Let's Do What Works and Call it Capitalism
By Dan Riker
Part II. Solving the Crisis of the 21st Century
"
"American history, as analyzed in Part I, shows what has brought change in the past, and it can do it again. America needs a new progressive movement. "
Chapter 1. It's Time for Outrage and Action
"The
Republican vision of how to build a future is clear. Protect tax loopholes for
millionaires and billionaires and leave everyone else to pick up the tab. Their
vision boils down to one sentence: 'I got mine, the rest of you are on your
own.'" .
- Sen.
Elizabeth Warren (D-MA), May 28, 2014 speech, Portland, OR
"...the
great special business interests too often control and corrupt the men and
methods of government for their own profit. We must drive the special interests
out of politics....every special interest is entitled to justice, but not one
is entitled to a vote in Congress, to a voice on the bench, or to
representation in any public office. The Constitution guarantees protection to
property, and we must make that promise good. But it does not give the right of
suffrage to any corporation."
-
Theodore Roosevelt, "The New Nationalism" August 31, 1910.
Nearly
two thirds of the America's population burst into the middle class in the 30
years following the end of World War II, riding an unprecedented wave of
technological progress and economic prosperity. During that time the United
States experienced the lowest disparity in wealth and income in its modern
history. Even the number of people in poverty was reduced by half. It was a
magical era for tens of millions. They lived the American Dream. Now after 30
years of conservative economic policies, many of those middle class gains have
been lost, and today's young people do not have the opportunities their parents
did. For them, the American Dream is a fading legend.
But
where is the outrage? Why are the American people so passive about what has
happened? The “Occupy” movement has shown some outrage, but with no plan of
action for anyone to follow does it actually dissipate whatever energy there is
to do something about the scandal that is contemporary American government?
Today,
the United States is in a position similar in many important ways to what the
nation was facing in 1901 and in 1933. There now is the economic disparity that
existed in the Gilded Age at the turn of the 20th Century, and again
in the 1920s, and enormous numbers of people are working in jobs that do not
provide a living wage. Government policies favoring the rich have been
implemented mostly by Republicans, but not reversed by Democrats. They include
the lowest tax rates of major Western countries on the wealthy and the big
corporations, many of which escape paying any taxes.
Meanwhile,
Republicans want to make up for the financial benefits they have provided the
rich by gutting the safety net programs that benefit the poor and the middle
class, including Medicare, Medicaid, Social Security, welfare, unemployment
compensation and food stamps. They also have stymied efforts to repair highways
and bridges, reform immigration laws, and improve the medical care of veterans.
Republicans oppose any increase in the minimum wage and they are trying to
further weaken unions. Republicans refuse to do anything about climate change,
or the nation's dependency on fossil fuels. They have blocked all efforts by
the Obama Administration to spur the economy. They repeatedly have tried to
kill the only halfway progressive program the Obama Administration managed to
get approved, the Affordable Care Act, which is providing low cost medical
insurance to millions who had no insurance previously.
The
cruelty and selfishness of the Republican agenda harken back to the depiction
of out-of-control capitalism in Upton Sinclair's The Jungle, in which
workers were interchangeable parts that could be used up and thrown away, while
the owners got rich from their labor.
The laissez-faire capitalism supported by the
wealthy and the Republican Party contains the
seeds not only of its own destruction but of the nation's as well – unbridled
avarice and greed that concentrate power and wealth in the hands of an elite
that feels no obligation to the public, or to the nation as a whole. Never has
uncontrolled capitalism been more dangerous
to more people than it is now in the era of the giant multinational corporations that no longer
identify with the nation. Indeed in his 2012 history of Exxon-Mobil, Steve Coll
quotes a former Exxon-Mobile CEO as saying his company is not an American
company: “I’m not a U.S. company and I don’t make decisions based on what’s
good for the U.S.”[1] And now,
because of Supreme Court decisions, corporate interests can spend unlimited
amounts of money on behalf of political candidates they support.
If our
nation and our people are to survive free and secure, our democratic government
must gain some control over those multinational corporations - not be
controlled by them.
Our
crisis today is more complicated than any that we have previously faced because
we never before had the loss of jobs we have suffered in the past 30 years, to
foreign competitors and offshore outsourcing, as well as to automation and
corporate consolidation. And, for the first time in our history, we have seen
the evaporation of opportunities to advance into middle class jobs from the low
paying jobs that do not provide a living wage. Middle class jobs no longer are
being created in the numbers they once were. Since the Great Recession began in
2008, the weakest job sector has been the mid-range.
In
addition, the middle class jobs being created usually require specialized
skills and/or experience, a college education, and, in some cases, even
post-graduate education. Yet the costs of college and post-graduate education
have increased dramatically, making it increasingly unattainable for millions.
In his
2014 book, Capital in the 21st Century, discussed in the
Preface, Thomas Piketty wrote that those who control capital, the wealthiest
individuals and corporations, are likely to become far richer in the 21st
Century. Much of the future wealth will be inherited and it will generate
greater returns than work. He believes that what he calls “Patrimonial
Capitalism” will make the rich so much more wealthy and powerful that they will
pose an existential risk to democratic institutions, if they are not already.
Short of violent revolution, or a global tax on capital that he proposes but
does not think is likely to be adopted universally, he does not see much of a
prospect they can be controlled.
Piketty
wrote that one of the known historic ways that wealth and income inequality
have been reduced was through expansion of knowledge and education. The incomes
of millions of “Baby Boomers” have been significantly higher than those of
their parents because so many achieved far higher levels of education. However,
Piketty pointed out that in the last 20 years, when the rich became
dramatically richer, the tuitions at elite American universities skyrocketed in
lockstep with the incomes of the rich.
“Research has shown that the proportion of college degrees earned by
children whose parents belong to the bottom two quartiles of the income
hierarchy stagnated at 10-20 percent in 1970-2010, while it rose from 40 to 80
per cent for children with parents in the top quartile. In other words,
parents' income has become an almost perfect predictor of university access.”[2]
And
Piketty added, “the average income of the parents of Harvard students is
currently about $450,000, which corresponds to the average income of the top 2
percent if the U.S. income hierarchy.”
The impact of less educational opportunity
already can be seen in social mobility, which is the lowest in the United
States in history. In fact, the United States, once the land of opportunity,
now offers less opportunity to advance than almost any other Western nation.
America now has a new type of “exceptionalism:” the majority of our people are
exceptionally worse off in most areas of modern civilization than the people of
other developed nations. Most European counties have higher educational levels,
better and less expensive health care, longer life spans, less poverty and more
social mobility, and thus, more freedom.[3]
Nobel
Prize winning economist Joseph Stiglitz is not as pessimistic as Piketty,
although his analysis of our problems is not inconsistent with that of the
French economist. Stiglitz believes that the problems of inequality of wealth
and income can be solved. In his book, The Price of Inequality, also
mentioned in the Preface, he describes how the rich have gotten much richer in
recent years:
We have created an economy and a society in which great wealth is
amassed through rent seeking, sometimes through direct transfers from the
public to the wealthy, more often through rules that allow the wealthy to
collect “rents” from the rest of society through monopoly power and other forms
of exploitation..[4]
And he added that much of the income of the top is not coming from
labor but from, “what we have called rents. These rents have moved dollars from
the bottom and middle to the top, and distorted the market to the advantage of
some and to the disadvantage of others.”[5]
And this is the issue that challenges the honesty of those who argue
for unfettered free markets. The rich do not let the markets decide their
fates. They manipulate the markets to their advantage, and try to prevent
others from doing the same. They have been doing it since the first great
“robber baron,” John Jacob Astor starting bribing public officials to gain
economic advantages and property, and employed his own private armed forces to
kill off his competitors in the fur trade.[6]
Republicans support government largesse for rich individuals and
corporations who make enormous contributions to them, but they do not want any
for the middle class and the poor. They are perfectly happy to have their
supporters receive government contracts without bidding, but they do not want
to help the long-term unemployed. This double standard hypocrisy has made
millions of Americans very cynical about their government.
Stiglitz has a long list of reforms that could end this double standard
and improve the nation's economy while reducing the inequality of income and
wealth. They include curbs on the financial industry and banking, strengthened
regulation of corporations and greater restrictions on antitrust and
monopolistic behavior, reforms of corporate governance, bankruptcy law, the tax
system and the legal system. He also wants an end to government giveaways and
hidden subsidies to corporations.
