Corporations make a lot of noise about supporting markets. However, again and again it is cleaer that they actively subvert the efficiency of markets in order to maximize their profits. They do this whenever the can, so the larger companies do it more than mid sized companies. Companies like Standard Oil and Microsoft interfered with markets to maximize their profits and their control over a market. The financial industry is all about market interference, but while talking up its commitment to markets. However, the question for this post is whether corporations in total are simply designed to interfere with markets.

The Evidence That Corporations Support Markets? 

Interestingly, corporations are said to support the market, but no evidence is presented that they do this. It is something that is simply said enough times by distinguished looking people on many news programs so it is simply considered a truism. A corporation is a legal entity that in the US at least, has fought through the courts to obtain the rights of personhood, but without the same liabilities as personhood. They did not always exist and in fact are a relatively recent development. Interestingly, they are increasingly seen as immortal, instead of temporary and we lament the passing of corporations when they are no longer competitive.

Why Corporations Are Anti-Market 

The problem with blindly supporting the idea that corporations support markets, is that many of them simply don’t. For instance many of the larger companies in the US directly interfere with markets by using monopoly power to control them. So when Archer Daniels Midland engages in price fixing this is anti-market behavior. The fact that so many corporations spend so much money on lobbying, rather than spending that money to improve operations means that corporations are not really all that focused on improving themselves or on the overall market efficiency and are more concerned with carving out certain markets for themselves. In fact of all the expenditures made by large corporations, lobbying has the highest return on investment. Political contributions of thousands can result in financial returns in the millions.

One of the most damning pieces of evidence that corporations don’t support markets is found in economics itself, which proposes that as markets become more efficient and transparent the profits for the companies in that market declines. Why would any company support something that decreases its profits? Secondly, if this is well known, why do we keep discussing corporations as if their statements about being in favor of efficient markets is true?

Preferring to Not Compete

As with any entity, when given the chance to compete for something, or to get that same thing without competing, they prefer not competing. Corporations don’t recognize the right of the government to regulate them. They prefer “self-regulation,” which is code word for no regulation. Many people that work in corporations or take the corporate line they would like the government to “get out of their way.” “Getting” out of their way often takes the form of reducing regulations which protect the environment, workers and other companies from the exploitations by the company under discussion. In this way corporations would like the government to get out of their way the same way a rapist would like law enforcement to get out of their way. Everyone intuitively knows that rapists would prefer if rape were legal, but we also understand that this desire is based upon selfish desires to continue exploitation. However, when corporations ask for governments to “get out of our way,” for some reason it is taken seriously.

Do Corporations Really Want to be Left Alone? 

Corporate relations with the government are not this simple as presented by corporations. Corporations are extremely active in influencing government at all levels. Corporations don’t invest in lobbying to simply put the government on the sideline, but to gain advantage over other corporations and over workers, in addition to obtain funds directly from the government in the form of contracts. In the case of lobbying against workers, the comment is often made that corporations must do this to fight against large and powerful unions. However, the amount of money contributed by unions is quite small compared to that contributed by corporations. The propagandistic term “unions bosses” is often used to give the impression that unions are corrupt and untrustworthy, when in fact the majority of the corruption resides within corporations as does the exceedingly vast majority of political power.

Also, corporations have lobbied against everything from child labor laws to health and safety laws, not only wages. Corporations were perfectly happy to have seamstresses burned to death so they be ensured the ability to keep all the doors locked on apparel manufacturing operations. Slavery is a common feature internationally, although it is not longer called slavery. Without logging regulations, logging companies will strip the land bear. Nuclear power plants are continually leaking radiation in an unreported fashion (as evidenced by the fact that populations close to nuclear reactors have higher cancer rates, and significantly higher cancer rates that populations not close to nuclear reactors), because nuclear regulations are too corporate friendly. Conservatives are very quick to call for an end to “overzealous” regulation, but are short on details.

Do Governments Interfere in Markets?

The opinion on this in corporations seems to differ depending upon that interference is helping the corporation in question or hurting it. When the government prevents companies from exploiting workers or from polluting the environment, the government is said to be interfering in markets. However, when the government is providing patent protection which allows corporations to make excess money off of a discovery which they usually did not invent themselves (corporations tend to strip inventions from the real inventors, such as when they get inventors to sign pernicious contracts or when they take inventions that were created in universities and compensate the originators very little for them), then this is not deemed as a market interference. Thus the term market interference  seems most importantly to be completely determine by whether the action benefits the corporation. Also, corporations do not agree amongst themselves, because a market interference which may help one corporation may hurt another. That is something else to understand, corporations do not all have the same interests.

