How the System Works

Mrs. CF and I watch a lot of documentaries. As a lazy person it’s a great way to learn new things and get exposed to different viewpoints on certain topics. We have been watching the documentary “Requiem for the American Dream“, which explains “how the system works”,  and it is not pretty! You should be able to find this documentary on Netflix (at least in the Netherlands you can). We can highly recommend watching it. We like it so much that it currently sits on top of our list of best ever documentaries.

How the System Works
How the System Works

Requiem for the American Dream

If you have not watched this documentary, do so without knowing or looking up who Noam Chomsky is. Try to have a completely unbiased view and focus on the content in relation to FIRE. It should open your eyes and explain many phenomena and observations you may have already made. We actually watched it 3 times in the last half year or so, to actually have it all fall into place (despite it being dummied down into a documentary, you can also read the book). It’s a rather complex theory told by an intellectual, so it takes time to process. Strangely enough we did not feel that it was boring at all, on the contrary, it was very enlightening.

Chomsky uses 10 principles to explain what is currently happening within our society and explains “how the system works”. Below is a short summary of these 10 principles. We have added in our thoughts on how this interacts with FIRE and the attitude required to become FI.

The italic texts is a copy from this post. Personally think that Mr. David Swanson made a good summary here.

1. Reduce Democracy.

Chomsky finds this acted on by the very “founding fathers” of the United States, in the creation of the U.S. Senate, and in James Madison’s statement during debate over the U.S. Constitution that the new government would need to protect the wealthy from too much democracy. Chomsky finds the same theme in Aristotle but with Aristotle proposing to reduce inequality, while Madison proposed to reduce democracy. The burst of activism and democracy in the United States in the 1960s scared the protectors of wealth and privilege, and Chomsky admits that he did not anticipate the strength of the backlash through which we have been suffering since.

Most people will value democracy as it provides freedom, security and wealth to a bread section of the population (likely including me and you). But for a small and (very) wealthy portion of the population and for corporations, it generally hampers their ability to grow their wealth/profits. Democracy generally provides a distribution of wealth and a better quality of life, whereas a lack of democracy generally favors just a few. It is therefore no wonder that very wealthy individuals and corporations are systemically trying to reduce the democracy (even on a small/local scale).

As the FIRE crowd we are (happily/unknowingly?) surfing along with these changes. Simply by being invested in these corporations, and thereby indirectly also into these wealth individuals, by owning company shares and index funds.

2. Shape Ideology.

The Powell Memo from the corporate right, and the Trilateral Commission’s first ever report, called “The Crisis of Democracy,” are cited by Chomsky as roadmaps for the backlash. That report referred to an “excess of democracy,” the over engagement of young people with civic life, and the view that young people were just not receiving proper “indoctrination.” Well, there’s a problem that’s been fixed, huh?

If you have wealth, or a good market share as a company, you want to maintain this and increase it were possible (sounds familiar, right?). How much would you do to maintain your wealth? Apparently, both individuals and corporations will go far (to the point of being unethical) to maintain their wealth levels. Excess wealth is corrupting, but that should hardly be something new to you.

The trick here is to try to avoid the above noted “indoctrination”, which we as a FIRE crowd are relatively good at.

3. Redesign the Economy.

Since the 1970s the United States has been moved toward an ever larger role for financial institutions. By 2007 they “earned” 40% of corporate profits. Deregulation has produced wealth concentration and economic crashes, followed by anti-capitalist bailouts making for more wealth concentration. Offshore production has reduced workers’ pay. Alan Greenspan testified to Congress about the benefits of promoting “job insecurity” — something those Europeans in Michael Moore’s film don’t know about and might find it hard to appreciate.

To be clear, this is not a conspiracy theory rather a development generated by a desire to have more control over wealth and wealth generation. It’s a natural, albeit destructive, development in a system that revolves around money. Money makes money so ways to make (more) money will be exploited.

However, this leads to the (un)intended consequence that businesses take advantage of the average Joe/Jane. Without some government interference/control this will generally favor a few and negatively affect the majority. The next logical step for wealthy individuals and corporations is to also “control” the government. See also points 6 and 7.

4. Shift the Burden.

The American Dream in the 1950s and 60s was partly real. Both the rich and the poor got richer. Since then, we’ve seen the steady advance of what Chomsky calls the plutonomy and the precariat, that is the wealthy few who run the show and get all the new wealth, and the precarious proletariat. Back then, taxes were quite high on corporations, dividends, and wealth. Not anymore.

A reduction in corporate taxes and dividends is great news for share holders like you and me. We actually get better from it and will get to FI faster too! But realistically it is killing for a large portion of the population. Less taxes is less income for the government and thus less money for social programs like schooling, unemployment benefits, Medicare coverage, etc. See also the next point.

5. Attack Solidarity.

To go after Social Security and public education, Chomsky says, you have to drive the normal emotion of caring about others out of people’s heads. The U.S. of the 1950s was able to make college essentially free with the G.I. Bill and other public funding. Now a much wealthier United States is full of “serious” experts who claim that such a thing is impossible (and who must strictly avoid watching Michael Moore).