Part III contains my proposal for a national progressive program that incorporates some of Stiglitz's ideas, some that are well-known and generally supported by progressives, as well as some of my own. But how can these ideas be implemented when we have a broken political system that has both caused an enormous crisis in the nation and is incapable of solving it? That is the subject of this Part II.
What Piketty and Stiglitz both recognize, along with many others, is
that there now really is an enormous crisis. In the past 30 years the middle class has
been hollowed out, and opportunities for others to join the middle class have
been reduced. The concerted program by Republicans and their wealthy
financiers includes subversion of public education, which will further
diminish opportunity, limitations on voting rights to prevent political change,
further reductions in union rights and public employee benefits to weaken the
largest remaining stronghold of union membership, and restoration of elements
of racial and sexual discrimination of the past.
These dangers to democracy, equality, personal freedom, economic
opportunity and security are greater than anything in recent history. And to
make the situation far worse, the government cannot even begin to deal with
them because a political crisis exists today unlike any seen since the Civil
War. The political system is polarized by extreme ideologies, political, social
and religious, reflecting the deep divisions among the population. As a result,
the government is grid-locked, unable to do anything except make the situation
worse.
Why did the American people put the Republicans back in control of the
House of Representatives in 2010? Democrats did not turn out to vote in 2010
like they did in 2008 and 2012, but did they really want the Republicans able
to block Obama's programs like they have been able to do? There is an absurdity in United States with
a near majority of the people supporting a political party that operates almost
entirely against their interests because it is completely devoted to helping
the rich get richer, and has no interest in restoring the viability of the
middle class to which most of its supporters belong, or want to belong.
In a short column in the New York Times on Piketty's book, Paul Krugman
wrote, “one thing that strikes me is the remarkable extent to which American
conservatism in 2014 seems to be about defending and promoting patrimonial
capitalism even though we aren't there yet.” And he added, “In short, the GOP
is more and more a party that consistently, indeed, reflexively, supports the
interests of capital over those of labor.”[7]
Not counting the racism that has shown itself in some of the virulent
opposition to President Obama, why do millions of middle class and lower middle
class people vote Republican even through they are hurt by the party's
policies?
Perhaps the problem is that the people really have not been given a
true alternative and have not been shown how that alternative actually will
work for them. Perhaps the Democrats and Republicans are not different enough
from one another. Perhaps many people are disillusioned because they voted for
a Presidential candidate who promised “change we can believe in” but has not
changed anything truly significant. Some polls have shown Americans growing
more cynical of government and its ability to solve problems, and it is not
hard to understand that.
By the time Barack Obama finishes his second term, Democrats will have
held the Presidency for 16 of the 28 years since Ronald Reagan left office, yet
most of his conservative program that wrecked the middle class still is in
place. Not all of that can be blamed on Democrats not always controlling
Congress. The budget developed by the Progressive Caucus of the House of
Representatives, praised by many economists, including Paul Krugman and Dean
Baker, as better for the country than the budgets of either the White House, or
the Republicans, did not received even a majority of the votes of House
Democrats and no support from the Democrat in the White House. This has to
change.
The problems the nation faces today cannot and will not be solved by
private enterprise. It is going to take massive government action and large
amounts of money. It is going to take new leadership dedicated to
problem-solving.
It may be that there has not been either the right kind of dynamic
leadership to bring about the changes the nation needs, or a large enough, and
well organized enough movement for change that could be led. The ending of
legal segregation and racial discrimination in the 1960s did not come about
simply through one or two elections, or one set of protests, or through one or
two leaders. It occurred because there was an enormously well organized
movement over many years that had clear goals, determination to succeed,
incredible courage, and developed both widespread support and outstanding
leadership.
American history, as analyzed in Part I, shows what has brought change
in the past, and it can do it again. America needs a new progressive movement.
That's how real change can occur.
[1] Coll, Steve. Private Empire ExxonMobil
and American Power. New York: Penquin Press, 2012. p. 71.
[2] Piketty
p. 485.citing G. Duncan and R. Murname. Whither Opportunity? Rising
Inquality, Schools and Childrens' Life Chances, New York: Russell Sage
Foundation, 2011.
[3] Ibid, p.484.
[4] Stiglitz, p 266.
[5] Ibid p. 267.
[6] Myers, pp. 93-175.
[7] Paul Krugman. “Working for the Owners.” The
New York Times, March 22, 2014.
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