Letter 2 America for April 5, 2013

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Dear America,
English: Bill & Melinda Gates Foundation

English: Bill & Melinda Gates Foundation (Photo credit: Wikipedia)


A few days ago, I happened to be listening to the news on the radio when three stories were reported all in a row that seemed to me to sum up what has gone wrong with our free enterprise system in this country.  Mind you, I believe in capitalism, but that is not necessarily the same thing as free enterprise, and the distinction is made by those three stories.  One was about those H1-B visas that bright young, mostly technology minded students get to come to this country to study.  Much was made of the fact that when their studies end, they go back to their home countries because their visas expire, taking what they learned with them and depriving our economy of their ingenuity and entrepreneurship.  But it turns out that what they are actually taking is American jobs as they tend to be hired by consulting companies, who use these talented foreign students to learn the things necessary for outsourcing their jobs to their home countries, and then going back home to help make the transition easier for the American corporations exporting the jobs.  And in the alternative, many of them do the work that Americans are doing, but they do it cheaper, so their employers prefer the foreign students and lay off the Americans...not my story, but NPR's.

The second story was about philanthropy.  It seems that much of what used to be done with foreign aid by our government is now being done by philanthropic organizations...you know, the Bill and Melinda Gates Foundation for example.  And some countries that used to get aid from affluent countries like the United States are now giving it out, like China for example.  The kind of wealth that used to be possessed by sovereign states is now owned by people like Bill and Melinda Gates and countries like China in which the wealth is being concentrated in the hands of the few, just as it is here, but the vast majority of the people who actually create that wealth live very modest lives...more modest than anyone would want.  And the third story was about businesses making money in enormous volumes as well, or in this case, losing it but paying not a dime.

In Manhattan in the 1940's there is a building complex known to me as a youth as Stuyvesant Town, built with government subsidies by Metropolitan Life Insurance Company.  In the period after World War II, it was a haven for middle class people in the middle of Manhattan, and when rents began to balloon a couple of decades later, rent control laws came into effect stabilizing rents there and throughout New York.  But during the most recent housing bubble, a couple of big real estate investing companies got a syndicate of pension funds and other big money players--apparently including government investors and subsidizing agencies--together and bought Stuyvesant Town thinking they would get rid of the rent control tenants and rent to more affluent residents who would pay rents perhaps five times what rent control permits.  They paid in excess of $5 billion for the property, only to discover that you can't take money to build or buy such properties and then disregard laws intended to protect the people for whose benefit the properties were actually built in the first place.  The collectable rent that was ultimately permitted by the courts was only half the real estate speculators' payments on what they borrowed, and in the end, they just walked away leaving losses for the California state workers' pension fund and the sovereign investing fund of the government of Singapore in excess of a billion dollars, not to mention all of the other big money players losses.  My guess is that derivatives were involved as well.  You remember derivatives; they're the bets placed by buying interest in mortgages without owning the mortgages themselves..."bets" they were called, losing bets in this case.

What the three stories said to me is that some people have entirely too much money, and they still aren't satisfied.  And the money they have accrued as well as the money they are trying to make with that money is a form of societal excess that is costing the rest of us in that society.  But let's be clear about this.  Bill Gates made his money by dint of hard work, ingenuity and foresight.  It is what I call natural wealth, and I don't begrudge him his money.  But when he calls himself a philanthropist and blows his own horn about distributing mosquito nets to people who own virtually nothing else and puffs out his chest by offering a million dollar prize to anyone who can build a better condom, I feel compelled to point out that the billion he gives away every year isn't from his natural wealth.  He continues to be one of the two or three richest men in the world, and he isn't getting any poorer because the money he gives away is no more than the income his money earns for him, what I call artificial wealth, not the money he earned through his labors.  That isn't philanthropy.  It's advertising, or worse, it's Bill Gates trying to buy his way into heaven, but he's still the camel trying to pass through the eye of the needle in my opinion.  And as to the visas and the housing scam, they represent people with too much money trying to turn it into much too much money, all the while taking no risks of their own and making the rest of us pay for their failures while they reap any gains...free enterprise in pursuit of artificial wealth again, except that the enterprise isn't free for the rest of us.

I don't know if anyone else would see these three stories as connected.  And maybe I do only because I see this distinction between natural wealth and artificial wealth in which one is the product of legitimate contribution to society and the other is an effort to prey on it while producing nothing.  But it seems to me that all three stories point to one thing.  People are pursuing wealth at the expense of others while producing nothing but profit for themselves.  That isn't growth; it's just moving money from someone else's pocket into one's own.  It is one thing to improve everyone's lot and get rich doing it.  It is another getting rich by improving no one's lot but your own.

Your friend,

Mike

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This page contains a single entry by Michael Wolf published on April 4, 2013 11:02 AM.

Letter 2 America for April 2, 2013 was the previous entry in this blog.

Letter 2 America for April 9, 2013 is the next entry in this blog.

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About this Entry

This page contains a single entry by Michael Wolf published on April 4, 2013 11:02 AM.

Letter 2 America for April 2, 2013 was the previous entry in this blog.

Letter 2 America for April 9, 2013 is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

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