We are definitely becoming more individualistic in society, and I don’t believe that this is a good thing. I’ll leave out what the possible reasons might be, but the results are far from pretty. Whereas things like medical care and educations should be free to all in my mind (they are basic human rights). But also some social security for the less fortunate (which could also be you or me in a few years, life happens!).

There will be a bill to be paid for this by all of us (via taxes and/or direct payments). In a society revolving around money where people (and governments) are generally mismanaging their finances, this will became increasingly more difficult. Making sure you save up and have a financial buffer, like we do, (partially) shields you from some of these risks/developments.

6. Run the Regulators.

The 1970s saw enormous growth in lobbying. It is now routine for the interests being regulated to control the regulators, which makes things much easier on the regulated.

Lobbying is great for corporations and the agenda of few very wealthy individuals, and thus indirectly also for the majority of the FIRE crowd. But the interest of lobbying groups is definitely not for the common good! It’s also rarely based on facts or science, it’s based on (corporate) interests.

7. Engineer Elections. 

Thus we’ve seen the creation of corporate personhood, the equation of money with speech, and the lifting of all limits under Citizens United.

Look at the last few American elections, do I need to say more? This is not a democracy! This is a media spectacle without any real content orchestrated by two parties and their (wealthy/corporate) supporters and sponsors. How can the American people make an educated decision if they are only fed commercials and mud slinging? Life is not black or white, it’s grey. Compromise!

Considering compromising is not going to happen (as it is not in the interest of the supporters/sponsors), the democratic/governmental system is bound to fail (or at least being very inefficient).

8. Keep the Rabble in Line.

Here Chomsky focuses on attacks on organized labor, including the Taft Hartley Act, but one could imagine further expansions on the theme.

This is actually a very scary developments that labor rights are systematically removed. Good for cheap products and stuff, not so much for the majority of the people working in these industries. But, great way to control this section of the population and generate more profits for you and me.

9. Manufacture Consent.

Obsessive consumers are not born, they’re molded by advertising. The goal of directing people to superficial consumption as a means of keeping people in their place was explicit and has been reached. In a market economy, Chomsky says, informative advertisements would result in rational decisions. But actual advertisements provide no information and promote irrational choices. Here Chomsky is talking about, not just ads for automobiles and soap, but also election campaigns for candidates.

As the FIRE crowd we are painstakingly aware of this. We all know the tricks marketers pull to lure us to buy products (and sometimes even become debt slaves). Most of us have learned, to a certain degree, that you are actually happier with less stuff and frugal purchases. So we therefore buy less of it, which in return causes us to save more money that we invest to become (or maintain) FI. For some reason we collectively have been able to partially wrestle us from this grip of corporations. Feels good, right?

However, we still have much to learn, here is a great example:

10. Marginalize the Population.

This seems as much a result as a tactic, but it certainly has been achieved. What the public wants does not typically impact what the U.S. government does.

Think this is pretty clear, most people want good healthcare, schooling, well paid jobs, social benefits, etc.. But this is clearly not what most governments (and in particular that of the US) are actually doing for it’s citizens. However, governments are great at providing subsidies to large industries (think air traffic, transportation, agriculture, big oil, etc.) that in return benefit our shares, dividends and index funds once again.


You might think that the above is some random incoherent rambling, but if you watch the documentary things might sink into place. The inherent power by corporations and wealthy individuals is really influencing politics/governments (via fund raising and lobbying) and therefore general policy. This will in return make life more expensive and difficult for large potions of the population.

However, for people like you and my that are aspiring for FI, this is great news as our investments will do very well. But for society (and the environment) as a whole it is very detrimental and will certainly cause issues in the future. Despite being on the path to FIRE, we are still part of society and will be affected. This is important to keep in mind.

What I found most interesting is the fact that the FIRE community partially sees through the system and uses it to their own benefits. I’m just afraid that it might turn around at some point and bite us in the @$$.

What do you think? if you watched the documentary, what did you think about it? If you didn’t watch it (yet), do you recognize elements in this post in your situation or country? Curious to know your thoughts.


  1. Very interesting! I really like these kind of subjects, so the documentary is high on my watch list (haven’t watched it yet). The thing that interest me most, especially in connection to the FIRE community, is that the system is most often not too blame (being bad or good) but in how people are using it that makes all the difference.

    1. I’m not pointing fingers here, just merely pointing out the flaws in the system and the way we indeed can benefit from the system as it is.

  2. Thx for the tip. Saw the interesting docu last night. Same shit in Belgium. This morning the people who run Belgium decided taxes for large corporations go from 34 to 25% and the smaller ones from 25 to 20%. For the working class they got new taxes of course.

