Creating and sustaining a nation of zombies is expensive.
Large sections of the US population have been turned into zombies. Retirees. Medicare dependents. Food stamp recipients. Disabled people. They are not necessarily bad people. They are not necessarily dishonest or lazy. But rather than add to wealth, they consume it. And when you have too many of them, your society consumes more wealth than it produces and you are on the road to The Downside.
But the feds are not only creating individual zombies, they are also creating corporate zombies. An obvious example: “green” energy. Without subsidies, loan guarantees, tax benefits and direct giveaways, the industry as we know it would not exist. Nor would the ethanol industry in the Midwest. Nor the security industry in the Northern Virginia suburbs of Washington, DC.
The financial industry too, as we know it, would not exist either. Much of it would have been swept away in the financial storm of 2008-09. That story is well-known, but not well understood. Most people believe the authorities acted heroically, saving the nation from a depression. But what the authorities really did was to take the public’s money and give it to cronies on Wall Street in order to prevent them from suffering the losses they deserved. The government transferred nearly $2 trillion in various forms from the public purse to the pockets of the financial industry. With that kind of backing, most of the old investment firms survived. The new ones that might have replaced them never saw the light of day.
Industries need to be sustained by the government when they cannot sustain themselves. This is practically the definition of “malinvestment” — putting capital and energy into investments that don’t pay off. When an industry is only profitable with government backing it means that the industry uses resources — labor, energy, raw materials — and turns them into finished products that are worth less than the inputs required to make them. The more of these zombie industries the government supports, the poorer the society becomes.
“Rentier” is a French word that has leaked into English. It doesn’t mean zombie literally, but it describes people who have found a way to exploit the system for their own benefit — people who have legal entitlements to income streams. In other words, “rentier” describes a class of folks who contribute absolutely nothing to national prosperity — zombies.
Before the French Revolution, favored groups were able to secure special privileges and monopolies giving them the right to income. For example, the people from whom we bought our first house in France had a monopoly on the importation of tobacco from the New World. I don’t know who granted this monopoly, but typically it was the monarchy. And typically, such monopolies were given away either to appease a potential adversary or simply to raise cash for the crown by selling off a stream of future income.
The French crown was always short of funds. It found it could raise substantial sums by selling the right to earn a “rent.” It might sell the right to collect tolls on a highway or a river, for example. Or it might sell the right to collect taxes (thereby getting its own tax revenue up-front and letting the rentier deal with the hazards of collection).
Any official document needed an official stamp. Naturally, the crown sold off the right to stamp documents. If you wanted to make a business deal, buy or sell land, or get married, you had to pay the person with the stamp.
Over time, the rentier class grew larger and harder to support. More and more of the kingdom’s energy went to support what was essentially a group of parasites who produced nothing. This is part of the explanation for the French Revolution. The system became so inefficient and was made so fragile by waste that a relatively minor setback — a couple years of bad harvests — caused widespread hunger and revolt.
In modern, developed societies “rents” come in many forms. They are often granted to favored groups in exchange for political support. Old people vote, for example. Political parties seek their votes by promising ever-larger health and retirement benefits. Rich people make campaign contributions. Politicians typically grant them favors too.
By the close of 2012, there were zombies everywhere. Throw a cream pie from almost any street-corner and you were almost certain to hit one in the face. If the street-corner were in Washington, DC, you’d probably hit two or three of them.
A recent report in The Wall Street Journal confirmed that zombies don’t work very hard. The Bureau of Labor Statistics has been compiling detailed data on how people use their time. Researchers tracked how many hours people slept, ate, watched TV and worked. And guess what? They found that federal government employees put in 3.8 fewer 40-hour weeks than employees in the private sector. Here, the cost of zombification is clear: if the zombies were forced to work the same hours as people in the private sector, the government would save $130 billion a year.
Meanwhile, over in the pentagon, R. Jeffrey Smith had his eye on the zombies too:
Of the many facts that have come to light in the scandal involving former CIA director David H. Petraeus, among the most curious was that during his days as a four-star general, he was once escorted by 28 police motorcycles as he traveled from his Central Command headquarters in Tampa to socialite Jill Kelley’s mansion. Although most of his trips did not involve a presidential-size convoy, the scandal has prompted new scrutiny of the imperial trappings that come with a senior general’s lifestyle.
The commanders who lead the nation’s military services and those who oversee troops around the world enjoy an array of perquisites befitting a billionaire, including executive jets, palatial homes, drivers, security guards and aides to carry their bags, press their uniforms and track their schedules in 10-minute increments. Their food is prepared by gourmet chefs. If they want music with their dinner parties, their staff can summon a string quartet or a choir.
The elite regional commanders who preside over large swaths of the planet don’t have to settle for Gulfstream V jets. They each have a C-40, the military equivalent of a Boeing 737, some of which are configured with beds.
