter parents who do their homework for them and schools that give everybody passing grades and gold stars?

A system that doesn’t allow individuals and enterprises to fail is a system that is simply taking another path to failure. Students who are given gold stars and 9th place ribbons (Meet the Fockers) cannot possibly establish a real sense of accomplishment or learn how to make a realistic assessment of their deficiencies or strengths. They are crippled by all the “help” enablers press on them.

The same is true of spoiled-brat economies. Enterprises that are never allowed to fail (for example, too big to fail banks, bankrupt cities, counties and states, defense contractors who produce failed weapons systems, healthcare organizations that cheat the government and patients, etc. etc. etc.) become deadwood that saps the vitality of the economy, dragging down the few productive sectors.

The “help” lavished on vested interests include sweetheart contracts, direct subsidies, tax credits, lines of credit, zero interest rates and a vast range of other subsidies. The entire point of the vast lobbying machine that funnels federal and Federal Reserve largesse to vested interests is about staving off the very failure that keeps economies from imploding (creative destruction).

The Yellowstone Analogy and The Crisis of Neoliberal Capitalism (May 18, 2009)

Innovation, Risk and the Forest Fire Analogy (July 2, 2010)

By insuring spoiled brats/vested interests never face the consequences of their actions, choices and self-absorbed greed, we guarantee failure of the entire system. So by all means, keep passing out subsidies to too big to fail banks and 9th-place ribbons, and give the brats whatever they want as soon as they start wailing, regardless of the cost to the system itself.

 

The Soft Drink That Conquered the World

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Environmental historian Bartow J. Elmore discusses the global consequences of ‘Coca-Cola capitalism.’

By Elaina Koros

Source: USnews.com

From its origins as a patent medicine formulated in a small southern pharmacy, Coca-Cola has grown into a multibillion-dollar company. Headquartered in Atlanta, it possesses one of the world’s most valuable brands. Yet despite its exponential growth over the decades, Coca-Cola has kept its operations streamlined by relying on partnerships with commercial titans like Monsanto and integrating its manufacturing plants with public water and recycling infrastructures, explains Bartow J. Elmore, an environmental historian at the University of Alabama. In his new book, “Citizen Coke: The Making of Coca-Cola Capitalism,” he argues that this business model, though widespread and successful, has global environmental consequences in the modern age. Elmore recently spoke with U.S. News about the sustainability and applicability of what he calls “Coca-Cola capitalism.” Excerpts:

What inspired you to write this book?

I grew up in Atlanta, born and raised on the syrupy Coke soft drink. Seeing this product that was from my hometown end up everywhere, I wondered how [something] that had started in the Jim Crow South in 1886 ended up all over the world. As someone who was interested in environmental history, I was particularly interested in answering that question from a materials standpoint. Beyond the advertising and marketing, how did the company acquire the natural resources it needed to put its product on retail shelves around the globe?

What is Coca-Cola’s business model?

I call the model Coca-Cola capitalism. I’d say what makes Coke great is not so much what Coke does, but what it doesn’t do. Coca-Cola embeds itself in systems of production and distribution that it doesn’t own. Coke didn’t own sugar plantations. It didn’t own caffeine processing plants. It didn’t own bottling businesses for most of its history. [Instead, it] relied on a host of independent businesses to supply its needs and to distribute its products.

How are Coke operations impacting the environment globally?

Coke is expanding into increasingly arid regions of the developing world, and that’s in part because Coke is going to places where there aren’t the same kinds of health concerns that there are in the United States. Unfortunately, that means they’re extracting water from places that don’t have a great deal of water to spare.

I think of the human body as part of the environment, and I end the book by explaining how the stomach has become a kind of silo, a storage unit for Coke’s excess. In a nation where more than 30 percent of people are obese today, this is a hot issue for Coca-Cola.

How has Coke’s expansion impacted other companies and the public?

One great example is Monsanto. You wouldn’t have a chemical company like Monsanto without Coke, because Coke in the early 20th century bought all of Monsanto’s main product, which was saccharin, an artificial sweetener. If you go to the Monsanto website, they say that in 1903 and 1905, without Coca-Cola’s massive purchases of their saccharin, they would not exist. I think that’s true of a lot of companies. It’s amazing how many businesses Coke has kept alive through its huge purchasing contracts.

When I say that Coca-Cola capitalism involves partnering with people, that often means the government. I think two good examples of this are public water supplies and recycling. Coke, throughout its history, depended on bottlers who tapped into the public water supply to access 80 percent of what they sold to consumers, which was water, 80 percent of the finished product. In the early 20th century, cities and even the federal government participated in building this infrastructure, spending billions of dollars to bring fresh, clean water to cities and increasingly to rural areas of the country. So, what made Coke expand so rapidly was that it was able to tap into that government infrastructure.

