Looters from the Future

Are we being looted?

This post has a long but interesting discussion of some of the economic problems facing us now. The money line is this: All three systems allow giant businesses which are friendly to the government to keep enormous private profits but to pass the losses on to the government and ultimately the citizens.

As you might expect, the tone of the post is one of moral outrage, which is understandable. But let’s look deeper.

The focus of popular moral outrage is the excessive compensation of some corporate executives. But with very rare exceptions, executive compensation is an insignificant portion of a corporation’s financial flows. The question to ask is who are the big beneficiaries? And the answer is simple: the owners.

So, who are these owners? Well, there are lots of them. Most are big institutions investing money on other’s behalf. The ultimate beneficiaries are the investors who directly and indirectly own the company. And the biggest group of owners are pension funds, 401K owners, and IRA owners. In other words, retirement funds.

If we are being looted, our future selves are responsible.

This is indeed a structural problem. Fortunately, this kind of situation has been thoroughly studied in some branches of economics. The solution is known, but it would be wildly unpopular, and therefore unrealistic.

Before there is any decent chance of correcting our structural problems, there has to be wide spread recognition among the governing elites of what the problem is. We have a long long way to go.

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