And then, even after they retire…the zombies keep feeding off the productive sector:
Updating a 2010 Boston Globe report that documented the practice, CREW found that over the last three years, 70 percent of the 108 three-and-four star generals and admirals who retired “took jobs with defense contractors or consultants.”
As Sen. Claire McCaskill, D-Mo., put it during a 2009 hearing on Obama’s nomination of former Raytheon executive William Lynn to become the deputy secretary of defense, “it’s an incestuous business, what’s going on in terms of the defense contractors and the Pentagon and the highest levels of our military.”
During the Presidential campaign, Mitt Romney mentioned that 47% of American households now receive some form of support from the government. In a better democracy, none of those people should vote. They all have a conflict of interest. They should admit that they find it difficult to separate their own personal interests from those of the nation and abstain from casting a ballot. Instead, they “vote their own pocketbooks” — usually coming down on the side of diverting more resources from the productive sector to their own personal consumption.
The zombies corrupt the system. The march to Stalingrad continues. And the Downside takes over.
Bill Bonnerfor The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010.
But aren’t these rents similar to annuities? I give you a sum of money and you pay it back to me, in installments, the form of the tribute you collect from those with whom you (or, by your leave, I) do business. The Social Security recipient who now, as an annuitant, draws an income, which he or she consumes, is receiving a return of the capital, with interest, that he or she has paid for the annuity. The analogy breaks down in that these annuities are socialized. In the words of the folk song, “All God’s children have a place in the choir,” the problem being, of course, that “some sing low and some sing higher.” Here’s the crux: the distortions of the malinvestments preventing an accurate assessment, over time, of the proper interest rate on which the initial investment should be returned.
Yet isn’t the first order of business to secure profits from investment whether that investment be in the form of goods and services or favoritism and influence? Why should a value-neutral, profit maximizing entrepreneur devote his or her capital and efforts to building a better mousetrap when the return, from a better mousetrap, may be less than the return to be gained by greasing the political utility pole? We have met yon Cassius, with his lean and hungry look, and lo and behold, he looks just like us! So we don’t escape the socialization of capital after all.
Really getting sick of articles like this putting “retirees” up as sucking money from government. In my 30s, I tried to remove myself from the Social Security program. I was told in no uncertain terms that I would be jailed if I didn’t continue to let them take my money “for my own future good.” I have been self-employed most of my life, so have contributed BOTH sides of the withholding, so double the whammy. Social Security is solvent, except for the criminals in government who have stolen from it over the years.
SO, HERE’S MY OFFER. JUST GIVE ME BACK RIGHT NOW WHAT I’VE PUT IN PLUS 2% INTEREST COMPOUNDED ANNUALLY, AND I’LL DISAPPEAR TO ANOTHER COUNTRY AND NOT REQUIRE ANY MEDICARE OR SOCIAL SECURITY DOLLARS.
OTHERWISE, IT’S OWED TO ME, AND I WANT IT EVERY MONTH!
Dear retiree, you have been robbed. Sorry. You don’t have the right to rob me or my kids because you were robbed. You have sown the wind and now we all will reap the whirlwind.
Bill is the best writer on the web. His wit and style are second to none. I know Bill watches the hit T.V. show the Walking Dead because it is about Zombies. In the show, the living are constantly elminating the Zombies, but there are always more and more, consuming all (even the dogs and cats, since there are none on the show) that get in their path. The same is true of our Zombie culture. They will consume everything until the U.S. resembles the Walking Dead.
I’ve tried to avoid reading Bill Bonner’s pontifications for years now, but he is addictive.
Not just because he agrees with me, but we all are titillated by danger….. at a perceived distance.
Now it is serious. The Barbarians ARE at the gates.
Now I’ll not be able to sleep at all.
AND for my younger American friends, go read this: (Why should I be the only one not sleeping well anymore?)
That was cold. But so right! Smartest thing I read this week. Just because the Greatest Generation took a suckers bet doesn’t mean I have to pay up on it. They should have been busy about the kings business cleaning out the corrupt politicians. Whatever generation does that will be my Favorite Generation. I’m ready to go, who’s with me?
Just because the government stole money from the last generation and blew it, doesn’t give that generation the right to steal from the next one.
Bill, it seems you use a very peculiar dictionary for your defintion of “rentier”. The American Heritage Dictionary defines it as “A person who lives on income from property or investments.” Even the French Wikipedia defines it as “un individu qui vit de ses rentes” (a individual who lives from his/her rents). Both definitions seem more applicable to yourself than to zombies.
“Rent” (the noun) means the income from an investment (especially property); more obscurely, it is the past participle of “to rend”, meaning to tear into pieces. Which pretty well describes what happened when too many “rentiers” were rent by the French Revolution. Will we see the same? Perhaps there is a future for Guillotine makers.
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This is true. I don’t have the right to rob you because I was robbed. And you don’t have to let yourself be robbed. So: how do you propose to defend yourself or are you just going to whine?
Jim, The courts have ruled. They owe you nothing. Get used to it.
