Fear, dead peasants and a new commonwealth

©

There is no denying that the federal Conservatives are organized. Here at home, the local riding association just finished its nominating campaign, and the candidates were on the phone, beating the bushes for support throughout the process, while the federal office mounted an aggressive telephone fundraising campaign.

I’m interested in the Conservative movement. What interests me in particular is the voting public’s general shift towards the right. What is it about conservative values that has become so attractive to us?

The principal change in society over the past 50 years is the shift from optimism to caution. Put another way, we’re more fearful of the future—because we have more to lose, and we know at both a conscious and subconscious level that we are facing the prospect of losing our dominant place in the world.

And if fear is the driving social undercurrent, what better protection could there be than taking a conservative position? The conservative paradigm is based on protecting and enhancing the status quo. It follows then, that if you’re a conservative, you’re at least going to hold on to what you have, and if you’re well enough connected, you may even improve your position.

Conservatism, as we’ve come know it over the past three decades, is deeply rooted in progressive individualism and capitalistic ideology. It’s an ideological architecture that protects the individual’s right to accumulate wealth, and limits the general public’s ability to redistribute that wealth. In other words, the function of a conservative government is to adjust regulation to allow money to flow more freely into private hands.

This dovetails nicely into the new global economy, in which the regulation of the financial markets is largely impossible. High net worth investors are now borderless. The rise of the super-wealthy is a global phenomenon. Here at home over 60 percent of Canadian wealth is held by the top one percent of the population. And even within that small group is a greater disparity, with most of the wealth skewed to the very top. And according to a TD Bank report, this small group will possess over 66 percent of the national wealth by 2018.

What I found surprising is that these gains in wealth are being taken not from the bottom segment of income earners, but from the middle to upper-middle income earners.

While these trends seem to be disturbing to some TD Bank analysts, in the U.S. Citibank sees this as a great opportunity for its wealthiest clients. And what they’re talking about is the new plutocracy, the rule of the wealthy over the rest of us. Here’s an excerpt from the report:

“We will posit that:

“1. The world is dividing into two blocs—the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.S. What are the common drivers of Plutonomy? Disruptive technology-driven productivity gains, creative financial innovation, capitalist-friendly cooperative governments, an international dimension of immigrants and overseas conquests invigorating wealth creation, the rule of law, and patenting inventions. Often these wealth waves involve great complexity, exploited best by the rich and educated of the time.

“2. We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization.

The report goes on to arrogantly declare that, “The earth is being held up by the muscular arms of its entrepreneur-plutocrats, like it or not.”

The hope is, of course, that you or I can become wealthy one day. But frankly, the odds are against it. You have as much chance of joining the super-wealthy group as you have of winning the lottery, which is in itself a symptom of our emerging social values.

Joining that elite group, however, would radically change your personal value system. How else can one explain corporate executives taking out “dead peasant” insurance policies on rank-and-file employees, unbeknownst to the employees, and making their corporations the beneficiaries in the event of the employees’ deaths? The companies involved include Wal-Mart, Walt Disney, Procter & Gamble and hundreds of others.

If this doesn’t clearly define which side of the economic equation you’re on, nothing will.

So, the question you might ask is, for whom is my government working? The influential elite, or the rest of us not-yet dead peasants? To its credit, the current Harper government is taking steps to ferret out wealthy tax dodgers hiding their money in secret Swiss bank accounts. One would hope that this is more than window-dressing to sooth a public that is becoming increasingly aware of the hijacking of wealth that has occurred in this country—an awareness heightened by the recent financial meltdown and scandalous bank bailouts in the U.S.

As we approach the next federal election, we need to challenge all the parties and all candidates about their plans to create a new common wealth for the people. If we don’t, an increasingly unequal society will be no easy place for our children.

Comments

  1. Among those of us who live south of the border in the United Banana States of America, we attribute this gilded event to Reagan era economic policies and Bush era tax cuts. No matter what anyone tells you, the latest Great Recession was produced, not by runaway sub-prime and credit default speculation, but by gross income inequality. Consider this a continuing saga … from the same producers who brought us the first box office blockbuster – the Great Depression.

    Our course, the story is too arcane, too boring for mainstream media, which prefers a good bimbo eruption to any Plutonomy. That is why release dates and show times remain a closely guarded secret … unless bloggers like us blow their cover.

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  2. I sense (I hope) that Americans are finally beginning to wake up. The arrogance of the plutocrats is just too much to ignore, as is the disappearance bailout money and the trillions being made plundering Wall Street and the war in the Middle East. There have been some pieces in the mainstream media that have surprised me.

    But maybe the bimbocracy down there is stronger than I think!

    However, nothing we write can be as compellingly damning as the actual Citi document, which you can read at:

    http://docs.google.com/viewer?a=v&q=cache:FqvNfGaRAkYJ:monthlyreview.org/images/2010/101001citigroup-plutonomy-report-pt1.pdf+Citibank+investment+report,+plutonomy&hl=en&gl=ca&pid=bl&srcid=ADGEESicZw1fMpKp97MYInBch0BOzVeu4pE7SqUf4XdG1GU5YEUOWsTtnNp79Q8DYInlba_M9Q6M454LiGa9OnMAFHAkcKzTGnwnINIXDbgCm37yZ1H5naWrcOoQl6FNz7fXVZuMOBnO&sig=AHIEtbS7JxsQDa-uP_I7DR0JJWqGftIStQ

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  3. Also, this excerpt re: Anglo orientation:

    “One explanation of ...increasing polarization of wealth comes from considering these great transformations as surges of complexity—waves of economic, political and commercial change—profound enough to break down old vocational and price relationships, greatly favoring persons with position, capital, skills, and education” (page 259, author’s emphasis).