Are Corporations Designed to Interfere with Markets?

The idea that governments interfere with markets while corporations enable markets is not cut and dried. Governments interfere in markets, but often have a higher public purpose. This is not always the case, but when they don’t have a higher public purposed it is most often because they are doing the bidding of a corporation. However, corporations never interfere in markets for a higher purpose. Their only purpose is profit maximization.


Corporations are anti-market mechanisms designed to push externalities onto society, while maximizing profits for a small elite. Corporations are anti-market because to support markets means to decrease the power of the corporations and to decrease its profits. Therefore, progressives should not unquestioningly accept the proposal that corporations are all about market efficiency. Examples from history as well as what economics says about markets can be used to effectively dispute the false claims of corporations and their backers in this regard.


It started out by observing the behavior of schools like Harvard and the University of Chicago. Then my analysis of Stanford  and their Hoover Institute which is a propaganda apparatus for concentrated power, which Stanford funds.

Nothing the elite universities contribute to intellectual capital, and no training they do of students is as important as the fact that they are simply mouthpieces for concentrated power. The most important challenges facing the globe are not the necessity for more scientific inventions, humans already have more inventions and technology than they can use in a sustainable manner, it is rather the management of our ecology and the reduction in corporate power and the social inequality in societies.

Universities have become co-opted by private power and now primarily serve them. Even the “state” school systems increasingly rely upon private funds, and churn out “research” that is compliant to their interests. This is as true of economics as it is of medicine.

Furthermore the graduates of elite universities increasingly pull value rather than add value to the economy. The recent financial crisis which was a fraud on a monumental scale was primarily created by graduates of elite universities like Harvard, Columbia and the University of Pennsylvania.


If the elite universities oppose the majority of the population, its time to stop thinking of them as elite. In fact the output of elite universities is not that good anyway, as research is now routinely carried out to please elite interest. Research that is carried out in an unethical fashion, but by smart people, is not worthwhile. The rest of the population needs to consider what it esteems. Intelligent people who like and cheat and subordinate themselves to concentrated power are not role models or people to emulate or be impressed with.


I am 1/2 way through Inside Job, which is a movie on the financial crisis. It is simply increasingly clear to me that not very much mental heavy lifting is done in finance. They essentially decide what they want to do (if they want to sell CDOs at a certain price) and then they work backwards from what they want, and then jerry-rig everything and call it analysis. I guess some math skills are used to create the during the jerry rigging but its all fantasy based. The idea that they seem to be missing about math is that it is supposed to be based upon something real. If math just becomes a mechanism for lying, then its not really “math” anymore, you might as well just draw a picture in crayon at that point. The fact that we have educated so many people in advanced math, who would be better off drawing cartoons, is huge concern. If physics and math departments are training people so they can go and work on Wall Street, they need to cut their class size because clearly we are over investing in mathematics education in this country.

Contrary the industries constant proposals, I have a hard time seeing actual intelligence being applied in this industry. Here an analogy is useful. There is a movie series called Saw where some sick mastermind comes up with “ingenious” ways to butcher people or have them butcher themselves. But this type of thing is generally not lauded, although some of the things he did were innovative.

Probably a lot of skill went into developing this death mask. It required knowledge of mechanical engineering, metallurgy as well as some mathematics. Furthermore, in the movie the homicidal main character has to capture his victims and put them in death contraptions. This all takes a lot of skill and motivation, which is above average in ever regard. However, would it be considered normal or proper to laud the creator for their multi-domain knowledge and ability to follow through on their plans? No? Then why do we laud financial types for creating financial products that do to the economy what the Saw character’s contraptions does to people? 

How Long Would a Fact Based Analyst Last in Wall Street?

If I had gone to work in finance, I probably would have lasted two minutes because its all really just high paid prostitution.  Acting as a sycophant you simply determine what the boss wants to hear, and then put together a report that is totally manipulated. Then you get paid. As time has passed, I have been approached by several companies to “write for cash,” that is to put your name to opinions and ideas that are not your own. This is where the real money is in both writing and in mathematics.

Do you know what else is almost as complex as a derivative? A Rubix cube. Both are of equal usefulness, but derivatives have more negative externalities. 

Illusory Complexity

While Inside Job is a good movie, I did not learn a lot new about the crisis. The fact is that no fancy math or big intellect is necessary to understand what happened. The major hurdle to understanding high finance and the crisis was placed there by major media outlets to built high finance into something significant with myths. The most import tool to understanding the fraud of high finance is the ability to see through propaganda. As soon as someone spend more than a few minutes talking about a derivative, its clear that its a crock. There is point in Inside Job where a financial consultant describes the fact that a derivative allows multiple people to insure something they don’t own. The example given is that 50 people could insure the same house. So two things immediately come to mind:

  1. How can 50 people insure the same thing for the same value?
  2. Why do we legally allow someone to insure something they don’t own?

