As
an economist, Milton Ezrati has impressive credentials, and he just published
an impressive 6,500-word essay under the title: “The U.S. Economy Is Rigged,”
printed on February 16, 2020 in National Interest.
Ezrati
has a point of view in which he firmly believes. He sees the modern economy as
being little different from that of the Fascist era. It is dangerous, he says,
as proven by the 2008-2009 near collapse of the financial system, something
that can happen again, he warns. Ezrati did a good job defending his point of
view, as long as you look at it through the narrow angle which he uses to
layout his argument. But is that all you can say about this subject?
The
writer's concern is not the “concentrations of commercial and financial power”
as such––though he has misgivings about that too––but the concentration that is
done in partnership with the government. When this happens, says Milton Ezrati,
the government takes control of the operation because it has the levers of
power by which to force the corporations to bend to its will. This allows the
government to choose winners and losers rather than let the marketplace decide
who lives and who perishes.
If
and when the government decides that a meritless corporation must live, as it
does some of the time, it bails it with taxpayers' money through such program
as the “Troubled Asset Relief Program (TARP)” and by allowing the creation of
devious financial schemes such as the “securitization” of bad assets and the
“credit default swaps.” The point that Ezrati makes with a hint of anger, is
that politicians holding office, collude with the corporations that go along
with them. Together, they run the economy in a way that serves the electoral
interests of one and the financial interests of the other. They do all this at
the expense of the public which ends up paying a heavy price for the mess
created by those who profit from it.
Does
that mean Milton Ezrati prefers having a system of unfettered capitalism as
long as it is not pursued in partnership with the government? It would seem so,
but he still wants to see the government get involved by making such laws as
the Sherman Anti-Trust Act of 1890 to prevent the formation of monopolies. These
are what Ezrati calls capitalist machines that, “manipulate financial markets,
abuse workers, and force higher prices on consumers even as they limit consumer
choices by controlling the flows of products to market.” And everyone agrees
there is not much to like about that.
Looking
at all that Milton Ezrati wants to see in an economic system, we find it to be
essentially the system that America is adopting at this time. So, we must ask:
what is the gripe that prompted him to warn that the US economy is rigged?
There can only be one answer: Beside the inherent unfairness in what he calls a
rigged economy, he worries that the 2008-2009 meltdown will happen again.
If
that's the case, why did he not propose a solution to prevent such thing from
happening? Well, maybe he doesn't have a solution. If so, it could be that the
neglected to look at the model known as public-private partnership, which many
regimes around the world are experimenting with at this time. Something good
may come out of these experiments, and if he delves into the subject by adding
his two-cents worth of ideas, he could make a meaningful contribution.
The
idea behind the public-private partnership model, is that it is no longer
acceptable to make businesses accountable to all their shareholders except one:
The public. Because many of the large corporations, such as those that do
business internationally, cannot run efficiently without the participation of
the government, be it financially or legislatively or diplomatically, the
government must have seats on the board of directors where it will articulate
the views of the public, and safeguard its interests.
But
that's exactly what Milton Ezrati rejects instinctively, seeing it as the
ultimate setup that can and will ultimately evolve into a government-business
collusion. His argument suggests that absent a system of checks and balances in
the economy, such as the one that's working relatively well for the political
setup of the United States, the public-private partnership will take us back to
square one.
When
we look at the problem under this light, a solution that should work well,
suggests itself. Here it is: To make sure that the government representatives
on a corporation's board of directors, have not been corrupted, a committee
acting as both ombudsman and grand jury can be formed on an ad hoc basis when
there is credible evidence that collusion has taken place in a corporation.
The
mere possibility that such committee can be formed, will serve as a powerful
deterrent, and will considerably reduce the possibility of corruption
developing.
But
if corruption develops anyway, it will be taken care of legally, and will be
stamped out before causing much damage to the corporation.