Economy of Innovation

President Bush says that regulatory reform of the financial sector should allow for innovation. The general suggestion is that regulation of industry and markets stifles innovation, including financials.

That is incorrect.

First, innovation is likely to occur where the capital is, and if the capital is allowed to concentrate as much as it is (not spreading the wealth around), then innovative ways to produce profit without growth are assured, has occured, and has resulted in general crisis.

Innovative ways to prevent crisis (optimal investment), instead of causing crisis, requires spreading the wealth around, or deconsolidating the capital.

Regulation can also produce innovation to control externalities, like pollution. Unfortunately, the capital is so consolidated, the innovation is resisted, considered a cost, not a benefit, so it suffers deficient investment (economic growth) and tends to be exported along with the jobs associated with it.

Neo-conservatives opt to keep the regulatory authority proactively cooperative, acquiescent, and a sycophantic satrapy organized to give the abuses of consolidated power the legitimacy of public authority, and to reactively manage the risk, the cost, to a minimum.

For the financial sector, the lack of regulatory authority produced negative innovations that are now being dealt with as negative externalities to be crisis-managed by the regulatory authority.

The negative externalities are the product of extreme misfeasance if not malfeasance of a public/private power structure called "The Iron Triangle." It is the bureaucratic model of power and political economy and it yielded a competence for corruption because its power is so huge and concentrated (non-pluralistic). The result is a systematic, structural, failure not seen since the Great Depression.

There is no reason to believe switching this bureaucratic form of power to a socialist legitimacy will be any less corrupt, and here is where the conservative rhetoric is focused to instill fear, loathing, and logical fallacy.

What needs to be innovative about the financial sector?

Innovative ways to lure consolidated capital out of its horded haunts yields crisis. We have incontrovertible empirical proof of that by living it now, but McCain still wants us to "believe" that innovation of leverage finance, encouraging it with a highly regressive tax code, will "create wealth." No, it creates crisis!

According to McCain, and what has proven to be a greedy, malfeasant, neo-conservative cohort, ensuring a very clear means of verifying class distinction drives productivity, innovation, and wealth. The argument is that if we do not subsidize the rich to stay rich, by not spreading the wealth around, we will suffer the effects of socialism--low productivity.

Policies and programs that encourage innovation of financial instruments yields low productivity and economic growth with the empirical proof of the current crisis. The employment we have had has been mostly to confirm ensuring class society of rich and poor so that we will be productive by exporting our good paying non-service jobs. A service economy, that is, an economy of servitude was created. Being assured A 2.50 an hour job serving food is not the model of innovative financing that assures creating the wealth. What it does assure is consolidation of the wealth and a workforce structurally enslaved to serve it up.

Mr. McCain and Mrs. Palin... NO THANKS!

We need our financial sector to very simply finance innovation of productivity in the marketplace. If the talent we have now--greedy, self-involved, incapable of seeing past their self-interest and the consciousness of their class--cannot identify the entrepreneurial talent that will pluralize the marketplace and cause productive capacity, full employment and low inflation, then let's get those that will, and we know all too well that will not be the party of McCain and neo-conservatives.