Mitchell’s laws: The more budgets are cut and taxes increased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

This is Part 1, of a two-part post, the second part of which will be titled, “Why does the 1% upper income WIN the war against the 99%.” This first part features excerpts from an article in NewScientist Magazine.

Poor little rich minds: The price of wealth
26 April 2012 by Michael Bond
NewScientist Magazine, April 21, 2012.

Psychologists now have evidence that money breeds greed and kills empathy.

From Scrooge to Gordon Gekko, stories have featured individuals who forsake compassion as they amass their fortunes. More recently, bankers have awarding themselves huge bonuses while taking excessive risks with investments.

Dacher Keltner at the University of California, Berkeley, and Michael Kraus at the University of California, San Francisco, divided about 100 volunteers into pairs, and then filmed each pair meeting and getting acquainted for 5 minutes. The poorer subjects were more likely to use warmer and more expressive body language and gestures that signal engagement, while the richer participants were more stand-offish (Psychological Science, vol 20, p 99).

To find out if wealth can influence empathy, the researchers asked 200 university employees, with jobs ranging from administrative support to managerial positions, to rate the emotions expressed in 20 photographs of human faces – a standard test of emotional intelligence. As predicted, those with the more prestigious jobs were consistently worse at the task.

When asked to imagine a conversation with someone they deemed to be higher up the social ladder, wealthier participants became immediately better at reading emotions. The team concluded that the observed effects are probably automatic reactions that lead us to become more vigilant and mindful of others when we feel subordinate.

A selfish tendency on the part of the better-off seems to translate to all kinds of situations in which wealthier people are more likely to behave unethically than those from poorer backgrounds. Hazel Rose Markus at Stanford University in California, who studies the effects of culture on behaviour, has also found that social and financial success can make people less caring. The more self-centred mindset that comes with riches might also have a profound effect on someone’s political opinions.

When the team asked university students to explain increasing economic inequality in American society, those from poorer backgrounds thought it due to political influence or disparities in educational opportunities. Those from wealthier backgrounds put it down to hard work or talent (Journal of Personality and Social Psychology, vol 97, p 992).

Keltner’s research might also suggest that the money and prestige of high office could degrade the altruistic tendencies of even the most well-meaning politicians. “A government run by wealthy, educated people is going to be interested in maintaining the current social order,” says Kraus. “[Its members] will not be interested in the welfare of everybody, but in the welfare of themselves and their own goals.”

No news here. Rich people focus on what affects the rich; poor people are more interested in what affects the poor. While poor people might protest cuts in food stamps, the rich might protest a tax on derivative trading.

More generally, the work could be seen to undermine “trickle-down economics”: the notion that money made or inherited by rich people will end up benefitting poorer individuals, through the creation of new businesses that provide jobs for middle or low-income earners, for example. This argument is often made in support of tax cuts for the wealthy.

Yet if the rich do create more jobs as a result, Keltner’s findings suggest they will be more concerned with preserving their own interests, by awarding themselves hefty bonuses, for instance, rather than creating a constructive working environment with fair wages for all. “Our results say you cannot rely on the wealthy to give back, to fix all the problems in society,” Keltner says. “It is improbable, psychologically.”

“Trickle down” economics works only to the extent that the rich will spend federal payments to them, and this spending will go to businesses, that grow and hire people. But, cutting taxes on the rich so-called “jobs creators” will not in itself, cause them to create jobs.

That said, all tax cuts, whether on the rich or the poor, do help create jobs. Tax cuts puts dollars into consumers pockets, and spending those dollars stimulates the economy. Tax cuts, not on the 1% “jobs creators” but on the 99% “buyers and spenders,” will have a more immediate benefit to the economy. (This is why FICA should be eliminated.)

Fortunately, not everyone seems to be corrupted by the trappings of success – as many instances of generous philanthropy attest (New Scientist, 24 September 2011, p 36).

Altruism may be part of it. But I suspect a large part is personal glory. Few large donations are made anonymously. From the numerous charity lists of donors (organized by the size of their gifts,) to the naming rights demanded by large donors (“The Smith Building,” “The Jones Auditorium,” “The Johnson Scholarship” et al) to the award banquets and honors, the wealthy crave admiration.

That is why the 1% continue to work. It’s why they build mansions, buy yachts and own limousines, not because mansions, yachts and limousines provide for important housing or travel needs, but because they evince superiority, cause envy, and elicit admiration. The rich work for glory.

Bottom line: In answer to the headline question, “Why does the 1% upper income fight the war against the 99%: The greater the gap between the two, the greater the glory — the greater the admiration and control the 1% believes it gains. The primary motivation of the 1% is not merely to acquire dollars, but rather to extend the gap, and it matters not whether a method lifts the 1% or crushes the 99%. Either way will do.

That is why the politicians and the media fail to “understand” the basic facts of Monetary Sovereignty. An understanding of this fundamental economic truth eventually leads to a reduction in the gap, for it demonstrates why federal benefits to the 99% need not be reduced.

Income gap reduction is an anathema for the 1%.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports