Five Ways the Free Market is Doing a Good Job. On Us.
An unwavering belief in the free market leads to some comical statements. Milton Friedman once said, "The free market system distributes the fruits of economic progress among all people." In response to the mortgage collapse the Chicago Tribune gushed: "Let the market do its job." And Mitt Romney's reaction to J.P. Morgan's profligate trading was "The market will take care of it."
But it's no laughing matter that the free market has done a good job for the small percentage of people that it represents so well. Here are some of its accomplishments:
1. It's making record-high profits while paying record-low taxes.
While corporate profits have doubled to $1.9 trillion in less than ten years, the corporate income tax rate, which for twenty years averaged around 22.5 percent, suddenly dropped to 10 percent after the recession and has remained there ever since.
2. It's making those profits with less real work.
The financial industry accounted for 10 percent of all corporate profits in the 1960s, 16 percent in 1980. But before the 2008 recession, the financial industry made up anywhere from 35 to 45 percent of corporate profits.
Growth in the lucrative, high-risk, alchemy-like derivatives market is even more startling. Less than 20 years ago total derivative value was about $18 trillion. Now it's $470 trillion. That's half a quadrillion, which may as well be half a gazillion, because derivatives are like casino chips in an untaxed craps game played by high rollers with other people's money.
So inflationary is speculative financial activity that the world's total wealth, according to the authors of the Global Wealth Report, has doubled in ten years, from $113 trillion to $223 trillion, and is expected to reach $330 trillion by 2017.
3. It's eliminating the pesky working class.
Productivity has risen steadily in the U.S., but because of outsourcing, improved technologies, and monopolistic practices, the average worker has not benefited from the growth. The median earnings of full-time male workers, adjusted for inflation, have remained at about $48,000 since 1979. The Economic Policy Institute's State of Working America reports an income DECLINE for 90 percent of America between 1979 and 2008.
As a result, the middle class is disappearing. Households with incomes between two-thirds and two times the nation's median income dropped from 61percent in the 1970s to 51% in 2011. The trend has worsened since the recession. Low-wage occupations ($7.69 to $13.83 per hour) made up 21 percent of recession losses but 58 percent of post-recession gains.
Among OECD countries, the U.S. had the highest percentage of employees in low-wage occupations in 2009.
4. It's taking a big chunk of money from the people who remain in the working class.
A New York Times investigation found that states, counties and cities are giving companies over $80 billion a year in incentives. These include cash grants, sales tax breaks, property tax allowances, and income tax credits.
An example is the confiscation of state taxes from workers' paychecks. Good Jobs First reported on this corporate subsidy program, which takes money directly from state revenues, and which has contributed to the fiscal pressures that have forced states to cut public services and raise taxes by a total of $156 billion.
5. It defends its actions by demanding more.
Caterpillar's Doug Oberhelman may be the prototype of a corporate executive who is so delusional, or so insensitive, or so crafty, that he had the audacity to say: "Legislators in Illinois have created an environment that is unfriendly to business and investment."
This from the CEO of a company whose profits rose by 78 percent in one year while labor costs declined. A company that took almost $200 million in state subsidies while paying less than 1 percent of its total net income in state taxes. A company that froze worker pay while giving its boss a 60 percent raise to $17 million.
That great champion of the free market, Milton Friedman, proclaimed: "Underlying most arguments against the free market is a lack of belief in freedom itself." Freedom, apparently, from the restraints of common sense and conscience.