Two commonly held myths have prevented the American public from electing politicians who will objectively solve our coming economic disaster.
Apologists for the wealthy and powerful have conned voters into believing that “class war” is when liberals try to make people envious of the rich. This leads directly to the second con: redistribution of wealth not only penalizes success and is unjust, it destroys the ability of wealthy investors to finance new and existing businesses.
The historical record
And what has history told us about the decline of previously thriving societies? Is the major cause a lack of money in the hands of investors? Or, is it the lack of money in the hands of customers?
There seems to be two schools of thought on this subject. One consists of conservative economists and policians like:
- Milton Friedman, who wrote Capitalism and Freedom.
- Amity Shlaes, who wrote The Forgotten Man, a New History of the Great Depression. (At least Shlaes admints she is revising history.)
- Senator Jim DeMint, who wrote Saving Freedom. (Check out the file How Senator Jim Demint revises history.)
Their version of a healthy economy is one in which investors have a lot of money and they have total freedom to use it as they wish. Their fundamental theory is that wealth (money) trickles down, and the more money the wealthy make, the more it trickles down to everyone else. Conservative economists judge an economy on the bases of money and businesses making profits.
- Is the stock market going up or down?
- Are housing prices increasing or decreasing?
- Are investors getting richer or poorer?
- Is the gross domestic product stagnant or growing?
Sure, they’re concerned about unemployment and wage levels, but only to the extent that they affect business profits. Their “capitalism” is an economic system in which people can become incredibly wealthy by buying and selling securities, properties, things, and services—while paying workers as little as possible. And they are willing to risk destroying the nation’s economy to achieve their goals (unregulated international trade is the classic example).
The other school of thought consists of legitimate historians like:
- Arnold Toynbee, who wrote the 12 volume study of the rise and fall of civilizations, A Study of History
- Will and Ariel Durant, who wrote the 11 volume, The Story of Civilization and
- T.H. Watkins, who wrote The Great Depression
Historians, on the other hand, consider these same variables, but they also think it is important to note how a society’s productivity is shared by its various classes:
- Is the growing disparity of income and wealth between the rich and the middle-class-and-poor becoming dangerously large?
- Is the upward mobility of citizens at all levels increasing or decreasing?
- How are minorities faring in the society?
- What is the power relationship between investors and workers?
Legitimate historians believe that wealth (products and services) is sucked up (my words, not theirs). Workers are the ones who produce true wealth, and the extent to which they get a share of the wealth they produce is determined by how much political clout they have with the government that regulates, or deregulates, the economy.
Our present economic meltdown
Today, conservative economists are advising investors not to panic, and to buy stocks of companies that seem immune to degenerating conditions in the U.S. After all, corporate profits are making records and their coffers are filled with cash. Investors the world over have made massive profits over the past thirty years and are loaded with money and they’re looking for places to put it—other than in the U.S. whose wages are still the highest in the world.
Those who rely on traditional historians take a different view. Arnold Toynbee noted that one of the first signs of national decline is that the elites, however they are defined, take too much of their society’s productivity. Will and Ariel Durant observed that unregulated economic markets always result in a growing disparity of wealth between rich and poor. When the disparity gets too great, there is always a revolution. If the revolution is violent, as in the French Revolution, wealth is destroyed and everyone is worse off. If done peacefully, as in the New Deal, wealth is preserved but redistributed.
T.H. Watkins specifically addressed the Great Depression and observed that in 1929 there was too much money in the bank accounts of too few people, and the masses ran out of the purchasing power needed to keep the economy growing. In addition, unregulated banks had turned our financial system into a casino and it resulted in an economic meltdown.
How we got out of the Great Depression
We got out of the depression when WWII gave a pro-worker President and Congress the persuasive clout to redistribute the wealth from investors—who had abandoned the economy—to previously tapped-out consumers. They implemented all kinds of progressive taxes on the wealthy and used the money to create a massive job creation industry.