    Clearly, a speculative instinct is key to generating and sustaining these complex and risky transformations. Here, a new, rather out-of-the box hypothesis suggests that dopamine differentials can explain differences in risk-taking between societies. John Mauldin, the author of “Bulls-Eye Investing” in an email last month cited this work.

    The thesis: Dopamine, a pleasure-inducing brain chemical, is linked with curiosity, adventure, entrepreneurship, and helps drive results in uncertain environments. Populations generally have about 2% of their members with high enough dopamine levels with the curiosity to emigrate. Ergo, immigrant nations like the U.S. and Canada, and increasingly the UK, have high dopamine-intensity populations. If encouraged to keep the rewards of their high dopamine-induced risk-seeking entrepreneurialism, these countries will be more prone to wealth waves, unequally distributed. Presto, a plutonomy driven by dopamine!

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  4. Your Edginess,

    About a year ago, I offered the same argument to the big Dinosaur (i.e. bloggingdino), who assured me that a little excess can be a good thing - and a great motivator. Of course, obesity, dope junkies, gambling addictions, and reckless driving are ultimately attributable to dopamine.

    In any event, I’ll see your CitiGroup Plutonomy Basket and raise you one Henry Giroux.

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  5. "How else can one explain corporate executives taking out 'dead peasant' insurance policies on rank-and-file employees, unbeknownst to the employees, and making their corporations the beneficiaries in the event of the employees’ deaths?"

    Like this, I suppose.

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  6. Lawrence, thanks for the clarification. So, if I get this right...
    1. the corp takes out a big loan for investment in whatever
    2. the bank gets a big customer
    3. corp buys "janitor" insurance on employees to secure loan
    4. the insurance company gets a big policy
    5. the corp pays the premiums and gets a tax writeoff for it
    6. when employee dies, corp recovers premium expense...

    Right?

    But the employee never knows, an unwitting pawn (peasant) in an investment-tax writeoff instrument. Not exactly ethical, but certainly legal...until citizens vote to change the laws, I suppose, however unlikely that is, these days!

    Octo, thanks much for the Giroux link. Excellent. I have been raised.

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  7. Gerald - No, I don't think you have it:

    Every COLI policy has a cash value portion and an insurance protection portion. Each premium is allocated between insurance protection and investment. So, for example, I might pay $1,000 for a $20,000 policy, and the payment might create a cash value of $800, with the rest going to pay the insurance company for its trouble and to cover the insurance company's risk of having to pay me $19,200 of its own money. No part of the $1,000 premium is deductible.

    Janitor insurance is about the $800. In oversimplified terms, the corp "borrows" that $800 from the insurer (there is no bank involved) using the $800 cash value as collateral. So now, the corp is only out of pocket $200.

    The company pays interest on the loan at the highest rate the parties think they can justify. Let's say 10%. So now the corp owes the insurance company $80. That $80 is deuctible. Let's say it costs the corp $50 after tax.

    The insurance company pays interest on the cash value at a rate close to the interest rate paid by the corp. Let's say 9%. So the policy cash value is credited with $72 in interest. The difference between the $72 credited to the policy and the $50 after-tax cost of the interest is profit to the corp.

    When the employee dies, the death benefits cover the $200 insurance costs assessed each year, and the experience-rating mechanism in the program assures that the mortality element is a wash for both sides. All that's left is the 1% interest spread that the insurance company keeps and the money made by the corp on the tax arbitrage.

    Because all of the corp's profit is in the interest deduction, the corp wants the smallest insurance policy it can get, so your "big" policy is not correct. The tax laws require that every insurance policy have a minimum amount of pure protection in order for it to be teated as "life insurance," so the COLI parties make sure that the policies have that minimum amount of insurance, but no more. That's why the idea of companies profiting on deaths is so bizarre - the companies do everything they can to avoid profit from deaths: they buy the least amount of insurance permitted by the tax laws, and then they add an experience-rating mechanism to remove any net mortality gain from the program.

    So, in what sense is the employee a "pawn"? The employee is put at no risk. His health is not investigated. If anything, the program gives the employer an incentive to maintain the employee's health so that the interest arbitrage can continue.

    At the end of the day, I think you'll find that you are trying to leverage the emotional creepiness of what looks like a bet people will die (but isn't) to support pre-existing dislike of the corporation. I don't see any ethical issue with the program as I have described it, other than the aggressive tax avoidance, which has nothing to do with the outrage Michale Moore et al. express.

    BTW, the law was changed to take away the tax benefits from these plans at about the same time as the courts were ruling that those benefits weren't available anyway, so all of the big plans are long gone. Financial institutions still use a non-leveraged from of janitor insurance, but most of those, too, use the smallest possible policies because the benefit comes from tax-free accumulation of investment earnings, not indemnity on deaths. (Ask yourself what insurance company would allow itself to take consistent mortality losses on life insurance programs sufficient to produce significant mortality gains for its clients.)

