“Takings is a matter of perspective. It’s a matter of bias. And too often, taking is the essential action of our capital-centric property regime.
We see this in private equity buying up rental properties and raising rents. Corporations taking from workers the increases in productivity their labor creates. Hedge funds operating dirty fossil fuel assets, taking from the biosphere its ability to sustain life.
From the perspective of capital, all of this isn’t taking. It’s “wealth creation.”
Regulation of business, now that’s a taking—taking the ability to maximize profits. Government taxes are a taking. The neoliberal agenda of limited government, low taxes, and deregulation is all about avoiding takings by government.
Yet it’s about something else as well. Something bigger—something implicit yet left unstated by neoliberal theory: a mandate to government to keep hands off and let the machine of capital extraction run unimpeded.
In essence, the free market concept is a fig leaf. It’s an ideological shield, designed to protect the real action, which lies deeper, in the power of wealth, free and safe in its own invisible empire, where it remains infinitely hungry for more. Neoliberalism is the cheerleader of the machine of extraction. Wealth extraction is the real game.
“The machine of capital extraction has been left quite free to run unimpeded since the 1980s, thanks to the long dominance of neoliberalism in policy. The result has been financialization—that state of affairs in which the financial economy is eating the real economy.
Most prominent among the beneficiaries are the wealthiest 1 percent of the world’s population, who now own about 46 percent—nearly half—of all the world’s wealth, according to Credit Suisse. A tiny handful of people—just ten individuals (not even enough to make up a full soccer team)—own an astronomical $1.5 trillion in combined wealth….
….We lack the standard conceptual frames to help us grasp what’s really going on here. The significant activity in the system now falls outside customary measures like GDP….But GDP is an inadequate measure for the financialized economy. Since 1980, the truly staggering upward leaps of wealth have come from elsewhere—from capital gains that remain “unrealized” (not cashed out): the gains in the asset prices of real estate, stocks, and bonds.
Economists Michael Hudson, Dirk Bezemer, and Howard Reed made a study of the US economy.
The paper’s authors show this has come about because we’re not using our wealth productively but extractively. We still discuss capitalism as a system of production and consumption, but it’s no longer how it functions. The system now drains income flows from production and consumption to support higher asset valuations.”
The authors spoke with us in language far more blunt than their academic paper, with Dirk putting it this way: “Much of the financial sector is parasitic. It’s not creating value but skimming off value.
A swelling of debt is one way this is accomplished. For example, when private equity buys firms, it often places substantial new debt on those portfolio companies, then uses the cash to write the PE fund and its investors a large check, in a sleight-of-hand maneuver benignly named dividend recapitalization. Once the PE fund sells that firm, the company is left responsible for paying down the onerous debt, which often means cutting staffing levels in order to manage the cash outflow. Income to labor has been drained. Income to finance has been boosted. And in a significant number of instances, debt-laden firms end up bankrupt.
From the book “Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises,” by Marjorie Kelly. pages 117-121.