The answer to the first question is they can’t, and the answer to the second question is we shouldn’t. At this point in a discussion with a super highly paid and coked up Wall Street type who I am sure would see someone like me, who wears clothes from Lands End and has a Honda Accord as a hopeless loser, would say that I don’t get it and I am being narrow minded, and possibly even “deliberately obtuse.” However, the coke up finance type has a real problem, because nothing they say makes any sense to anyone who has any sense. Let me just say that there are some things that are genuinely very difficult to understand, and where suspension of disbelief is important to understanding what really is happening. Microbiology is like this. The number of things happening at a microscopic level just inside of our bodies is mind boggling and cannot be understood with normal everyday logic. Gravity is similarly deep and complex and requires a movement outside of the everyday realm to understand. Finance types would like this to be the case as it would help justify their expensive degrees, and help them hypnotize people better so they can be separate from their money. However, the problem is that it just isn’t. Finance is a business activity where money flows between individuals and institutions in order to support individual needs for consumption and investment, businesses for investment and the government for spending and investment. While a description of the gravitational effect can go on for hours, if a discussion on any financial transaction or setup goes on for more than a few minutes, then fraud is taking place. Finance types essentially want the best of both worlds. They want very high pay, and they want the prestige of being intelligent and in working in a very intelligent field with high status. However, the problem is that the two are not related. The best paid doctors are not the most intellectual (who perform quality research), but those that perform the most unnecessary surgeries, and dispense the most pills. However, money does funny things to your ego. Because they are so overpaid, they think that they are incredibly intelligent. In fact, they chose a profession because they are greedy, got through a fancy school by paying big money and studying hard. However, nothing high finance does is based upon truth or reality. And the inconsistency there is that in order to be considered “elite” it is necessary to investigate real things and to follow some method that is based upon discovering some truth. High finance reveals nothing and covers truth, in order to maximize profit and short term gain, and therefore is a hollow field of study. Saying that finance is intellectual is much like saying marketing is intellectual. Its impossible as the depth of study is limited by the field.

There is a scene in the movie Cop Land where DeNiro’s character who is a detective tells Stallone’s character, who is a small town Sheriff that “you may be part of law enforcement, but you are not a cop.” This same statement could be said of high finance with regards to their pretense of their amazing mental capabilities. They could have chosen something intelligent to do with their lives, but they took money over doing anything interesting or of value.

Ending High Finance  

While Inside Job did not cover new ground, it was very well done. The consistency of the story of what happened is simply damming evidence that this is an industry that is better off dead. Not reformed, dead. High finance is what economists would describe as a negative externality machine. People in favor of high finance’s continued existence declare that it is necessary to have a vibrant economy. However, no evidence is ever provided of this. It is simply expected to be accepted, because all the really intelligence people who have been right about so much (Larry Summers, Timothy Geithner, Alan Greenspan, Hank Greenberg, Robert Rubin — you know the really really smart folks) tell us that it necessary.

The Necessary Functions of a Financial System

Not much more than a national banking system is required to support the financial needs of any country. Banking should simply be seen as a mechanism for efficiently and in a stable fashion distributing government fractional reserve based money.  This national banking system, which would employ very few people would work like the Social Security Administration. The Social Security Administration has less than 1/2 a percentage point in administration costs. This very low administration cost is not unusual in government, although this story is muted because anytime government beats private industry at something its kept relatively quiet because of the lack of profit incentive to point this out. For instance, similarly, Medicare administration costs are 2% of claims, while private insurance has a 30%. Large public financial programs like this are inexpensive and quite stable. Any situation involving benefits distribution the US government easily beats private industry, which brings up the question of why we have either a private banking system, private health care system or private insurance system. Of course government employees are limited in that they cannot expense Lambroghini’s, prostitutes and cocaine so you have to take the good with the bad. However, extensive research into this area demonstrates that removal of these items actually brings administration costs down. Although the Hoover Institute and Heritage Foundation hotly dispute this point.

Can We Live Without Financial Innovation? 

Its important to point out there would be no innovation, just the same basic standards applied year after year. The interest rates would also be very low, because the costs of running the system would be also low, and there would be no financial panics, no FDIC (the government is insuring itself already), no bank mergers, nothing exciting at all.

