Before arriving in Moscow we had heard of the corruption still thriving in Russia, how those of power in the former regime, members of the Duma, the managers of government-owned enterprise, politicians in the communist party, higher-ups in the KGB, people of influence in the Kremlin, landed on their feet in the new democracy.
They grabbed hold on nearly instant wealth by assuming ownership of government-owned utilities, businesses, and organizations. This is gain not made by prowess and hard work, not carved out of freshly birthed ideas, not built stone on stone, not crafted and tested and crafted again until the work is valued and freely chosen by a discerning public. This is the gain of monopoly practice, of force into a system where there is but one source for essential life needs. (By the way, there are bright spots in Russia of people providing real service and innovative products.)
This is easy street where money flows to those in the club, not based on inherent value, superior service, or uncommon invention but on membership and chains of influence. This is not an indictment of Russia alone or Ephraim of the Old Testament. He’s not the only one to pick up on unjust gain. We all like the something-for-nothing idea. “Free” is still one of the strongest marketing words available.
Nothing shows the propensity to extort on a grander scale than the present economic system at work worldwide. If the obstacles to graft in defense contracts, pulling commission off each bottle of imported alcohol, or forming an oil cartel have already been conquered, what really is next? What can the mind conceive and the technology allow? Why go for small potatoes? What if past success and present greed leads to the question, “How could each and every transaction be imposed upon? How could a cut be extracted no matter what the product or service whether the exchange was country to country, business to business or even person to person?”
In order to get a cut on all alcohol imports, for example, the transactions must go through the approved source. Since in matters of extortion the one in control offers no real value, this has usually been done by creating certain monopolies through government force. The mafia does the same as they impose their own force and enforcement in order to gain money without delivering value. They always mount a value façade such as protection from bad guys. Politicians who own a stake in the brick company will enact a law that all homes must be made of brick. Their value façade is providing quality construction because the ignorant would prefer houses that fall down. Extortion works by scraping off a portion of each transaction as it passes by without expending any real effort. In these structures, money flows to the positions of power not to the vendors of value.
If the think-big goal is to extract a commission on all transactions, a fundamental principle must be found. It must be common to all exchanges and it must be susceptible to some sort of control. And ideally, it will be less visible than the average scheme. What is this common principle?
It is money. Barter, of course, is possible but terribly inefficient. People need money. What do we have now that we have never had in centuries past? We have, on a worldwide basis, country by country, the use of worthless paper currency. It has no inherent value, is not redeemable for any commodity of value, not gold, not silver, not shells or nails or buttons. If you take your paper to the bank to trade for a valuable medium of exchange you will get more paper. I have recently traded dollars for rubles and British pounds. I always ended up with paper backed only by the faith in the government that issued it.
Today’s currencies have two chief characteristics: 1) having no inherent value they can be created instantly in limitless supply and 2) governments demand that they be used ‘for all debts public and private’.
Yes, we can exchange our paper for goods. But ask yourself, how can billions and even trillions (that’s a lot) be given overnight to governments and banks? Where does this money come from? What kind of value can it have? It cannot be based in any commodity such as gold for that would take work and time and the means of production and wages and real value creation. The only value the mandated ‘money’ can hold is the limit of its supply.
But let’s get back to extortion – it’s a fun subject. How do the creators of the money scrape off their cut? Each time the supply is increased, meaning the quantity of money is inflated (like blowing up a balloon) the value of each unit (like the dollar) becomes less. This inflation eventually causes prices to increase. (Inflation is not the price increase it is the cause of the price increase). When prices go up wages usually don’t which means everyone loses buying power, everyone except those who get the surge of money first. Those would be the governments and the banks. (Have you ever seen a bailout equally handed out to each citizen?)
Think of the Europeans who have just sent massive bailout money to Greece and now to Spain. The euro has been inflated (increased in supply) and family by family the Europeans will pay for these bailouts as prices increase without a corresponding increase in wages. Value is being extorted from each individual by those who dump the worthless money on the economy. They get use of the new money first, we get it last.
It is quite a brilliant scheme. The mechanism is not very visible and people get to blaming the free market, political parties, and even each other instead of the creators of the money. Through government force there is a monopoly on money with no restraint on its supply. That is how the ‘dream’ of getting a commission on each transaction country by country and ultimately worldwide has been realized. Sound too fantastic? It is not fantastic at all. It is a natural extension of the mechanisms that have been in use for centuries.
Does the greed of mankind have any bounds? We love to extort.