It is fairly plain to see that the $700 billion stimulus has not worked. At least not so far, and in light of the planned executive bonuses there is a fair chance we can take that statement to the bank. This is good in that at least we have something to take to the bank considering all they are taking from us, but I digress.

As an economist, I take this seriously. I realize the government is trying anything to get the economy back on track, but seriously folks in D.C. Did you really think that money would find its way down from Wall Street to Main street? A trickle down theory of economics is good, and has at times been successful; however, not when greed and corruption are rampant. This is where my common sense becomes inflamed. The government knew very well that corruption had caused the banks to crumble. Why then would they pour $700 BILLION into a corrupt institution?

Did we need a stimulus? Yes. Do we still need a stimulus? Yes, because main street is still suffering. Unemployment is quickly approaching 16% in places like Michigan, but even in California it is continuously creeping up. According to the Bureau of Labor Statistics it rose again to over 12% in September. In fact, that is only “registered” unemployment and not actual figures. It does not account for those that are underemployed or are not eligible for unemployment compensation such as the formerly self employed. If we counted those workers the numbers would more than likely approach  at least the 20% – 25% level. As of the latest September statistics, long term unemployment (those unemployed more than 27 weeks) rose to 5.4 million people. Does this sound like a recovery? Does this resemble a successful stimulus?

Although I was not a fan of the previous administration, I am also one to give credit where credit is due. The decision to give a stimulus to the people, in the form  of a $600.00 check, was a step in the right direction. It was designed to “stimulate” consumer spending, but it did not do the trick and was therefore deemed a failure. That was also part of the design. The administration needed to be able to point to a failure of the trickle up theory of economics. The failure was in the fact that the amount was ridiculous. If anyone thought that $600 in a person’s hand was going to do anything but pay a bill or two they were sadly mistaken. Very few people ran out and went on a shopping spree with a paltry $600, and thus consumer spending continued to drop. See, trickle up doesn’t work so let’s try trickle down and give big business billions said the guys in charge. Whew, aren’t we glad they tried? Don’t we feel better now?

Why not try this President Obama? How about taking the beginning amount of $700 billion and divide it by the 250 million adults in the U.S.? MAYBE, even add another $700 billion to the mix, which is probably closer to the amount that will actually end up being poured into our failing economy. Divide all of that by 250 million adults and watch how they spend their $5,600 windfall. Yes, people will pay down a bit of their debt like they did with the $600, but they will definitely go out and spend some of that much larger check. How do I know this? Because it is human nature. Sociology 101 for a consumer nation, and especially with the holidays right around the corner.

Trickle down did not work. What do you say we give trickle up a “real” try, and watch our economy start to right itself with a genuine stimulus?!

BLS (Oct. 21, 2009), Regional and State Employment and Unemployment Summary. Retrieved Oct. 23 from

http://www.bls.gov/news.release/laus.nr0.htm

The new film by Michael Moore, Capitalism, A Love Story, did not really say anything different from what I  have been talking about for many years now. While I am not necessarily always a fan of his tactics, he does have some very insightful things to say. Capitalism is failing.

For almost a year now we have been hearing Wall Street wail as loud as they can for help so we bailed them out despite the knowledge that they created the disaster themselves by virtue of unethical business practices and greed. The idea was such that pouring taxpayer money into badly managed, unethical, parasitic banking institutions would save the economy, our beloved free market system, and give them more money to loan. The trickle down theory of economics in practice, but it is not trickling down and never will. Therein lies obvious as well as less apparent problems.

By the very definition of capitalism and free market economy it is survival of the fittest. This is what Wall Street has been espousing far longer than I am alive.  But wait! Apparently that does not apply to Wall Street itself, and the rest of us never got the memo. If it did apply they would have insisted that inferior institutions be allowed to fall in order to make way for the stronger ones, but they didn’t. All of a sudden they had their hands out with fear mongering speeches decrying the end of America. The best part is that we the American public, and our government, all drank the Kool-Aid. We buy into fear. It unites us. It gets us to agree to things that we later scratch our collective heads in wonderment over. If the previous eight years can be pointed to as an example it is not surprising we find ourselves in a similar position today, and those that reap the rewards stand laughing.

Just a few days ago I ended up in a conversation with an otherwise intelligent man that begged me to understand that the United States financial system was hours away from “Armageddon.” Armageddon?! Does this not wreak of familiar pulpit driven tactics to control the masses from thoughts of upheaval? Of course, the moment he began spouting his vitriol I correctly guessed that he was an investment banker by trade.What was there to understand? Where is their free market, capitalist model now? I do not see small business being bailed out, and small business employs the bulk of Americans. Small businesses are failing at record rates because of the mess that Wall Street created.

I am not saying I disagree with a free market system, but left unchecked as it has been since WWII it is doomed to self destruct. The fact that our economy has been in free fall has not been remotely solved by the big bailout, but why? That is what they promised after all. The answer is simple. Our form of capitalism breeds greed. We can look back to Lord Acton’s famous quote; “power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.” This is why my recent debate opponent sees nothing wrong with the bailout or the huge sums being given out as bonuses to the very people that did a poor job to begin with. It is not that he is a “bad man” as Lord Acton would suggest, but he is employed by some. If the rest of us had driven our companies into the ground we would surely not be given bonuses.

This folks is capitalism, but it is not democracy. They are mutually exclusive from one another despite what we are too often told. It is not democracy it is plutocracy, which is the form of government rampant, unchecked capitalism is best suited for. By definition plutocracy is “government by the wealthy.” Sound familiar?