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  8. Given the events of the past 20 years (massive deregulation, etc.), and the recent financial mess, a great many people mistrust corporations, with good reason. But that's another dialogue.

    Thanks for the clarification. It was most helpful. By "big" policies, I was referring to the aggregate of tens of thousands of "insured" employees, and some of these policies are much larger than $20,000, as you know.

    I still think that any financial instrument that involves employees and their lives, should be explained to and approved by the employee first. And finally, if the actual insurance portion is not the important feature, why aren't the death benefits allocated to the dead employee's family?

    I know you're trying here, Lawrence, but please... I've spent a lifetime in corporate communications and marketing, and this one is a PR stinker...

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  9. "I still think that any financial instrument that involves employees and their lives, should be explained to and approved by the employee first."

    OK. There's no logical basis for ths position - the employee is not prejudiced by his being "insured" or his ignorance thereof - but so be it. You are not alone, of course, which is why these plans were frequently not explained: they did no harm, but they would surely provoke distrust nevertheless.

    "... if the actual insurance portion is not the important feature, why aren't the death benefits allocated to the dead employee's family?"

    Not an important feature and not real money are very different things. I said there was no profit on employee deaths, not that there was no real premium payment and no real return of it. Getting that money back was important; it just didn't matter when, as it always came back with interest eventually, and it did not give rise to a gain. But it was the employer getting back its own money, not some small windfall that could be paid gratuitously to employees, widows, or the tooth fairy.

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  10. Gerald - It's a PR stinker because it's easy to misrepresent. You started from the position that it is bad. Now you're down to it smells bad. Sounds like progress to me. Keep up the good work.

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  11. "But they would surely provoke distrust nevertheless."

    Listen Lawrence, I know it's difficult to argue with a lawyer, and especially an experienced one who is discussing something within his own field.

    Any instrument that involves real people should require that those real people involved be consulted on their involvement. This is not only good marketing (hence the "smell"), it is also ethical business, and a foundational piece of jurisprudence—and governance. This is why criminal defense lawyers have full access to the prosecutions' files.

    The "no logical basis" line of reasoning is inaccurate and disingenuous. Optics actually do matter, a great deal.

    Distrust is well-founded. The peasants were not informed. That's bad.

    Finally, in actuarial terms, yes the company is just "getting back its own money." But an employee is not a fixed asset like a building. In this case, the employee has been treated as a fixed asset, and that, too is bad—for a whole variety of reasons (up to and including justifying the off-shoring of entire industries).

    But returning to your lead point, you have admitted that despite "no logical basis...they would surely provoke distrust," which sounds like progress to me. So good for you.

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  12. Seinfeld’s Kramer: “ There's no logical basis for ths [sic] position - the employee is not prejudiced by his being "insured" or his ignorance thereof …

    It is hard for a humble Octopus to comprehend the ethics of taking bets on peasants, with or without their knowledge, living or dead, for a mere tax gain. Once freed of indentured servitude, what gives former masters the right to treat former serfs differently from any name chosen randomly from any telephone book? Prejudice is in the eye of the beholder.

    I surmise the judge does not consider said COLI policies to represent a legitimate form of economic activity. To understand the judge’s decision, here is my easy Octopus guide to basic economics:

    ECONOMICS - Assume you have two cows.

    CAPITALISM - You have two cows. You sell one and buy a bull.

    DYSLEXIA - Uoy evah owt swoc.

    POST-MODERN CAPITALISM - You have TWO cows. You sell THREE of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank. He then executes a debt/equity swap with an associated general offer so that you get all FOUR cows back, with a tax exemption for FIVE cows. The milk rights of the SIX cows are transferred via an intermediary to a Cayman Island company secretly owned by your CFO who sells the rights to all SEVEN cows back to your listed company. The annual report says the company owns EIGHT cows, with an option on NINE more. You declare bankruptcy and get a government bailout.

    GLOBAL ECONOMY - You have two cows. For decades you prospered from their milk until you discover that there are cheaper cows in Asia producing cheaper milk (under horrific conditions). Meanwhile, your cows go on unemployment and are scorned by other cows for being too lazy to produce milk.

    LIBERTARIANISM - You have two cows. You let them do what they want. They wander off the reservation.

    My point: There was a time when the purpose of financial markets was to raise capital to invest in worthy enterprises – such as building and construction, business expansion, equipment, machinery, inventory, research and development, etc., etc. Today, we have trillions of dollars diverted to algorithm trades and casino capitalism but not the kinds of back-to-basics activity that create jobs or contribute to real economic growth.

    COLI policies, indeed! Kinda needs a capital ‘E’ in front of the name. All that creativity, all that brain power for negligible gain. Imagine what you can accomplish if you had a real job!

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  13. (Note: E. coli = Escherichia coli, a common intestinal bacteria, some strains causing food poisoning - link here)

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  14. "It is hard for a humble Octopus to comprehend the ethics of taking bets on peasants...,"

    Indeed, it is. There were no bets. There were insurance policies with their names on them, but they were not bets, because the insurance company and employer agreed in advance to balance out the gains and losses on deaths as they went along. It only LOOKED like a bet, but it wasn't. Ethics are about how things are, not about how they look. Business and politics are about how things look, so I get Gerald's point about COLI being bad business. But ethically, you can't be upset about a bet that isn't a bet. There's no there there.