The other example would be recycling. If you look at the history, you see that Coca-Cola and its industry partners lobbied heavily in Congress to try and get curbside recycling to be the solution to the nation’s litter problem. Why not have you and I, the regular taxpayer, pay for that infrastructure and, in a way, conveniently bring the company’s packaging back to the company?

How would you curb some of the negative effects of Coke’s operations and products?

One thing is to make companies pay for the pollution they generate. If we don’t like litter, then we should force corporations to realize that by putting a price tag on it. I would say the same thing goes for obesity. If we think that these products contribute to really expensive health costs like obesity, then let’s make these corporations change. They’ll find ways to respond to the pressures that people put on them.

Why Has Classical Capitalism Devolved to Crony-Capitalism?

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By Charles Hugh Smith

Source: OfTwoMinds.com

Here is the quote that perfectly captures our era: “People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.” (John Kenneth Galbraith) The trick, of course, is to mask the unspoken second half of of that statement: everybody else gets destroyed along with the Elites when the system implodes.

Union pension funds: toast. Government employees’ pension funds: toast. 401Ks: toast. IRAs: toast. The echo-bubble in housing: toast. The Fed’s favorite PR cover to cloak the enrichment of their financier cronies, the wealth effect:toast.

The primary tool the Elites use to mask the risk of complete destruction is magical thinking–specifically, that “given enough time, the system will heal itself.”

That’s rich, considering that the Elites’ primary tool of avoiding destruction is crippling the market’s self-healing immune system: price discovery. Thanks to ceaseless interventions by central banks, the price discovery mechanism has been shattered: want to know the price of risk? It’s near-zero. Yield on sovereign bonds? Near-zero. And so on.

Prices have been so distorted (the ultimate goal of Central Planning everywhere, from China to the EU to Japan to the U.S.) that the illusion of stability is impossible without more intervention.

This leads to two self-liquidating dynamics: diminishing returns (every intervention yields less of the desired result) and the Darwinian selection of only those money managers who believe risk has been vanquished.

Everyone who pursues prudent risk management has either been fired or saw the writing on the wall and exited stage right. So the only people left at the gaming tables of the big institutional players are those individuals who are genetically incapable of responding appropriately to rising risk. Those who did have long been fired for “underperformance.”

So how did classical free-market capitalism become state-cartel crony-capitalism, a Ponzi scheme of epic proportions that is entirely dependent on ceaseless central bank perception management and interventions on a scale never before seen?

We can start with these six factors:

1. Those who control most of the wealth are willing to risk systemic collapse to retain their privileges and wealth. Due to humanity’s virtuosity with rationalization, those at the top always find ways to justify policies that maintain their dominance and downplay the distortions the policies generate. This as true in China as it is in the U.S.

2. Short-term thinking: if we fudge the numbers, lower interest rates, etc. today, we (politicians, policy-makers, money managers, etc.) will avoid being sacked tomorrow. The longer term consequences of these politically expedient policies are ignored.

3. Legitimate capital accumulation has become more difficult and risky than buying political favors. Global competition and the exhaustion of developed-world consumers has made it difficult to reap outsized profits from legitimate enterprise. In terms of return-on-investment (ROI), buying political favors is far lower risk and generates much higher returns than expanding production or risking investment in R&D.

4. The centralization of state/central bank power has increased the leverage of political contributions/lobbying. The greater the concentration of power, the more attractive it is to sociopaths and those seeking to buy state subsidies, sweetheart contracts, protection from competition, etc.

5. Any legitimate reform will require dismantling crony-capitalist/state-cartel arrangements. Since that would hurt those at the top of the wealth/power pyramid, reform is politically impossible.

6. Understood in this light, it’s clear that central bank monetary policy—zero-interest rates, asset purchases, cheap credit to banks and financiers, QE, etc.—is designed to paper over the structural problems that require real reform.

Japan is a case in point: the Powers That Be in Japan have put off real reforms of the Japanese economy and political system for 25 years, and they’ve enabled this avoidance by pursuing extremes of fiscal and monetary policy that have eroded the real economy and created long-term structural imbalances.

In this 24 minute video Gordon T. Long and Charles Hugh Smith discuss through the aid of 17 slides the rapid advancement of Crony Capitalism in America. The facts are undeniable, but why is it becoming so obvious and undeniable? Why is it accelerating without any apparent ‘checks and balances’? Where have the safeguards against this happening gone?