  3. So many thoughts… First off, never confuse this documentary with the movie “Requiem For A Dream”. I watched it at a theatre and had to leave in the middle because I left had a panic attack! That movie was nutty!! But back to the doc… Shift the burden is a necessary but difficult notion. I think it is instinct to want to help others but, as ties in with #5, not at the cost of hurting yourself financially. We are very much in a me me me world (speaking from a US perspective). I often dream of living in a world where the outside can’t touch me. Off grid, away from the crazy. And then I realize for an outsider to see me would think I was the crazy one!

  4. Sounds like a good documentary to watch. A pitty I don’t have Netflix.

    About the system, is it flawless? Absolutely not. But that doesn’t permit us from profiting in the best way we see fit. It’s not bad and I think everybody should do it. Does it change? It can happen. You never know. That doesn’t mean we have to stay on the sidelines, does it? 🙂

    1. Here is an interesting thought: we are fighting and using the system at the same time. We are using it with our investments, but are fighting it with being frugal and living intentionally (i.e. less consumption). If we all would start to do this, most corporate profits will likely plummet and certain industries would collapse, leading to an overall market crash that will affect our investments too. Egoistic thought: Better hope the majority of mankind won’t figure this out…… As to the survival of our species and our planet, better hope they (partially) do, as continued consumption is unsustainable.

  5. I do have some guilt over this as well. We are betting with out investing that this will continue. But what if it doesn’t and there will be a big crash?

    1. I’m less worried as to what will happen during a big crash, as there most likely will be a recovery, simply because we cannot do without this system (yet). I’m more worried if the system implodes and will lead to civil unrest at some point. But honestly, we are probably far away from this scenario.

  6. I’ve watched it. It’s been a while so I should probably rewatch it. One of the things I think will happen, due to the increasing chasm between the poor and rich, is that at some point there’ll be an uprising. An Arab Spring type event, but in the Western world too. Especially as more and more jobs are taken away by AI and automation. This should accelerate the activism around this, among the general population. So the only thing I can think of, is in order to placate society, there’ll be some sort of universal income for each citizen so that everyone’s basic needs are taken care of.

    1. Not a bad suggestion of a universal income, guess we should tax AI and automation to generate the income for this? I would agree that at some point, if inequality becomes even bigger, there will be an uprising. But this could still be decades or longer away. In the mean time, guess it’s not a bad idea to use this flawed system to our advantage and become FI, what do you think?

  7. ‘What I found most interesting is the fact that the FIRE community partially sees through the system and uses it to their own benefits’
    That is just the great advantage of the system and too my actually contradicts the point Noam Chomsky is trying to make with this documentary. If a lazy ass sloth like me can achieve financial freedom then everybody can do it. And a system where everybody can achieve financial freedom after about 20 years of working is a pretty good system in my book!

    When still at university I had a girlfriend who liked Chomsky a lot. And since I liked the girlfriend a lot I read a few of his books back then. Frankly I thought the man to be an idiot and in the following 20 years he has done or said nothing to convince me otherwise. He is too ideologically blind (anarcho-syndicalism and libertarian socialism, really?) to view the world how it really is, which leads to the use of wrong premises which off course lead to wrong conclusions. But hey, he has been able to sell a lot off books with it for all of his live so kudos to him I guess?

    1. Right, so your argument is that the system works well, really? Using a flawed system to your advantage is not the same as saying the system works well! You are a highly educated and smart person (lazy or not), most people will never come close to what you could achieve in life if you put your effort into it, FI included.
      Kind of surprised about your reaction to Chomsky, as he appear to be (and I have not read his books) one of the most highly regarded intellectuals of our time. You might not agree with him, and that is fine, but to call him an idiot is not really showing much respect nor does it prove your point. Neither is the comment about him selling books, pretty sure he is not in it for the money.
      In all fairness, I think that he really understands the system well and has a world of data and research to prove his points.

    2. O, it is a flawed system. It’s also the best system there is in the world at present (and with system I mean the western capitalistic democratic system in broad terms, from New Zealand, Australia, Western Europe and North America. So there is a wide variety within it, you can pick the flavor you like the most). Can it be improved upon: without a doubt! Will anything Noam Chomsky ever wrote improve upon it? Nope (well, for 98% nope, even a broken clock is right 2 times a day). He is probably a n excellent linguistic but as far as his activism goes, he is an idiot. But then again, most activists are idiots. Then again, I am a male, chauvinistic and capitalistic pig (and a lazy sloth thrown in for good measure). Perhaps I am the one blinded by my own ideological viewpoint to see the world how it really is … On the other hand, my grandfather had to go help on a farm from a young age just so he had food and he was able to make a decent live in our system. Both my parents only went to school till they were 16 years old and never knew anything about investing. They are now both comfortably retired with a decent stash of their own, all within the system. Like I said, the best in the world at present …

      1. “Then again, I am a male, chauvinistic and capitalistic pig (and a lazy sloth thrown in for good measure).” yes you are 😉
        Guess we have to agree to disagree on a couple of points, but that keeps the whole thing interesting for sure.

    3. Just like fysicists use the large hadron collider to speed up particles and have them collide with each other to make new discoveries it is from colliding viewpoints that new insights are gained …

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