Kingdom of Bigdom

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–Thank goodness. The Europeans have given themselves two weeks to come up with a “comprehensive strategy” for their banking crisis. Until then, markets are free to go nuts, apparently. And they are.

–US stocks raced ahead by almost 3%. Crude oil, which is a kind of barometer for expectations about economic growth, was up 3.2%. The US dollar – which has become a liquidity safe haven – sold off. And gold and silver rallied. Markets have a full two weeks to party until the EU greybeards come back and tell us their big plan.

–Let’s see…two weeks is about enough time to get all your things from a bank savings deposit box, transfer your money out of the country, and get the hell out of Europe. That’s pretty much what Jean-Claude Trichet, the President of the European Central Bank, is doing. He’s retiring at the end of the month. We wonder how many people would love to quietly slip out the door with him and leave this mess to someone else.

–In any event, life on this big fuzzy blue ball goes on. So we’ll move on from Europe, but not before saying that a rally on a plan that doesn’t exist is a poor excuse for a rally. It may be tradeable. But it’s certainly no sign that the danger of falling debt dominos has passed.

–Here’s a question for you: why are strikes and work stoppages that reduce productivity dignified with the name “industrial action”? We’d never heard the term before moving to Australia. We can’t help but admire it…and hate it.

–“Industrial action” is a non-deliberately ironic word; the intended meaning is different from the literal meaning. It means exercising leverage in a negotiation by doing absolutely nothing. It’s a mini-strike. But really to dignify it with the term “industrial action” is to suggest it’s a legitimate and normal negotiating tactic when you’re looking for a raise from your boss.

–Of course if you tried this at your own workplace, say, refusing to use the photocopier or the stapler for three hours, or sitting on the filing cabinet and chanting Buddhist prayers while the phone rang, you’d be out on your keester sooner than your HR manager could say, “you’re fired”.

–Apparently it’s perfectly legitimate to conduct an “industrial action” when you’re part of a union though. Last night we flew up to Sydney to have dinner with a friend visiting from the States. We flew back to Melbourne early this morning. Qantas cancelled 348 flights yesterday and more are planned today thanks to planned “industrial action” by various unions.

–Yes, yes, we know. We’re a hard-hearted jackass from the States who has no sympathy with the plight of the working man in his un-ending battle with corporate greed and over-compensated executives. Spare us the hate mail. If you must make yourself heard, you can write in to dr@dailyreckoning.com.au

–But this brings us back to the New Big Bang theory we unveiled yesterday. It’s a work in progress. But bear with us. You see, union power is part of the Cartel of Bigness too. The cartel is made up of politicians, bankers, defence contractors, and unions. They all benefit from a centralised system of Bigness.

–The central law of this Cartel of Bigness is the Iron Law of Oligarchy. This law was developed by the German writer Robert Michels in his book Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy. If you’re not planning to read the book any time soon, allow us to summarise it for you.

–The Iron Law of Oligarchy states that political power tends to concentrate in a democratic system over time. There are two reasons for this. The first reason is that those in power have a personal interest in staying there. While the rest of us are off being variously productive in order to pay our rent or our mortgage, the members of the Cartel of Bigness are able to tax, steal, coerce, or commandeer a share of your productivity in order to enrich and entrench themselves.

–Fundamentally, the oligarchs are parasites. But when a parasite is dedicated to keeping itself alive full time at your expense, and you’re too busy to do anything about it – especially when they make the laws and collect the union dues – they tend to entrench themselves more deeply in power. Call this the power of incumbency. The trick for the parasite is not to kill the host, which we’ll get to in am moment.

–The second reason democratic regimes devolve into oligarchy is that there will always exist a small fraction of mildly sociopathic people who enjoy the accumulation and exercise of power over other people. This could be legislative power, police power, or the power to speak on your behalf but without your consent. Fortunately, most people aren’t interested in telling each other how to live down to the minutest detail, or tasering those who fail to comply with given orders, or blackmailing others through “industrial action.”

–Unfortunately, the ones that are interested in bossing the rest of us around dedicate all of their time and energy to putting themselves in positions of power and staying there. They will tell you that they have higher motives like “social justice” or helping the country achieve its “manifest destiny”. They may partly believe it. But their motivation is the preservation of power and the accumulation of money and influence.

–The trouble right now for the members of the Cartel of Bigness is that the productive class is tired of being ripped off, bossed around, and taken for granted. Usually the productive class is too busy to get stirred up about anything. And usually, it can be placated, diverted, or confused into believing what’s really needed is more centralisation and more authority. You just watch this happen with the Occupy Wall Street movement.

–But for the privileged elite to retain its status and power, the productive class has to have a fundamental respect for the integrity of democratic institutions. Once this respect is lost – and it has been well and truly lost over the last three years – the parasites at the top are exposed for what they are: hopeless, rent-seeking know-it-alls in taxpayer-shareholder-dues payer-funded suits with taxpayer-shareholder-dues payer-funded pensions.

–Tomorrow, we’ll explain how we all got lost on the way to Bigdom. But don’t despair! We’ll also show that the New Big Bang, by driving us so far apart from one another, will inevitably lead us to something more natural and much better, although less big. Stay tuned.

Dan Dennning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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14 Comments on "Kingdom of Bigdom"

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David
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Dan, I am all in favour of less bigness but I can’t help thinking no-one is really protesting for less bigness, only for the bigness to be theirs, with the same people paying for it.