What About Other Types of Finance

There is no need for any parallel financial system outside of a national banking system. Other areas which currently exist are described below:

  1. Individual investors can invest their money privately, but should be barred from selling products or making products that could in any way be sold to individuals or public trusts like pension funds. With no stock market, and no bond market and no mutual funds or hedge funds, these d-bags have no market and nothing to do. Then individual private investors who can invest their own money in starting up new business or combine with other individual wealthy private investors to form partnerships.
  2. With no stocks or bonds, there would be no need for auditing companies as all companies would be private.
  3. Bonds do not need to exist outside of US Treasuries, because municipalities would simply tap into the public nationalized banking system for loans. States are part of the US monetary system. Why do they need to sell bonds in the first place?


Outside of a national banking system, I see absolutely no purpose to the finance industry. Secondly, its more than clear at this point that the financial industry in its current incarnation is just too dangerous to be allowed to survive. They are the most powerful lobby in the country and will use their financial muscle to continue to fight any regulation and to fund supporters in the media system which will write articles that justify their existence.

At this point, the rest of the population is very much faced with the decision of what to do after you capture Hannibal Lecter. If you capture him, you have to decide if you can transport him in a way that is safe for you as well, then you have the luxury of providing him with due process. However, Hannibal is not an ordinary criminal, he is smart and resourceful, and if you make a mistake during transportation he will eat you. That would be a tragedy because as a sociopath Hannibal’s life has little value compared to your, just as with those who work in high finance. If you can’t transport him, you kill him where captured and say he resisted arrest. This is the situation with high finance. Never before was Malcom X’s quotation of “By any means necessary,” more applicable.


I have recently been reading the excellent book disciplined minds by Jeff Schmidt.







This book describes how professional are deeply indoctrinated during their professional education in order to accept the assumptions of the ruling power. This indoctrination is present in all professional education, from the extreme being lawyers – who’s training is almost entirely ideological to physicists, who also must demonstrate that they are willing to subordinate themselves to the ruling concepts of the day.

MIT Sloan Management Review

I occasionally get emails from the Sloan Management Review in my inbox as I signed up for them at some point in the past. I never really read them because just don’t interest me much. However, the August 23rd newsletter really caught my attention due to the ridiculous article links that it contained.

The first one is listed below and re-proposes the Milton Freidman-esque concept that corporate social responsibility is wrong.


Here is the comment I left on the site.

So elitist that it could have been written by Goldman Sacks. I am increasingly tired of reading articles like this that simply accept as wrote all the assumptions of concentrated power. Why pay livable wages if they reduce the gains to the shareholders? And who are these shareholders, greedy and narrow minded windbags. Yes, the ultra wealthy must have their way. It will not do to call them the ultra-wealthy, so they are renamed “shareholders.” Now the standard retort comes that actually “shareholders are all of us.” However, not so fast, stock ownership in the US society and all societies is highly concentrated. We are talking about the rights of the wealthy here. I have a solution. Eliminate the stock market, it does nothing but concentrate power, increase corruption, cause companies to look for short term profits, and serve as justification for immoral behavior.

This article uses coded language to argue for corporate irresponsibility. Congradulations Aneel you serve you masters well. If you keep writing articles like this maybe you can get a seat on the board of directors of BP.

Sloan Management Review Training Business How to Decrease Market Transparency

The second article describes how the internet has increased price competition allowing people to comparison shop online. Typically we constantly hear from economists how transparency is a good thing that leads to higher market efficiency. Not so according to Sloan, in this article by Detlef Schoder, it is described how to decrease this transparency by hiding pricing and doing other things to make comparison more difficult for consumers.


Here is my comment:

Very interesting, this professor is arguing against the price transparency provided by the internet and recommending to companies how to move around it. However, isn’t the goal of modern economics to increase price efficiency? Isn’t this a good thing? The article could be retitled “How to Recover Monopoly Pricing.” But that title would be less PC.

Sloan’s Views

These two articles speak volumes about who the Sloan Management Review is writing for. They write for concentrated power. Neither of these articles have anything to do with scholarship and are straight ideological puff pieces. This is the type of pseudo-academic Milton Friedman used to be famous for. Articles like this are important. They make the elite happy, and provide the elite with justification to do immoral things and tell people they have the intellectual backing of academics from prestigious universities. Both these professors have demonstrated very “Disciplined Minds”


For many decades a concept was presented that the real economy and the financial economy were symbiotic. I was taught that the financial sector supported the real economy by making capital available. However, as Michael Hudson points out, currently the financial sector acts as as parasite on the real economy

The bubble’s health (if one can refer to a financial cancer as having health) derives from the economy at large losing momentum by employing its savings in an unhealthy way. Any threat of restored health in the ‘real’ Main Street economy threatens to doom the Wall Street bubble, for not only must savings increase, they must be diverted away from tangible capital investment to continue to bid up the prices of stocks, bonds and real estate. What is healthy for Wall Street is thus anathema to Main Street. This is why Wall Street investors instinctively recoil when employment and investment rise.

