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Inequality, Capitalism And A Nation Of Men

Memo Pad

Inequality, Capitalism And A Nation Of Men


John Adams famously sought to create “a government of laws and not of men.” Sadly, I suspect John Adams would be disappointed in the nation today. Increasingly, the application of the law reflects what Adams feared: It depends on who the men or women are rather than what they have, or have not, done.

A central principle that is necessary for the rule of law, as well as a successful capitalist economy, is embodied in the statues that stand outside many courthouses. They portray Lady Justice with a blindfold. Justice is blind, and every person — rich or poor, mighty or not — stands before the court on an equal basis.

Within this framework, the court applies the law without regard to the status of the defendant.  The ideal of blind justice is a pre-requisite for both a fair society and a vibrant capitalist economy.  With all treated equally, buyers and sellers can rely on the courts to enforce their agreements: Small businesses know that their agreements with large corporations and institutions of any size will ultimately be protected by the legal system.  Contracts, declared immutable in the early days of the republic under the Dartmouth College case, will be enforced. As a consequence, trade and production occur, while markets and commerce have the opportunity to flourish.

In contrast, when Lady Justice’s blindfold is in tatters, our economy loses its efficiency and ability to create real wealth. Consumers and businesses grow afraid to borrow from financial institutions knowing they will be at a disadvantage in any contract dispute. The mighty gain an unfair advantage in commerce (since crime starts to pay), knowing they can engage in profitable, but potentially illegal activities with impunity.  When this two-tiered system of justice arises, trade and productivity diminish drastically as potential wealth creators know the contracts that protect them for the risks they take will not be fairly enforced.

A central aspect of this system is the fair and equal use of prosecutorial discretion. When prosecutors treat different classes of people in vastly different ways, a system of unequal justice similarly arises. The courts never have the opportunity to enforce the law with equal vigor, as prosecutors create a two-tiered system of justice through the choices they make. For the society and a capitalist economy, there is little difference where the inequality starts: The outcome is the same.  Potential wealth creators take far fewer risks, and produce less, since they know the legal system, starting with prosecutors, will allow the rich and powerful to act in potentially criminal ways.

Let’s not kid ourselves: the portrait painted above is, in many ways, a charitable portrait of the nation today. We now live in a society where the rule of law, confidence in the judicial system, a fair capitalist economy, and an essential public respect for the law is rapidly disappearing. Indeed, our largest financial institutions seem to break the criminal laws with impunity, and a two-tiered system of justice has evolved. I believe John Adams would say he fought a revolution to prevent the type of society that is now evolving.

Here are two examples. Unfortunately, my files contain dozens more:

In the HSBC case, as Matt Taibbi recently wrote, “the U.S. Justice Department granted a total walk to executives of the British-based bank HSBC for the largest drug-and-terrorism money-laundering case ever. Yes, they issued a fine – $1.9 billion, or about five weeks’ profit.

Taibbi further notes:

“For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico’s Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years …The bank also moved money for organizations linked to al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

“They violated every goddamn law in the book,” says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act. “They took every imaginable form of illegal and illicit business.”

That nobody from the bank went to jail or paid a dollar in individual fines is nothing new in this era of financial crisis. What is different about this settlement is that the Justice Department, for the first time, admitted why it decided to go soft on this particular kind of criminal. It was worried that anything more than a wrist-slap for HSBC might undermine the world economy. “Had the U.S. authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, “HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized.”

There seems to be little question that the executives involved knew they were breaking the law. These executives assisted in the system that distributes massive quantities of prohibited drugs, which is also inevitably accompanied by violence and murders. The harm to our society was inestimable.

Yet, no criminal prosecutions arose. No accountability (which is fundamental to a fair society and a capitalist system) was demanded. Instead, prosecutors used their discretion to settle for a fine.

Bruce Judson

Bruce Judson is a bestselling and award winning author, a successful entrepreneur and one of the nation’s leading experts on the implications of rising inequality in America. Most recently, he has been developing, and writing about, a practical theory of sustainable capitalism in America, and how this often differs from current federal and state policies. He writes a regular column titled “Restoring Capitalism” for the Next New Deal Blog, a project of the Roosevelt Institute, and recently served as an Entrepreneur-in-Residence at the Yale Entrepreneurial Institute. Judson’s most recent book, published in 2009, It Could Happen Here: America on The Brink , forecast the rising levels of economic inequality in America, if unchecked, would lead to extreme political polarization, absolute political paralysis, anger and mistrust throughout the society, the collapse of the middle class, followed by protests and reform or political instability.

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  1. Daniel Jones February 26, 2013

    When businesses pay a fine to continue business despite having broken the law, the legal system becomes, by definition, sponsored injustice.

