Expanding the Pie

Financial reform relies heavily on the technical expertise of a bureaucratic elite that span the boundary between business and government (the bureaucratic model of power and poilitical economy). It is a combined corporate (a practical, operational model) that defines the problem and, therefore, the solution.

Identifying the decisional model in operation provides a high degree of predictive utility. The bureaucratic model combines the expertise of elite authority with public process. While the results validate, rather than legitimately confirm, Hamiltonian hypotheses, like the wealth will trickle down to provide the general welfare, the validation occurs by means of legitimate due process.
The empirical legitimacy of pluralism is absorbed into the false utility of an authoritarian regime that is exclusively capable of resolving an organized complexity.

Non-elits are not only incapable of determining a proper resolution, they are incapable of criticizing the competence of the managerial elite.

Accountability under an authoritarian regime is less a function of empirical measure than a game of confidence. It is not a facile accounting that can be directly acted on in a facile manner, like in a free-market economy in which disconfirmed hypotheses fail without bringing down the whole system.

Accountability that relies on an elitist, Hamiltonian, decisional model validates hypotheses by an appeal to authority rather than confirming them by an empirically ontological process of legitimacy. The model accumulates errors and risk, and will not bring down the entire system on confidence of the very best authority (empowered by what is too big, and too important, to fail by default of system).

As it is now, for example, we have low inflation with high unemployment because the pie, rather than expanding, is consolidating. Now that there are signs of growth, the Fed is hinting at raising the interest rate which will dampen inflation, and growth. Without growth there are no jobs to "demand" the economy out of the recessionary trend. The trend will, instead, be reversed on "command."

If the economy is financed for expansion rather than consolidation, markets tend to be saturated and experience a disinflationary, rather than a deflationary, declining rate of profit. The distinction is absolutely essential.

A deflationary decline presents as inflation and unemployment with the deflation aspect being more a consolidation of assets--wealth--than reduction of prices. Disinflation, on the other hand, allows for the demand-support--the price control--necessary to keep the economy out of recession, preventing the consolidation of wealth that feeds a deflationary trend marked more by unemployment than a reduction in prices.

In a disinflationary free-market environment, rather than a deflationary consolidation of the marketplace, the market share is won with the fittest to survive left standing by popular consent (demand) of consumers (an ontological legitimacy of democratic process). Winning the market share, rather than consolidating it, then determines the profit margin, and the consumer, rather than paying whatever a big corporate commands, has the "discretionary" income available to bid prices in a disinflationary manner. Power is shifted from the corporate to the consumer, exactly what the corporate wants to avoid by consolidating the marketplace. (That is why the proposed health care plan is not likely to reduce costs, because it does not empower the consumer.)

If the regulatory authority is not empowering the consumer, contrary to the conventional wisdom of expanding economies of scale, the pie will not expand and the risk will not be dissipated but will accumulate with market share.