Joe
Guest
If Qantas is the subject of such protectionism that a flight from AUS to UK rather than UK to AUS for the same route and dates, is for a family of 4 is $4,500 more expensive booked outward from Australia, you have to wonder why the Airline including its 75%+ this year CEO is so loathe to pay their staff what they ask for or to offer them the work longevity assurances they are seeking. Since they can ACTUALLY rip the citizens of this country off with scant regard to international competition, why shouldn’t the workers expect to be part… Read more »
Greg
Guest

Great article Dan. One of your best, and I’ve been reading DR since before it came to Australia.

Ross
Guest
I’m following the winds of manifest destiny, destiny fell afoul always odorous, once sweet, now familiar and foul. Manifest Destiny rears its ugly head this week with GOP’s Romney, (courtesy of Lawrence Wittner citing his foreign policy speech) : “God did not create this country to be a nation of followers,” Romney explained. “America is not destined to be one of several equally balanced global powers.” Instead, “the United States should always retain military supremacy.” As president, he would not “wave the white flag of surrender” but, rather, “devote” himself to building “an American century.” As he explained: “The twenty-first… Read more »
Bettina Gordon
Guest
I think it is DISGUSTING for anyone to try to justify ripping aged pensioners off (yet AGAIN) with a common hackneyed comment of “life is unfair”. Let’s see YOU have to live almost on the street with no income, little food, threadbare clothes, and then ask you how your views just might have changed! It’s okay for people with top-paying jobs to treat the aged like crap off the street – but we are NOT, and we have worked many, many years, as you recognise yourself. Now we are weaker and frail, you in your high and mighty position suggest… Read more »
Richard Gordon
Guest
PLEASE leave pensioners alone! Give it a BREAK. We have worked all our lives and in our weakest and illness-prone years are expected to survive on a PITTANCE from government. I am sick to death of hearing people moan about how “MUCH” the government pays for pensions. What about the money WE paid for periods of 45 or more years? I pay high private rent which takes up 60% of my pension, and have to try to scrounge a living – food has to be cheap, lacking in adequate nutrition, and if it wasn’t for medical benefits I would be… Read more »
Biker
Guest

I read and reread this article to try to understand the final two comments here… and can only conclude that they’re in response to Dan’s phrase “…hopeless, rent-seeking know-it-alls in taxpayer-shareholder-dues payer-funded suits with taxpayer-shareholder-dues payer-funded pensions…”

In fairness to Dan, while it’s extremely difficult to know just who he’s shooting at here, it’s unlikely to be OAPs.

OAPs deserve their pensions. In fact, everyone over 65 should be entitled to a _full_ OAP, after paying tax for 40+ years. Gordon’s comments do, however, provide a very timely warning for those who believe that renting-for-life is the way-to-go… .

shortchanged
Guest
Unfortunately Dan, I think the last few comments by, it seems, pensioners, have completely misread what you mean. That it is in fact those living “high off the hog” who are the parasites in our society. Again unfortunately, some of them are politicians whom are either rejects from business, or have never had a proper job in their lives. Without qualifications or experience, they are well paid, have very luxurious working conditions and after two terms in office, can retire on a pension most would kill for. To cap it all off we, the taxpayers, fund these pensions, and here… Read more »
Biker
Guest
On the question of pensions, my retired Canadian inlaws are not penalised at all for their investments, made during the last sixty years. They receive (and deserve) quite a number of different pensions, in addition to Canada’s equivalent of our Australian OAP. We’ll personally never receive a cent in pensions, being ineligible. Can’t complain about that… it’s a great position to be in… but I sometimes wonder about the incentive-value of the Canadian system, which encourages citizens to invest, then rewards their 40 – 60 years’ endeavours with an OAP. While our Superannuation system has huge financial benefits for those… Read more »
shortchanged
Guest

Hello Biker! By the sound of it I should have emigrated to Canada, I did think of it.
To anyone who looks into it, the Australian state pension, or centrelink, as its more commonly known, is designed to keep you poor. Just what you need for the few remaining years of your life.

Biker
Guest
SC: “Australian state pension, or centrelink, as its more commonly known, is designed to keep you poor. Just what you need for the few remaining years of your life.” We came to that exact conclusion 35 years ago, SC… and planned accordingly. It may seem counter-productive to have created a portfolio which prohibits us from receiving $22.5K pa in OAP, but we’re happy to have achieved a comfortable independent retirement thanks to property, Super and cash. Yes, the Canadian system does have a lot of advantages. One benefit the Aussie system provides is tax minimisation in retirement. My inlaws do… Read more »
shortchanged
Guest

I should have had your financial acumen all those years ago, Biker, but sadly i did not. I was born in a country, and an age, when you did not question authority, as you were told, “you don’t have to worry about matters like that, we will look after you” and of course we believed them. To be growing up in the ’50s was a totally different world than today, so much so, that youngsters of today would not believe it. I should have been as cynical then, as i am now.

Biker
Guest
There’s not that much difference in our ages, SC… though I accept that we Aussies have always nurtured a larrikin spirit. At the same time, we also have some of that “…you don’t have to worry about matters like that, we will look after you…” ethos in our “She’ll be right, mate!” attitude. If I look back over the decades when we were building a foundation for future comfort in retirement, it’s evident that the factors working most against us, until we swept them off the table, were: * Financial Advisors whose fees and trailing commissions were secret until new… Read more »
shortchanged
Guest

Fair comments Biker. I came late to matters of finance, and read DR and others for interest only. It seems you are content with your situation and I wish good fortune to you and yours. I cannot complain, compared to some of my old school friends back in the old dart, i have had a good and varied life, for which I thank my adopted Country, Australia. See you again in another article.SC

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