    1. CPAinNewYork February 26, 2013

      Similar to what happened in the American Civil War, when the 1863 draft act authorized one to evade military service by paying three hundred dollars or providing a substitute. In 1863, three hundred dollars was the average annual salary of an unskilled laborer. That was state-sponsored injustice.

      It was little wonder that the lower classes rebelled and we had the draft riots in New York and in other big cities. Lincoln must have been asleep when he signed that bill into law.

      A similar situation existed in the South, which had a draft a year before the North did. The injustice there was that rich people just were not drafted. No three hundred dollars or a substitute was needed.

  2. nobsartist February 26, 2013

    Well, considering that this has been business as usual for decades, whats the problem?

    We always have the 2nd Amendment that we can apply against those that are blind to justice.

    Thats what it is for and thats why THEY want to change it.

    When the courts are corrupt you just have to take it to the next, 2nd Amendment protected level.

    1. CPAinNewYork February 26, 2013

      How does the Second Amendment apply to bankers not being prosecuted for their crimes?

      1. Michael February 26, 2013

        He is stating that at some point, you take justice into your own hands, as lady justice has become too blind and has been bought and paid for.

        1. CPAinNewYork February 26, 2013

          In other words: revolution?

          1. Michael Kollmorgen February 26, 2013

            Well, that’s what they did in France and in the UK. They got fed up with Tyranny and overthrew it.

            When a government has been bought and paid for by the powerful and rich, it no longer represents the people.

            Therefore the 2nd amendment comes into its own, according to our Constitution.

            With the issue of not prosecuting these bankers and others, the representation of the people has been ignored in favor of them, the rich and powerful.

            Therefore, our government is no longer a Representative form of government.

    2. highpckts February 26, 2013

      Yeah, just go in a shoot all of them! Obviously your answer all the worlds woes!!

    3. jarheadgene February 26, 2013

      Where do you start to right the wrongs. Bankers never seem to get jail time no matter what they do. And just how far reaching does it go? Well consider this. Sen Prescott Bush and his Partner in banking never did jail time for bankrolling the German NAZI party. So instead he mentors Richard NIXON and makes him his personal choice for VP, under IKE, and his first run at POTUS against Kennedy. Nixon as you know went on, not only to continue the war in Vietnam but to also instigate the Watergate break in. What were they really looking for? Election materials…..don’t be so naive. Then Precott’s son goes on to become a POTUS, himself. And then OMG….GW pops up on the scene. BIGGEST LOSER of a POTUS our country has suffered since Herbert Hoover, GW may be even worse. So is letting these rich criminals get away with stuff really helping our Country…..NOT!

    4. Michael Kollmorgen February 26, 2013

      As much as I hate to admit it, I agree completely.

      It’s a totally logical conclusion. Though it is one hell of a way to solve it.

      It’s a shame that we would need to stoop to that level.

      I’m just worried about who would control Justice afterwards. What would come to pass afterwards could be a lot worse than it is today.

      1. nobsartist February 26, 2013

        Who do you think controls justice today?

        1. Michael Kollmorgen February 26, 2013

          Good Question.

          Devious people with a thirst for power, people with too much money, religious wackoos, right wing social engineers, etc………….

          I could probably think of more if I wanted to.

  3. Lovefacts February 26, 2013

    Now that the Supreme Court has ruled corporations are people too, it’s time for prosecutors to treat them as people. When they break the law, instead of allowing the guilty parties to hide behind corporate shield, arrest and take to trial the decision makers. Plus fine the heck of the corporation and try to make whole the victims of corporate malfeasants.

  4. Jim Myers February 26, 2013

    Citizens United gave Carte Blanche status to the wealthiest people the United States has ever seen.

    They can pretty much write the rules, (ALEC), and have their lackeys simply “copy and paste” them into new legislation.

    Ultimately, they will no longer see the need for elections. Just hand pick whoever will do their bidding, for a price, and give them the Legislative and Administrative positions needed in order to carry out their wishes.

    This will prove to be much more efficient and productive than our so called “Democracy.”

    A Democracy distorted by Gerrymandering, Voter Suppression, Dirty Politics, and, of course, MONEY.

    1. CPAinNewYork February 26, 2013

      Mr. Myers:

      You forgot to name the ultimate result: revolution.

  5. CPAinNewYork February 26, 2013

    I think that the government’s failure to prosecute the crooks that regularly evade our banking laws is due to the government regulators taking bribes.

    1. Michael Kollmorgen February 27, 2013

      Sure that is one of the problems.

      How is it these people when they are office have accumulated millions? They sure don’t get that sort of wealth from just their “official” salaries.

      Please notice, just last year Congress “supposedly” banned any trading on Wall Street by congressman due to “insider” information. Who’d of thought they were doing that? It’s been going on for many years without much knowledge from the public.