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  15. Seinfeld’s Kramer: “the insurance company and employer agreed in advance to balance out the gains and losses on deaths as they went along … Ethics are about how things are, not about how they look.”

    Bet, scheme, sham, scam, or whatever you want to call it, your game of semantics reveals an ethical blind spot. While your vaunted insurance company and employer may agree, did it ever occur to you that named peasants might not necessarily agree? Furthermore, what confers upon you the right (besides obdurate arrogance) to assume peasants would agree to let their names profit someone else? Your claim concerning the harmlessness of said scheme is untrue to the extent that I would be the last Octopus in the deep blue sea to take your word for it. Whether you think E. coli is harmless or not, your scheme is tainted meat.

    As for myself, anyone who uses my name to profit a third party without my knowledge and permission is harming me, and I would not hesitate to litigate and seek punitive damages.

    In your reply, you conveniently sidestepped my economics lesson. How does your scheme advance the cause of commerce and the public welfare (besides lining your pocket by exploiting unsuspecting persons)?

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  16. If the government gave a tax credit for every new employee a company added, would the employer be ethically obligated to get the employee's permission to claim the credit? Would you be so outraged if the employer did not get permission to claim the credit? That's all COLI was - a way to get a tax credit because someone worked for the company. Everything else was mechanics.

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  17. (Later that afternoon, Octopus remerges to throw more ink on Kramer's argument)

    Seinfeld’s Kramer: “Ethics are about how things are, not about how they look … There's no there there

    What I find incomprehensible is your implication concerning the relativity of ethics, as if there were no Archimedes point of fair and equal treatment, as if Immanuel Kant never coined the term, Categorical Imperative.

    Let us talk about how your scheme turns unsuspecting peasant folk into ciphers … mere commodities expressed as statistical data points on an actuarial table as if their lives and good names had no intrinsic value to themselves … but only to your employers. In essence, you have created two classes of people along an ancient fault line – the rift between privilege and injustice.

    If these ‘dead peasant’ names were Angelina Jolie or Brad Pitt or Apple Computer, any misuse of said names (especially without their knowledge and permission) would constitute an infringement, a violation of ownership and privacy rights. In your universe, however, only the rich and famous deserve the right to protect their good names; whereas Joe Blow from Kokomo is reduced to commodity status for wanton commercial exploitation.

    If you insist on defending this argument, then you are defending a case for two classes of people with different rights under law. This is your ethical and moral blind spot, and I find your argument to be indefensible and unacceptable.

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  18. Seinfeld’s Kramer: “If the government gave a tax credit for every new employee a company added, would the employer be ethically obligated to get the employee's permission to claim the credit? (…) That's all COLI was - a way to get a tax credit because someone worked for the company.”

    When does a convenient self-serving error of omission turn itself into an outright deception? When you confuse current versus former employees. When you fail to distinguish between a legitimate right to claim a tax credit versus a bogus one.

    According to your original weblog article, those COLI policies contained the names of FORMER employees. ‘Former’ means persons no longer employed by their companies, means the employer-employee relationship has terminated, means no further exchange of compensation or benefits between the parties, means no more benefit to ‘dead peasants, means no more tax credits. Q.E.D.

    Governments issue tax credits as an incentive to create employment. Tax credits in exchange for employment confer a social benefit. When employment ceases, tax credits cease. Just because, once upon a time, you employed a ‘dead peasant,’ a terminated relationship does not confer a lifetime privilege … unless you are a tax credit junkie or a skunk. That is why your intestinal bacteria insurance policy scam is bogus ... and why the judge thought so too.

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  19. The tax law can give you a tax credit for having an employee, or it can give you a tax credit for once having had an employee. What the law says governs. The law at the time allowed tax benefits for loans on insurance on former employees.

    The courts ultimately ruled that it didn't matter whether the employee was current of former: the janitor insurance loans weren't really loans, the insurance wasn't really insurance, and the whole thing was a sham. That's fine with me. But its failure as a tax device has nothing to do with the ethics of insuring employees.

    I never said the COLI program wasn't "bogus"; I said it didn't do anything unethical to the employees. Do try to stay with the tour. The ethics of tax avoidance is a whole other question.

    As for classes of citizens, if the government gave a tax credit for having an employee, a famous employee would have no more to complain about than anyone else. You are confusing two different types of "using" someone's name with using two different types of people. Fame or non-fame is wholly irrelevant if the fame of the person is not exploited.

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  20. Arcane. Who thinks this stuff up? It's the ethics of tax avoidance that is the central issue if it's the driving motivator of this kind of thinking.

    So, following the bouncing ball, when instruments detach themselves from reality (as in insuring former employees to beat taxes), it's not a big stretch to figure that the corporation has no value for either private interests (instrumentalizing former employees—and collecting dividends on their deaths) or the public interests (collecting reasonable taxes from corporations to repair the commons they often compromise).

    This is technocratic scheming plain and simple, in the same league as derivatives, mortgage bundling, sub-prime selling and the rest. It's merely pyramiding cash to the top in an already compromised economy, much of which has already been offshored, and is still hollowing out the middle class, with one in five (!!) US houses in danger of foreclosure. Jeez. It's the basic THINKING that's gone wrong—the denial of any moral set point.

    Lawrence, I suspect you care about your country, too, or you wouldn't be sticking to this discussion. When does ethics finally trump wealth creation? I think that's what Octo is really driving at... and I agree.