The essence of the global financial bubble is that savings are diverted to inflate the stock market, bond market and real estate prices rather than to build new factories and employ more labor. The system threatens to collapse in such a way that will leave a legacy of financial cleanup costs for the bad debts that form the counterpart to the economy’s ‘bad savings’, that is, savings lent to speculators who use the money simply to buy existing properties rather than to create new assets.

This recognition by Wall Street’s financial strategists underlies the push to privatize Social Security. The system is not sick, but that is not the point. The real objective is not to bail it out, but rather to bail out the stock market. If the vast sums invested in government securities could begin to be switched into the stock market, the effect would be to bid up equity prices. Of course, when it comes time for the system to begin paying out — when the number of retirees exceeds the number of new employees contributing to the system – the result will be a stock-market outflow. – Michael Hudson

I included a leech as the opening picture for this article. Its important that the old ideas about the financial system are completely outdated if they ever applied. Rather than enabling the real economy the financial sector undermines it in numerous ways that end up increasing the costs for everything. The best way to personally stay out of their clutches include the following:

  1. Bank with a credit union or small regional bank.
  2. Do not invest in the stock market
  3. Self insure when possible
  4. Only take out loans when absolutely necessary, for instance when paying for either education or borrowing money for a house
  5. Actively oppose increases in financial power or and ask for increased regulation




I had one of those “I can’t believe it moments when I received the Beat the Press Weekly Roundup from The Center for Economic Policy Research. In it was a link to the CIA FactBook page that showed the US ranking as the 40th least equal country out of 134 countries. This places us in between Uruguay and Cameroon.








The countries which are of course socialist are far more equal than the US. These countries include Sweden, Norway, Luxembourg and the Czech Republic. Countries on the other end of the scale are Nambia, South Africa and Lesotho. Sure, they are terrible places to live, with high infant mortality and illiteracy and few rights for women. By at least they are not “socialist.” Amazingly, there the next two developed countries on the list are Israel at 67, and Portugal at 72.

So, what do the supply siders have to say about this. Is there any more evidence required that trickle down is actually no trickle at all?










Hudson’s points on financialization are that what the US and other countries are going through is the takeover by the finance sector of a greater and greater proportion of the national output.


Often discussed by concentrated power and property owners is the importance of keeping wages low so that they are competitive with other countries as we live in a global economy. This is because the debate on issues in this country is framed by the powerful, and the property owners-employers want to constantly beat down wages. The model of our economic system is to break work down into small pieces and pay the lowest possible wages for that work, while charging the highest possible rate. The end state is the Nike model, where a giant company is managed by a relatively small administrative staff in Beaverton, Oregon, while all of the work is done at slave wages in third world nations. This is what is meant by the term “staying competitive.” Competitiveness is code by the wealthy for keeping the distribution of income going to the top. The inconsistency of this model is made plain by analyzing how the powerful in this country and in others have increasingly financialized the economy. That is they have increased the take from the economy by the rather useless financial sector. Michael Hudson points out that the load of the financial sector is now so high that is reduces American competitiveness internationally, not that you will hear a word about this on the conventional news outlets.

This policy cannot work. One constraint is the balance of payments. The competitive power of U.S. exports of the products of American labor is undercut by the fact that housing costs absorb some 40% of labor’s family budgets today, other debt 15%, FICA wage withholding 12%, and various taxes another 20%. U.S. labor is priced out of world markets by the economy’s FIRE sector overhead even before food and essential needs of life are bought. The “solution” to the financial sector’s negative equity squeeze thus threatens to create even larger problems for the “real” economy. Ms. Bair appropriately concluded her written testimony by commenting that the context for the present discussion of financial reform should be the fact that “our financial sector has grown disproportionately in relation to the rest of our economy,” from “less than 15 percent of total U.S. corporate profits in the 1950s and 1960s … to 25 percent in the 1990s and 34 percent in the most recent decade through 2008.” While financial services “are essential to our modern economy, the excesses of the last decade” represent “a costly diversion of resources from other sectors of the economy.”

This is the same criticism that John Maynard Keynes levied in his General Theory, citing all the money, effort and genius that went into making money from money in the stock market, without actually contributing to the production process or even to tangible capital formation. In effect, we are seeing finance capitalism autonomous from industrial capitalism. The problem is how to restore a more balanced economy and rescue society from the financial sector’s self-destructive short-term practices. – Michael Hudson




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