Is It a Burst Bubble, or Engineered Wealth Consolidation?

Is It a Burst Bubble, or Engineered Wealth Consolidation?
Photo: Venkane, Creative Commons, Flickr
There are two ways to look at recent economic problems, especially as they affect the stock market, the American economy, and jobs.
Bottom-up, it looks like a crisis. Top-down, it looks like a further consolidation of wealth, as the U.S. Federal Reserve, or Fed, bails out the egregiously greedy and even well-known companies are gobbled up by those with just a bit more money and (presumably) business acumen.

Take a look at recent headlines: Oilseed processor Bunge Limited said it has a deal to acquire Corn Products International; Republic Services said it will acquire Allied Waste Industries; British gas producer BG Group went hostile, making a bid directly to Australia’s Origin Energy shareholders; Russian oil major Lukoil bought 49 percent of Italian refiner ERG SpA’s Mediterranean plant; Heavy machinery maker Caterpillar Inc said it will buy Brazil’s privately-held MGE Equipamentos & Servicos Ferroviarios Ltda; Nokia plans to pay $410 million for the remaining shares of UK-based smartphone software maker Symbian. The list goes on, and on.

On June 24, Reuters published a U.S. merger and acquisitions spread on 37 companies, some of them – like Anheuser-Busch, Clear Channel, Wrigleys, Wendys, Calpine and Puget Energy, and Circuit City – names we once thought would never disappear from our economic radar. Now they are at risk of being sucked up into a vacuum of M&A that leaves only two categories: the quick and the dead. With these dead companies go jobs and another shove down the economic ladder for American workers.

I’m not an investor and I don’t own any company shares. What I know about the stock market could fit on the nail of my pinky finger, with room left over for the Preamble to the Constitution. But something looks eerily familiar, and I suspect it is the deja vu of a seventies adult, who saw bank deregulation and a recessionary economy change the face of American business for a whole generation as the big fish ate little fish, and international business sharks gobbled the leftovers. Wages went down, because fewer corporations held the purse strings and were thus able to dictate terms to the American worker – a situation not seen since the Great Depression.

By the mid-1980s, the U.S. had graduated from a family with one wage earner and one homemaker to families where both worked simply to provide for themselves and their children. The ‘80s were crunch time for American jobs. Outsourcing took hold and downsizing became a cost-cutting excuse that led to executive-level salaries in excess of $1 million and longer unemployment lines. Many adults who had been drawn into the mainstream by wartime jobs opted out again; “mushroom” farms sprang up from Oregon to Montana. These were our radical fringe, living off the grid and making do. They don’t look so radical anymore.

In April of this year, the Fed stepped in and further established its stranglehold on the American economy via a new set of market and banking oversight regulations. Large corporations are again busy gobbling up smaller companies, consolidating economic and employment power in fewer and fewer hands. The saying, “He who has the gold makes the rules” was never more applicable than in today’s imploding economy, and those who currently have the gold don’t appear willing to share it, either in terms of jobs and adequate pay for the middle class, or reductions in the cost of basic necessities like medicine. After all, the shareholders have to be paid first. Or is it the CEO?

Ten years ago, a decent starting wage at a large company was $10 an hour. It is still that today. Meanwhile, energy prices and a housing bubble have decimated wage-earners buying power, with food and gas at $4 a gallon taking the biggest bite. In 2007 the international food price index spiked by nearly 40 percent, compared with 9 percent in 2006. In the first quarter of 2008, prices skyrocketed again by about 50 percent.

What’s next? Two jobs for every worker, just to make ends meet (assuming anyone can find two of them)? Putting our minors to work just to put food on the table? That’s what they do in Mexico and the rest of the third world. It’s a sad day for America when 10 percent of the population holds 60 percent of household wealth. It’s an even sadder day when the current travesty – of banking interests being bailed out by the Fed – provides wealth for a few miscreants and an insupportable tax burden for the rest of us and our children for generations to come.

If you think trickle-down economics really works, wait until the current crisis trickles down to you.

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