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  21. I'm addressing a narrow point: companies did not benefit from the deaths of their employees. They did buy insurance contracts on them, and the contracts did pay proceeds to the company, but the premiums were recalculated to make create an actuarial wash, so there was no profit on the employees' deaths.

    All of the outrage over these programs stems from Moore's claim. Take it away, and there's just the usual tax-diddling that people have been doing forever. All of the fuss about using employees as pawns is just an attempt to rescue the outrage when a simple "never mind" is in order.

    So now you're on about tax avoidance, as if that's what upset you in the first place. Trouble is, corporations are tax-collectors, not taxpayers. WalMart and Winn-Dixie, to name two of the most famous COLI cases, are both in businesses where market share is the name of the game. Both of those companies try to lower their taxes so that they can lower their prices and get more customers from the competition. There's nothing noble about the effort - they don't lower prices as a gift - but the benefits fall to the customers nevertheless.

    Of course, every dollar of tax WalMart fails to collect from its customers, the government must collect from someone else. Maybe personal tax rates would be less if WalMart paid more taxes. Where would that leave the WalMart customer, who is also a taxpayer? That depends on how the replacement tax is levied - across the board or on high earners like Mr. Walton.

    Because corporations merely collect the tax, the idea that they are "paying" for despoiling the commons - as if they were not despoiling it at the behest of their price-sensitive customers (that'd be me and you, Gerry) - is just nonsense on stilts.

    All this self-righteous posturing arises over a failed tax shelter? Give me a break. You're guiding philosophical position is that any stick is good enough to beat a dog. If the corp isn't profiting on employees' deaths, then it's profiting on something it shouldn't be - credit default swaps, subprime loans, whatever - so what difference does it make whether any particular claim is true?

    Octo can drive at the relationship between ethics and profit all he wants, but he can't make janitor insurance a bet against employees' lives or an exploitation of employees' names. He can only make it a failed tax shelter. These policies are a pretext for raising the general ethical question, not an example of it.

    Lawyers learn early on not to address questions like "When does ethics finally trump wealth creation?" Ask me whether a particular thing is or is not on the wrong side of the categorical imperative, and I may offer an opinion. But defining boundaries is a sucker's game.

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  22. Gerald: “When does ethics finally trump wealth creation?

    Yes, exactly! And I would add fairness, justice, and social equality. But our friend from Bedford NY casts a cold eye on such naïve notions. One more irony to note: Outrageous income inequality bursts bubble economies and ultimately defeats further wealth creation. Too bad our friend from Bedford has not employed his education and experience in the service of higher angels. With friends like Mr. Kramer, who needs anemones!

    Fortunately for me, my species will have a bright and promising future. In 100,000 years from now, cephalopods will be farm-raising human beings.

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  23. No, Larry. I've not moved on to tax avoidance, as if that's what upset me in the first place. To be clear what upset me in the first place was "It’s an ideological architecture that protects the individual’s right to accumulate wealth, and limits the general public’s ability to redistribute that wealth."

    The dead peasant issue was an example. You're simply building the case. Why aren't corporations taxpayers? They're legal people.

    I understand that competition (i.e. lower prices) is a part of the game. So is tax law and marketing. Like you, I've been a part of the technocratic game, with my area of expertise contributing to the system.

    The PROBLEM I have, is that we (collectively) are moving into a plutocracy, in which individuals running corporations have undue influence on the direction of our governments.

    I think you understand there is a bigger picture in the general patterns that is worth investigating, even if some of the specifics need adjustment.

    I keep trying to thank you for trying to adjust these, and I am interested. But I care about the bigger picture more. It may not matter where the Caribbean ends and the Atlantic begins, but the Gulf Stream does matter, especially if it's slowing down, which it is.

    Understanding why it is slowing down may be quite important to the big picture and our own survival.

    I also understand, despite your nonsense on stilts claim, that we, the customers, are a large part of the equation, including me. We're all the dog. Or worse, more like a natural cancer on the planet...

    So, let's agree to say that we are arguing in two oceans: philosophy vs. utilitarian function. On utilitarianism, especially the application of law, you win.

    The rest of us have an inherent right to question whether the general disposition of a set of laws are appropriate to the whole of society.

    Unfortunately for all of us, we've given up a great portion of our decision-making process to utilitarian lawyers. You might read John Ralston Saul's Voltaire's Bastards for an in-depth perspective on this.

    By way of closure, I despise Michael Moore's sloppy approach to sensationalizing very important problems such as health care and capitalism, and polarizing the dialogue. He does us all a disservice in that way. But in a general way, he's more often on target than not.

    So, Lawrence, why don't we stop picking away at small points and talk about the real problems in the ocean? All three of us already agree that the dead peasants tax dodge was a shitty little tool...

    And as to the "narrow point," the corporations did benefit—from avoiding taxes. To say that it was a wash is, again, dismissing the ethics of using that employee for any other purpose than that to which the employee has agreed—his work. And the taxes the corporation did not pay had to be recovered from somewhere...

    There are 400 billionaires in the United States. The last 30 years has seen the largest transfer of wealth in the history of the world. The US government is $11 trillion in debt. The US consumer, who carried the economy since 1992, when Goldspan decreed it so, is also $11 trillion in debt. Meanwhile, US-based corps are doing business with a totalitarian communist government, and profiting from two, government bankrupting, decade-long wars in the Middle East.

