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For most of the last 30 years, we've been told how well the market economy is working and how beneficial that is for everyone.

Think about that.  When an economy is really expanding and doing well, there's money to go around - regular people see their wages improving.  That's not what we were seeing even before the 2008 crisis.  In reality, we're living in a time of economic problems.  There was a stock market crash in the late 1980's.  Then the Saving and Loan industry collapsed and had to be bailed out.  We've had a number huge bankruptcies, like Enron.  We've had some industry "bubble" crises, such as the end of the "dot com bubble" around 2000.  In 2008, we were hit by the worst economic crisis since the Great Depression.  Four and half years later unemployment is still at recession levels.  (Even the official figures are no lower than 7.6%, and that doesn't include many jobless - see "New Jobless Figures: Illusion & Reality".)  This is not a success story for the market economy.

After receiving bail-outs and "stimulus" programs, after being able to borrow money from the Federal Reserve at virtually no interest, after reducing benefits and making employees do two workers' jobs for one salary, after being allowed to avoid prosecution for their crimes, after switching to cheap labor and materials overseas ...they're still demanding lower taxes for businesses, being allowed to use even more money to get their way with the government...

The market system is struggling.  It needs us to be poorer to get along.  And privatization is part of its "solution".  Privatization of government services benefits big business in a few ways.  By reducing what government does, business hopes to be able to cut business taxes (or at least taxes on the wealthy).  Elimination of some kinds of government programs will leave more working people desperate enough to work at worse poverty wages.  In addition, it's important to understand that it's also a part of the logic of business and investment.

Most truly wealthy people don't work for a living - they invest parts of their family's fortune and get their bloated incomes when those investments go up.  They (or more likely the financial experts they employ) are always interested in places to invest money that may increase in value more than others.  Also of importance is the fact that the total wealth available for the rich to invest tends to increase.  And in a period such as ours, as wealth inequality increases, the rich have growing piles of money just waiting for a lucrative investment opportunity.

They have influence in the government to see that the government allows or helps their fortunes increase.  Generally, the investments that require the largest amounts of money be invested are the ones with the highest return rates.  They can afford the best investment advisors.  They can afford the best tax shelters.  Their investment income in the form of capital gains has a top tax bracket that's half the rate of an equal amount of wages.  And so on.

When the fortunes of the rich increase, that means there's more money looking for advantageous investments.  When there's so much money in search of investment, the wealthy may look for areas that weren't previously available for investment - such as public services.  Privatization of government operations have advantages as investments.

* When you're buying from a businessman, he's trying to make you pay as much as possible.  With politicians, they may want more political contributions and some other help, but that doesn't cost as much as purchasing an equivalent operation from a businessman.

* Unlike most venture capital investments, investing in privatized operations means taking over an existing system - not trying to see if a new product is feasible.

* If you can get into some kinds of privatization, such as running prisons, you know the government is never going to allow prisoners to go free because you can't make a profit doing it.  At worst, you may have to let the government run the jails again and you may be able to get money from the government when you do that.  Meanwhile, prisons provide the potential for a captive source of cheap labor.

Another possible benefit of privatization for the wealthy today is the destruction of unions.  Government employees are one of the key remaining areas of union employees in the US.  After privatization, the company can either try to stop signing contracts with the union or demand more concessions than the government would.  By weakening unions in those areas, labor (unionized and unorganized) can be more easily made to accept lower pay and benefits throughout society.  Even if the privatized operation doesn't turn a profit, the owner's other businesses will make more money.

Today, in countries like the UK, we're seeing attacks on national healthcare systems in order to give wealthy investors more cash cows.

Even if this current episode doesn't scare us enough, its implications for the future should.  Every time the rich find a new source to further inflate their obscene fortunes, it only means that much more capital building up - which according to the dynamics of a society dominated by big money "must" find its own investment opportunity.

There is no end of this race.  We don't pick a winner on some date, hand them a prize and then start running things for the benefit of the vast majority.  It's like an endless arms race with money.  Each army needs more than just capital that's invested, it needs its operations to have at least as good a return on investment as the other "armies".  And return on investment requires at least some of the following: cheap labor. cheap materials (in which cheap labor plays a part), low taxes and few government regulations that add to business expenses.

Privatization has a deep logic in this context.  Privatization by itself doesn't mean an end to regulation, but corporations can get their politicians to institute industry "self-regulation" which is essentially the same.  Government "Self-regulation" (the government seeing it follows its own rules) isn't always what it should be, but it generally doesn't have the same level of recklessness which results from having no other goal than profit.  

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Smart Economy Vs. Market Economy

Pro-business pundits would probably try to tell you it's a good thing the rich have increasing amounts of money to invest - because that will lead to great new products.  There are at least two major flaws in this.

First, what wealthy investors find advantageous to put their money into is not necessarily what is good for society as a whole.  Given a choice between:

1) A new kind of cigarette that decreases a person's addiction to nicotine (so they stop smoking both the old and the new cigarettes in a year) while not causing any cancer, or

2) A new kind of cigarette which is just as addictive but causes a less serious form a cancer so the product can be marketed as "the safer alternative"

Many investors will put their money in (2) because the continued addiction means an unending flow of profit.  (No, the above example isn't perfect, but it should make the point.)

A smart economy would definitely choose (1).

Second, the fact the rich have tons of money is beside the point.  The money is there - it's only a question of whose pockets it's in.  That money can be put to work where it's needed without the billionaires making selfish decisions with no thought of the common good.  A smart economy would put the money in the hands of those who would invest guided by humanitarian principles.

Originally posted to workingwords on Mon Apr 22, 2013 at 12:47 PM PDT.

Also republished by Anti-Capitalist Chat.

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