The "Too Big to Fail" Discussion: the National Interest (essay)

***

The cardinal American values are peace and prosperity, equality of opportunity, liberty and justice for all. These values should be pursued, supported, and honored above all others. Actions that threaten or diminish them should be avoided or prohibited, vilified, or at least highly taxed. Public leaders praising these essential values should be supported; those whose decisions undermine them should be hounded out of their positions of influence.

Peace and prosperity, equality of opportunity, liberty and justice for all: the most persistent threat to these essential values is the concentration of wealth and power in the hands of the few. Equality of opportunity is not possible when power – social, political, or economic power – is highly concentrated. Justice is undermined. Liberty is diminished. Peace too is endangered when power is concentrated, because a means of perpetuating the hold on power by the few is demonizing so-called enemies, promoting fear, and pursuing social conflict at home or war abroad. Prosperity depends on peace and equality of opportunity. Concentration of power – as the Founding Fathers clearly understood – threatens our pursuit and attainment of all that we value.

When political and economic leaders are forced to admit that failure of this or that individual company threatens the viability of the entire national economy, it is clear that such companies have become too large and too powerful, in other words that wealth and power has indeed become too concentrated. Care must be taken to prevent such concentration of corporate power, through rigorous fiscal and taxation policies and through prudent management of the economy in general.

*

The value of a nation’s economic system is measured by the degree to which the system benefits the nation including its public institutions, its businesses, its workers, and its families. A prudently managed capitalist economy has proven its ability to benefit a nation more effectively than any other kind of economic system. Capitalism is the most reliable means of making progress toward our essential values; to continue functioning efficiently and effectively, a capitalist economy must find a right balance between (a) reward to the most successful and (b) protection for all from a high concentration of power – economic or political – in the hands of the few. One might say, for example, that if the richest 5% or fewer of the nation’s population controls 50% or more of the nation’s economic assets, then the capitalist system is prevented from sustaining the most consistent and effective achievement of equality of opportunity, prosperity, justice, and liberty for all, as well as the stablest peace possible in an uncertain world.

High-minded and unselfish people do exist, but as our founding fathers realized, the most common motive for one’s actions is self-interest. As the wealth of a nation becomes overly concentrated in the hands of the few, experience has shown time and again that members of the wealthiest group, acting rationally, use their economic power to insure the continuation of their own financial advantage, including even that of future generations of their families. Although a relative few rich people give generously to those needing help, many – perhaps most – grow more and more motivated by selfishness, greed, and the pursuit of political power. Also, a nation in which a significant number of its poorer citizens are held in a perpetual state of dependence on charity is clearly not experiencing what might be accurately called prosperity.

*

As Lincoln wrote, “Labor precedes capital.” In a healthy capitalist economy, workers make products and provide services. Owners of the firms employing the workers are paid by customers for the goods or services they purchase, and earn profits according to the ratio between the price paid and the cost of materials and labor employed. In this system most individuals receiving income are either business owners or their employees; a relative few use money itself – rather than goods or services – as a means of earning income; in a healthy capitalist economy, those few make their money by providing loans to or investments in the businesses that make the goods or provide the services. Their role is solely to facilitate the efficient production and exchange of goods and services.

The long-term health of an economy and the prosperity of a nation depend in no small measure on the degree to which income earned results from the production of goods or services, rather than from the manipulation of money. The greater the proportion of income earned resulting from money manipulation, the more vulnerable the economy is to disruptive cyclical swings from times of great prosperity, created by money’s making money, and great privation resulting from the distortion of the healthy capitalist economy caused by such a high level of dependence on money itself to generate income, rather than on the production of goods and services.

A high level of concentration of wealth in the hands of the few makes it inevitable that the economy will be characterized by a relatively high degree of dependence on income from money manipulation rather than on producing goods and services or directly facilitating such production. This is true because, in this unhealthy system, the few controlling the economy have a surplus of money that they control directly, in contrast to the businesses manufacturing goods or providing services that they control somewhat less directly. When wealth and power is highly concentrated, it is to be expected and rational for the wealthy to find it more and more convenient and vastly more efficient to make their additional income more and more from finance than from production. But in excess, this practice has disastrous consequences.

Concentration of wealth thus creates distortion of a capitalist system that threatens the nation’s prosperity.

*

The value of a tool lies in the skill and competence with which it is used. A capitalist economy is a tool for achieving the highest level of prosperity possible for a nation and its citizens; the value of our economy lies in the cleverness, the skill, and the wisdom with which it is managed to the benefit of a nation’s citizens. As a complex and always changing tool, our capitalist economy requires careful and skillful management in order to create enduring and widely shared prosperity. Over-managed or over-controlled, a capitalist economy has the tendency to stagnate, to impede technological innovation, and to bog down in paperwork and bureaucracy. But, left without sufficient managerial control, a capitalist system has the tendency to create greater and greater concentration of wealth and economic power and to produce greater and greater dependence on finance rather than production. In any case, the economy must be considered a tool which can be used, consciously and deliberately, rather than a force of nature which can only be observed and endured.

*

For a democracy to work as it is intended, creating the conditions under which the citizenry – through elected representatives – may govern themselves, it is necessary for citizens to learn the facts, not merely to exchange opposing opinions or hear others do so . The most critical function of the public media is to acquaint the citizenry with the facts, which those in the media must come to know and to report as objectively, as fully, and in as disinterested a manner as possible. This is insured by the media’s taking seriously its core mission as conveyor of fact rather than opinion and by a diversity of individual media outlets which when taken together can cancel out the subjective residue that may remain in each other’s reporting despite good-faith effort.

When economic, political, and social control of the media becomes concentrated in the hands of a relative few, the chances of such disinterested reporting of the facts and actual conditions is significantly reduced. Social and political diversity will be diminished, and narrow partisanship will be increased. Biased readers, viewers, and listeners will come to use the media as the drunk uses a lamppost, for support rather than illumination.

Seeking arguments for support of one’s bias or for opinions supporting one’s self-interest is not to seek the truth in order to make reasoned decisions, which is the approach needed for a successful democracy. Concentration of media control undermines the effectiveness of democratic processes.

*

The greatest thing about our great nation is the ideals upon which it was founded. If we are to continue America’s noble tradition and live up to our great mission in the world and in human history, we must do everything in our power to nurture, sustain, and pursue our essential values. Highly concentrated wealth and power threatens all that we hold most dear in the United States of America: peace and prosperity, equality of opportunity, liberty and justice for all.

***