    And to think, it all hinges on "narrow points."

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  24. And you do get it, sort of. In the NYTimes site on Tuesday, you wrote:

    "Poor Bob, bever [sic] really getting what is cause and what is effect. In 1950, what was good for GM WAS good for America, because GM sales and GM jobs were American sales and American jobs. Thanks to globalization, what's good for GM is NOT good for America. Wall Street and Big business are no better now at getting their way than they were sixty years ago. But their way is no longer congruent with national prosperity. So now, when they get their way, everyone else loses."

    So, what IS the cause, Lawrence?

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  25. I understand that Gerald and Octo have bigger fish to fry than dead peasants. But I came here to answer a question asked in Gerald's piece: how to explain the purchasing of insurance on the lives of rank and file employees. If I was wrong to assume that the question was asked because Gerald thought that employers were profiting from those deaths occurring early - when in fact just the opposite was true - I apologize.

    I did not address the larger question. I have written extensively on how the wealth came to be centralized the challenge of redistributing it when jobs are scarce. Just mosey on over to my blog and knock yourselves out.

    Being a legal entity has nothing to do with paying taxes. Taxes are an existential thing. They are a contribution of labor to the public service. Everything else is intermediation - how our labor, or the fruits thereof, are diverted to serve a public purpose. The corporate income tax in one such device, but the burden is on the employee, the customer, and the shareholder, not on "the corporation."

    I have no problem with taxes, but neither do I have a problem with tax avoidance (as distinguished from tax evasion). Paying more taxes than the law absolutely requires is charity. Charity is a good thing, but giving to Uncle Sam and giving to MADD are ethicaly equivalent. Why is it unethical for me to try to keep as many dollars as the law allows so that I can give more to some other charity? I see nothing inconsistent in voting for higher taxes and then paying as little in taxes as the law I voted for allows.

    Not all failed tax shelters are corrupt. Some simply misread applicable law. Personally, I would put janitor insurance, as it evolved, anyway, on the wrong side of that line. But that doesn't license all the silliness about employees' being exploited. They were just data, not "pawns" or "peasants" or any other such thing. Their mortality rate was the metronome, not the song.

    Likewise, there is nothing wrong with WalMart of Winn-Dixie trying to deliver the lowest prices that the tax law allows. If people didn't demand lower prices, we'd have tariffs and jobs, at least until the robots put us out of work. But we like low prices. Janitor insurance was part of the sausage-making process, like cheap Chinese labor, that produces those prices.

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  26. "So, what IS the cause, Lawrence?"

    What part of "thanks to globalization" did you not understand? Here's the long version.

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  27. Thanks Lawrence. I like how the pages merge with some patience. This in particular from your site:

    "This change in financial appetites should not be wasted. The government should seize the opportunity to undertake massive infrastructure projects, putting people to work using funds borrowed now (and not later, when the permits are granted and environmental impact statements are done, and interest rates have risen in anticipation of the work starting). This opportunity to upgrade our infrastructure may not come again. Of course, I don’t for a minute believe that such projects can be sold on the rational basis that exists for doing them. But I have infinite faith in our politicians’ ability to find some other reason to do what material conditions demand be done. By the middle of 2011, it will be clear to President Obama that the jobs lost to cheap labor are not coming back. Something more will have to be done to create jobs, and the infrastructure and cheap foreign money will be sitting there...

    "Lowering taxes will not help restore the private economy even when infrastructure projects have primed the pump.

    "We used to have a competitive moat around us called the ocean. We need to replace that moat with tariff walls."

    Very good assessment and remedies. If you haven't read it, please pick up Clyde Prestowitz's The Betrayal of American Prosperity. He goes into this in some detail. The US government (and Canadian) has been very slow to react to the Chinese rigging of tariffs, aided and abetted by the globalized multinationals. Greed remains the driving factor, as we both know.

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  28. I should also include this of yours: "If we fix the infrastructure with cheap foreign dollars and idle American builders, and we protect our manufacturing workers from having to compete on the basis of how poorly they are willing to live, we can right this ship."

    Now we get to the real technical job: how?

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  29. "Greed remains the driving factor, as we both know."

    Speak for yourself. Competition demands that entrepreneurs pay the least they can for goods and labor and the least they can in taxes. "Greed" turns up mostly in rent-seeking monopolies, not in competitive industries like retail and groceries.

    Often as not, it is the "greed" of the customer, not the greed of the capitalist, that accounts for many rough practices. If we all boycotted companies whose ethics we disapproved of, then companies would behave more ethically, and "greed" wouldn't be alleged. But we don't. We have once again met the enemy, and he is us.

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  30. I disagree. The derivatives windfalls, Wall Street bonuses, Rupert Murdock's hijacking of the media, the architecting of government financial policy by Wall Street mandarin-technocrats, the creation of a new plutocracy, these travesties of greed and power are too extensive and egregious to ignore. And it's all been done by pandering to the greed of the consumer—but that segment is not driving the bus. You and I are NOT the enemy. We simply don't matter. Again, read Prestowitz.

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  31. In the simplest terms, the difference between you and me is that you blame someone where I blame something. To me, human nature has been pretty constant over time, but technology creates new opportunities for us to be what we have always been, and sometimes the exploitation of those opportunities is destabilizing.