  6. jstsyn February 26, 2013

    When I was young and she was still around, my great grandmother used to say ‘money is the root of all evil’ Little did I know and I neglected to ask.

  7. Michael Kollmorgen February 26, 2013

    Lady Justice has ALWAYS been blind to power and money.

    The more power and money people have, the more blinder she becomes. And, this is not only in matters of businesses. Our very personal lives are just as affected in areas of criminal justice, now called the Justice Industrial Complex, along with the Prison Industrial Complex.

    Our system of justice has been corrupted from the bottom up all along. As in all these situations – Money Talks, BS Walks.

  8. 1standlastword February 26, 2013

    This article illustrates what could be the coming of our final hour. So far as wealth is concerned those who have the gold make the rules and people don’t give up power or wealth without conflict.

    Those enforcers of justice choose to nurture injustice so chaos is the child of injustice

    We are watching the birth of chaos.

    Humans are creating Armageddon!

    1. Michael Kollmorgen February 27, 2013

      When someone said “Money is the Root of ALL Evil”, they weren’t bullshitting in the least.

      I’m reading a real good book on such subjects like Armageddon, Dooms Day secrendos, X-Events. None of these events has very little to do with religion, only in so far as a mindset of pending disasters which further exasperates an already tenacious situation.

      The book is titled; X-Events; Complexity Overload and the Collapse of Everything by, John L. Casti. Please read it. It is an eye opener of what has taken place and could take place. John explains things in easily understood concepts.

      What we are experiencing now is just a small faction of what could take place to topple our government and our very way of life. What could happen and has happened in the past that causes everything to collapse is a X-Event.

      Another good book which I am currently reading is The Future, by Al Gore. It’s very complex, very good. It falls somewhat along the same line as X-Events but goes much much deeper.

      So far, I’m only about a fifth through it. Even here, money, in and of itself, is the biggest problem.

      1. 1standlastword May 27, 2013

        I’m still around! LOL
        I’ll look into your suggestions. Right now I’m wading through David Stockman’ The Great Deformation

  9. Sarel van der Walt February 27, 2013

    What is to stop a victim / survivor of a drug related crimve (and/or their relatives) to begin a class action lawsuit against HSBC? The suit should be against the company, as well as the individuals that made the decisions, or failed to stop the bad behaviour if they had the authority to do so. In many countries, citizens also have the right to sue the govt for failing to do their job of protecting their citizens – is it possible to sue the govt for failing to prosecute adequately? Lastly, many countries also have laws allowing for the seizure of assets which were obtained from criminal activities or from income derived from the criminal activities – why not seize the assets of the directors & managers of HSBC since part of their salaries were paid for by illegal activities?

    1. Michael Kollmorgen February 27, 2013

      It takes a tremendous amount of money and dam good lawyers to fight any of these corporations. Trials can last for months, memories fade (deliberately), facts get distorted. Corporations usually win.

      Only in cases where there is a such a large bulk of verified misdeeds that can’t possibly be hidden or ignored, does the public win.

      Forget trying to sue the government at any level. Rarely does anyone win.

      For example, ever wonder why nothing can be done about all these cell phone and home phone calls concerning fake credit card offers, fake late payment calls? We in Ohio, our home gets bombarded by them at least a dozen every week. We track some of their phone numbers where they come from.

      The phone company can track where all the calls are made from. Try getting that information. We have given the information to the Ohio Prosecutors Office when we can obtain it. The State of Ohio Prosecutors Office would love to prosecute these criminals. They get thousands of complaints every day. The State can only get this information via a Sepena and court action. Extremely hard to do. For every 1 crook they catch, 10 more pop up. One company has an F rating from the Better Business Beaure since 1990. Yet the state can’t nail them.

      Unless the state has a completely legal case, lock solid evidence, they are virtually powerless.

  10. ralphkr February 28, 2013

    The only thing new about this is the sheer size of the money being bandied about. I remember being told 7 decades ago that if you wanted to steal money without being punished you should become a bank executive. If I rob a bank of $1,000 and I am caught I shall get a hefty prison term but if I am an officer of the bank and embezzle $100,000 absolutely nothing shall happen because the bank will not want anyone to know that it happened for fear that it will erode confidence in the bank. Today we can add upper echelons of business to the “unpunishable” in fact those who rob a business and/or the shareholders blind are often given bonuses now.

  11. Liberty: Coercion's Absence October 11, 2013

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  12. Socialism: Organized Evil October 11, 2013

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  13. Defend The Constitution November 23, 2013

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  14. Liberalism is Nonsense November 28, 2013

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  15. Thomas Aquinas December 8, 2013

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  16. Liberalism Is Nonsense December 9, 2013

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  17. Benjamin Dover December 13, 2013

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  18. Bundle Up January 7, 2014

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