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Democracy is the system of one person one vote. Business is one dollar one vote. It would take a vivid imagination to think that the perfect scenario for a business, securing abnormal profits or a monopoly, is appropriate in a fair and democratic society. Likewise, the managers and shareholders of corporations need to be offered a reward for their time, skills and investment, otherwise there would be no motivation to take risks or to employ workers. A fair equilibrium is the logical aim.

But the two, democracy and business, co-exist uncomfortably as there is a finite amount of wealth in the economy and that wealth needs to be shared equitably between two of the three participants in any economy: individuals, (workers, consumers and taxpayers) and businesses. The third participant is the government which should not pursue wealth or power for its own benefit but should act as the moderator and facilitator, creating a scenario which allows the two other parties to prosper fairly, in correct proportion and in line with the law. To achieve this fair scenario, key governmental decision makers should not have personal interests more aligned with one group, business, than the other, society.

In periods of economic growth, when both the individual and corporations as a whole prosper, the division of wealth between the two is naturally a concern. But those concerns are magnified significantly when the economic pool of wealth is contracting. In a recession, tensions between the individual (the ‘man on the street’) and companies increase as corporations lay off staff to protect the interests of the firm’s owners. Tensions rise further when certain companies or industries receive preferential treatment at the expense of industries with less political influence or the collective society.

The onus is on the government to ensure fair allocation of stimulus and support so that both individuals and companies exit the recession together, as far as that is possible. But if the country is still struggling to recover, unemployment is rising and the average individual is still suffering whilst certain corporations are already, again, enjoying abnormal profits, then the division of wealth and the legislation that created that scenario is flawed. Also, corporate earnings can only grow quicker than GDP growth if the finite wealth of society is being re-allocated from the individual to corporations.

The past 25 years have seen the economic balance of power shift too far from the fair equilibrium. The few are benefiting at the expense of the many. Goldman Sachs (NYSE:GS) is a beneficiary. Wall Street as a whole is another beneficiary. Main St. has suffered. But the individual, the workers, the micro-engines of the economy have suffered most. Unfortunately, one dollar one vote is more popular than ever in Washington.

Disclosure: No interest.

Source: One Dollar One Vote Still Rules in Washington