    The shrinking ocean is a big deal. I don't know whether we'll be able to cope. But whether we can cope won't turn on whether capitalists are greedy bastards. What does "greed" add to the discussion of public policy that "competitive self-interest" doesn't accomplish? The value-laden "greed" is merely an opiate for the have-nots; it's not a basis for sound policy analysis.

    As for specific solutions, I think you can appreciate that I'd prefer to post them on my own blog, if I ever find them. Some of them are already there and at Seeking Alpha. But I will say that I am evolving away from trade barriers as a long-term solution, as I suspect American robots will too soon replace Chinese workers.

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  32. "You and I are NOT the enemy. We simply don't matter."

    Whatever helps you sleep at night. How do you think the guy driving the bus decides where to drive it? He goes where WE reward him for going. Take some responsibility for your own choices.

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  33. Greed and human nature. Blaming someone or something? There is no something without someone... Well, let's skip over the semantics and discuss civilization, the public interplay ideas, motivations, actions and controls.

    A good place to start is with Ray Anderson, CEO of Interface, the world's largest flooring manufacturer. Ray is both a good businessman and an environmental reformer, and an advocate for increased corporate responsibility (refer to the Canadian documentary, The Corporation featuring Anderson for more).

    Greed and competitive self-interest are two polemic views of the same organism—capitalism. It is an ideology that can be dissected and redirected. As long as there is the public will to look past beliefs. I am not blaming anyone. Or excusing all of us. Though there are individuals to blame and all of us have to accept responsibility.

    So, here we are at the end of the industrial age. The end, because we're running out of fossil fuel, which has been driving the machine and shrinking (and killing) oceans.

    Fair trade practices are essential, robotics or not. Frankly, I don't believe that technology is going to "save" us, but neither am I a dystopian. Solutions include a fair exchange rate on currency, which has fueled the Chinese industrial revolution.

    When I ask "how?" I mean, how do we get our governments to insist on fair exchange rates, and what are those, and what punitive steps will we take to achieve these, and how will we manage to educate ourselves and the public enough to create an informed consensus which can drive the legislative process—without being derailed by corporate interests. (And you, of all people, should know the power of lobbying.)

    "We" have several major challenges:
    1. Climate and environmental degradation (over-consumption)
    2. Demands of 9 billion people (over-consumption)
    3. Demise of fossil fuel (over-consumption)
    4. Lack of globally shared principals, goals and governance
    5. Hijacking of the agenda by special interests—including elites and their reactionary forces, terrorists.

    And the great thing about problems of this magnitude, is they are so large we ignore them, and debate dead peasants policies. It all comes down to over-specialization (endless, Babelizing, narrow points) and over-consumption.

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  34. You really can't escape your antipathy to "corporate interests." It colors and distorts any policy solutions you might come up with. You've never heard of SEIU or AFSCME? Do you think the Sierra Club has never blocked a good project? That PETA has never slowed a cancer cure?

    Political interests are ubiquitous. We all have them, and we all assert them collectively. But you have singled out "corporate interests" - your pension plan and my wife's employer - the people who organize the energies of prosperity - as the villains in your narrative. Why aren't you worried that card check won't bring the thugs out to "explain" the benefits of signing up for the union?

    I'm not singling our unions and liberal activists as my betes noires. I don't hold their efforts against them. I'm merely suggesting that politics is not just the unrepresented against the military-industrial complex. It's way more complciated than that. And you'll never solve your "how" questions if your concern is simply how to tame capitalism.

    If you take the chip off your shoulder, your vision may improve.

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  35. Okay, corporations are essentially good. Politics is complicated. Self-interest is great. Tree huggers are obstructive. I have a chip on my shoulder. Got it.

    Taming capitalism is exactly what FDR did in the 30s, and is exactly what is required today, except that, with globalization, it's a hell of a lot more difficult to do...

    A personal affront is meaningless, Lawrence. You (and I here) are not solving anything, most particularly the big issues. If you have some good ideas, let's keep discussing. Otherwise, let's leave off the quagmire-building for a while.

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  36. Gerald, before I drop out of this discussion altogether, I want to leave behind some closing remarks.

    Here are the headlines one reads on any given week: BLA-BLA-BLA numbers of people lost jobs; BLA-BLA-BLA numbers of people are homeless due to foreclosures; a 90 year old retiree is bagging groceries because his pension fund went bust; the death toll in yesterday’s plane crash is BLA-BLA-BLA; there are BLA-BLA-BLA cholera deaths in Haiti; and so forth, et cetera, und so weiter, e cosi via.

    There are at least three ways to read such headlines depending upon one’s capacity for imagination and empathy: Technocrats read numbers, lawyers spout legalisms, and some of us hear human voices leaping from the page.

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  37. I didn't mean to offend you, but I did intend to give you the gift of seeing yourself as others see you. You have a powerful anticorporate bias that, in my opinion, makes it impossible for you to recognize the environmental changes that have changed the direction of the world.

    Globalization is the problem, not greed. Greed has always been with us, and we have dealt with it. Globalization is new, and we have not dealt with it. The table has tilted, and you're pissed that the shit is flowing downhill. Well, duh.

    It's a given that narrow political interests will interfere with the work of the Philosopher King. But it's not "corporate" interests that are the problem. It's "political" interests, including corporate interests. So long as you insist on making only one set of interests give up its goals, you'll never find the "how" you seek.