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Tell me about it. I didn”t realize there were so many zombies until I came to work in America. Actually most really are not disabled people. If you can read, type on a keyboard and click a mouse then you can work. I’m sure most of these “disabled” people just choose not to work, or at worst just need a little training to find employment.
I have paid into the Social Security system now for 47 years and am 1.5 years from full retirement at age 66. I and my employers have paid into the system about $140,000 which is not nearly as much as some folks have paid, I know. I am supposed to receive about $1,800/month so it will take about 7 years to get my money back, and after that it would be considered earnings on the investment? If it just get my money back, I’ll be happy!
They promised us too much and expanded the program too much–more than they can pay. And they used the funds to pay for other stuff. If I did that to my employees, I’d be put in jail.
I guess it’s the price of putting so much faith in government, rather than taking care of ourselves. Although we had no choice.
In fairness, it should be noted that most of the problem is simple demographics. People are living 20 year longer on average than when the system started. And they stopped having so many children, and aborted 54 million of them since Roe v Wade. More takers and fewer payers than anticipated.
I have read articles recently that there were lawsuits about SS and basically, the courts ruled they/govt does not even have to pay it back and they can change the laws around it at their will. It was just a law that allowed the theft of our money, like they all are. taxes should be on consumption/corporations only, not individuals. Tax on individuals is just slavery.
“…An obvious example: “green” energy. Without subsidies, loan guarantees, tax benefits and direct giveaways, the industry as we know it would not exist…” This was, and still is, true of the Nuclear Energy business long before the first Earth Day. Has Bill every pointed this radioactive zombie out?!
Honestly I don’t know and don’t wish to presume but the point is that the public good is what is in question while private profit is held up as some sort of panacea.
Bill, have you become a Zombie? Is that why this page have become the extremely occasional reckoning?
P.S. Wealth is meant to be consumed. That is why if is created in the first place.
Retirees have earned “claim checks” on goods and services and are entilted to spend their claim checks. Did you forget that a main purpose of Agora is to teach people how to invest so that someday they can live off their money instead of hand to mouth?
Will someone, anyone, please drop a nuke on the State-of-the-Union Address this year. This tyranny must end.
Well, I’m glad to know that at least 47% of the populace receives some benefit from the government. I would hate to think the government spent 2 trillion a year without anyone benefiting.
But for the benefit of anyone not paying close attention the past 30 years, here’s how the economy has evolved: Massive increases in productivity, some of it very real, has pretty much wiped-out entire sectors of the labor force rendering it redundant. We actually produce far more with much less human input than we did even 20 years ago. Unfortunately, most of the net benefit has been captured by corporations and by extension their owners, hence the wide skew in income disparity which has only accelerated the past 10 years or so. If it’s no longer necessary for someone to produce a good or service because of increases in productivity, why should it be necessary for everyone to work in order to collect on the net benefit? The only other option being a zero net gain for the population as a whole while the super-rich collect an ever larger share of the nation’s output.
Bill…. Bill …. BILL…it’s time to wake up and post something…
A rentier (pronounced /ˈrɒnti.eɪ/ or /rɑ̃ˈtjeɪ/) is a person or entity that receives income derived from economic rents, which can include income from patents, copyrights, real estate etc. So not a state parasite as Mr Bonner claims – these people PAY taxes!
Why are you all fighting about retirees stealing from the next generation when all generations have been robbed by the politicians, not by each other? If Soc. Sec. payments stopped now and the ‘next’ generation just paid for their future benefits there still wouldn’t be any, because the politicians of both parties would have stolen it to buy votes all over again.
At last the zombie specialist is back in business, detailing zombie characteristics in great length. As per your post, it could literally be understood zombies are especially rampant over there. UN has not by now listed zombies as one of the endangered species.
No one should worry about their survivorship. For those zombie-lovers, they may keep one or two zombies at home as pet provided their whereabout are monitored round the clock.
Zombies are no ordinary tamed cats or dogs. They are of free moral style, responding
actively to monetary cash and kind, suitable to be employed as mercenary in any regional
conflict. Ideally, it is most inhuman to raise any local or foreign zombies in great numbers.
Embarking in large scale zombie farming whether intensively or extensively is most uncalled for. With more stringent zombie control your constitution could be saved. Let us prevent
zombie from spreading worldwide. If it is not checked. zombiles could even, one day occupy the entire socialist politburo. The agenda should be put on the alert and even above
all other disarmament treaty. Maybe, internationally, among nations, it is imperative to get
the long awaited zombie proliferation treaty endorsed.
It *IS POSSIBLE* to print money and give it to consumers. It works mathematically. Imagine fully automated factories requiring one human, the owner. His income would need to be taxed at 95% and that tax re-circulated to consumers later.
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The quack policy that was good for stock owners in North America turned out even better for those in Japan.
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In places like Mongolia or Myanmar, for example, you find today’s Dakota Territory.