American Billionaires: Never mind our influence on public policy, just remember that this is how economics works

This is one of my favorite videos on YouTube. The man behind the podium is Eben Moglen, professor of law and legal history at Columbia University, and is the founder, Director-Counsel and Chairman of Software Freedom Law Center. At the time that video was made, Microsoft had just conclude a controversial deal with Novell that gave certain protection from patent litigation for Novell's business Linux software that other Linux distributions could not get.

That video is actually pretty funny and I laughed out loud the first time I watched it. I appreciate Moglen for his measured choice of words and his sense of humor. If you haven't seen it, take a few minutes to watch it. If you're into Linux, patents and a dash of law, you'll like it. Even if you're not, you'll probably get most of the jokes. But underneath all of the humor is a very subtle, very serious point which I'll get to later.

At the time of recording for that video, Microsoft was claiming that Linux had violated more than 200 patents owned by Microsoft but, for obvious reasons, Microsoft was not willing to identify those patents. The purpose of this strategy was to create fear, uncertainty and doubt about using Linux in business applications. If anything, Microsoft's strategy makes it clear just how much they feared Linux and it's potential power disrupt the markets that Microsoft once dominated or that Microsoft missed altogether (think smart phones). Today, Linux is ubiquitous. You can find it in TVs, Chromebooks, even watches. Linux dominates the server world, particularly web applications servers.

It seems that at the time, Microsoft couldn't stop people from using Linux and their gambit to compel paid, per processor licensing by their proxy The SCO Group, was not going well. Microsoft thought they couldn't compete against free as in beer, nor free as in freedom.

So Microsoft used this ploy with Novell to discourage developers from contributing code that was used in Linux distributions. The problem with Microsoft's plan was that it had the effect of dividing the two major constituencies of the Linux project, users (customers) and developers and setting them against each other as adversaries. Moglen summed up the situation well when he said:

If you undermine community defenses to give peace to your customers at the expense of your developers, you undermine the entire ecology.

We see this happening in American capitalism on a massive scale. Very large businesses have been hard at work undermining the power of the middle class in their never ending quest for lower wages for the benefit of the shareholders. To rephrase what Eben Moglen was saying to fit the context of this article, it would read like this:

If you undermine community defenses to give peace to employers at the expense of employees, you undermine the entire economy.

The problem with this behavior is that the very act of undermining the power of the middle class also reduces support for the upper class and for the poor. After all, if we're invaded, who will fight for you? It is the middle class that supports the entire system for if they have no money, there is no economy to work with. And if the billionaire class can find a way to get everyone else at odds with each other, they will pretty much be leave be left alone with their wealth and no one else will notice what they're doing.

The wealthy American elitist will use their extra money for long term investments, keeping it locked away. Any money that the wealthy believe they can afford to lose, will be used in speculation in the markets and to purchase political favors. Usually, those political favors have more to do with setting others at a disadvantage than actually enhancing the power of the middle class and the ecology, or the economy.

Economies are ecologies. Every component works together to make a whole. Weaken one component, and then the demands of the advantaged class, become greater, stronger. More security, more regulation, more enforcement. Sure, you might hear some billionaire talk a good game about "freedom" and "free markets", but if you look closely, you'll find that most billionaires are sitting on top of a well regulated monopoly, with very high barriers to entry in the market.

All of this is very well documented all over the internet. There are literally thousands upon thousands of articles on wealth inequality in the United States. The best article that I've found to document what has happened is The 9.9 percent is the new American aristocracy, by Matt Steward at the Atlantic. In it, you'll find a very good overview of economic history, a story of how the middle class got crushed by the top 0.1% and their vassals, the 9.9%. For a more detailed account of what happened, check out a book by Dean Baker, Rigged:
How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. It's a free PDF online, too.

Another interesting feature of this story is that the wealthy will talk about what happened as if this is how the economy works. And they will omit the part about how much influence they have on public policy by virtue of their money, rather than the virtue of their ideas. When I used to watch news shows and public debate shows (think Fox, CNBC, even PBS), there was very little discussion about political influence. It was all spoken as if this is just how the economy works. No one ever said, the economy works this way because that is how the wealthy wrote the rules.

I'm not here to say that there is anything wrong with wealth, or being wealthy. If you worked hard and you earned what you earned, good on you. I'm here to say, you can't use your wealth to write the rules that increase your wealth at the expense of everyone else, and then claim that's how the economy works. Unfortunately, that's exactly how modern American capitalism works.

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