    As for Octo, he pretty much lost me at "Seinfeld." Please don't ask me to take him seriously.

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  38. Lawrence, you're got it backwards. Greed IS the problem. Globalization has been going on since before the Middle Ages. Only by regulating greed and other vices, can we build a civil society. (It's like saying lust is not the force driving pornography, the Internet is. That's just instrumentalism.)

    I think we've taken this debate as far as we can. So enough. Octo, thanks. Lawrence, also thanks. I've learned from you both.

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  39. Gerald,
    Unbeknownst to your visitor, I know Bedford, and Bedford Village, and Mount Kisco (home of the butcher shop where I sourced my Christmas goose). Mansions and horse farms line the country roads leading into Bedford Village. One of my oldest friends of 40 years owns a horse farm on South Bedford Road.

    These communities are idyllic and insular; its people are idyllic and insular; and the world never disturbs their protected and pretentious tranquility. Very few American communities are as out of touch and tone deaf to human suffering as these well-healed towns of central Westchester County. This is the mentality of Seinfeld’s Kramer … and why this entire discussion has been an exercise in futility.

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  40. Gerald - You are entitled to your opinion about when a "debate" has gone far enough, but we are generally poor judges of when we have learned "enough."

    I particularly urge you to rethink your claim that "globalization" has been going on since the Middle Ages. International Trade has been going on forever, but not globalization. The difference lies in waht is being traded. International trade historically involved the sharing of non-human resources. The classic Ricardian model of comparative advantage - British wool for Portuguese wine - was a way for each country to benefit from the other's weather; essentially, the parties traded English rain for Portuguese sunshine. This sharing created jobs in both places.

    Only recently has labor per se become an item of trade. Not specialized labor, as in Swiss watchmaking and Persian rug-weaving, but commoditized, anyone-can-do it labor. That's new. That's different. That's "globalization" of the economy. That sort of trade only creates jobs where labor is cheap.

    Globalization explains why Keynesian stimulus doesn't "work" anymore: the spending stimulates "the economy," but the economy is global, so the positive effects are felt where the cheap labor is, not where the money is created. That's new.

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  41. "One of my oldest friends of 40 years owns a horse farm on South Bedford Road."

    Octo infers that I'm somehow benighted from the fact that I live near one of his oldest friends.

    The mind boggles. I thought this blog was moderated....

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  42. Two months have perhaps calcified everyone's opinions rather than otherwise. I suppose, since a corporation is an entity in law, that being 'anti-corporation' may be tantamount one of these days to being guilty of a hate crime. Nevertheless, I hope the Moderator will allow me to post here some interesting recent examples of corporate greed.

    (1) Ken Feinberg has announced that it is only necessary to spend 1/2 of the funds allotted for BP to compensate business losses of individuals whose livelihoods have been destroyed by the Gulf Oil Disaster;

    (2) Wikileaks has released e-mails from the U.S. State Department which threatened France with reprisals for that government's decision to comply with its citizens' denunciation of Monsanto genetically-modified corn;

    (3) Within days of Obama's swearing in ceremony as President, Michael Chertoff launched his firm Chertoff Inc., eventually recruiting at least 11 top officials from the Department of Homeland Security, as well as former CIA director General Michael Hayden and other top military brass and security officials. The lobbying firm has successfully assisted its client Rapiscan in selling backscatter passenger radiation scanner machines to all major U.S. airports, for which CEO Deepak Chopra (owner of parent company OSI Systems) was probably so thankful that he sent all concerned autographed copies of the book he wrote recently, as one of America's most popular New Age gurus: "The Spontaneous Fulfillment of Desire: Exploring Meaningful Coincidences."

    I agree there is more than "greed" at work in this game. I believe it has a spiritual source, and a global dimension quite different from "globalization" - a zeitgeist concept which tax lawyers would be the last to want to seriously consider.

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  43. "...a zeitgeist concept which tax lawyers would be the last to want to seriously consider. "

    I assume you chose tax lawyers because they know that the zeitgeist follows technology and not vice versa. You are right that we wouldn't consider the zeitgeist independently of globalization. The zeitgeist doesn't, why should we?

    The anti-lawyer thing seems a bit gratuitous to me. But what do I know? On a planet where the zeitgeist transcends globalization, maybe insult really is argument. Living in Bedford and being, you know, insular and all, I have no way of knowing how things work out there among the bigots.

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  44. Lawrence, dismissing eternalu's argument on the basis of a throw-away comment about lawyers is simply, well, gratuitous.

    This seems to be the page that doesn't want to die (like dead peasants!).

    At any rate, there is a philosophical underpinning to this entire line of discourse, if not spiritual. It's about corporatism, with which John Ralston Saul deals nicely in his excellent book, The Unconscious Civilization. It's worth a read, Lawrence, and you too, eternalu.

    This vast migration of cash to the top and the hollowing out of the working class is the real issue, and though the details are highly complex, the process is simple: a well-entrenched managerial elite engineering the system to their advantage. Call it greed, or just structural, legal, self-interest, it still hurts the bottom half of income earners in the US, a lot.

    Anyway, thanks for reading and joining in, eternalu. And always good to hear from you Lawrence. Be well.

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  45. Organized content is the best way to display or post an article, thank you for making it easy to digest your post.

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