Why Capitalism Thrives–and how it self-destructs

Defend Democratic Capitalism!

Vote for any Democrat...

...because we need a majority to control the legislative agenda. Most Democrats believe in true capitalism, the kind of economy that benefits the wealthy, the middle class and the poor. That’s how the federal government managed capitalism and its free markets between 1932 and 1980, when it effectively balanced the interests of both investors and workers.

Our federal government’s sensible economic policies—regulatory, fiscal and monetary—during that period created a large number of wealthy investors, the biggest and most affluent middle class in history, and a reasonably prosperous poor.

To defeat any Republican...

...because when a Republican majority controls the legislative agenda, they freeze Democrats out. Most of today's Republicans are closet aristocrats. They use a pseudo "capitalism" as a cover for their version of an economic system that destroys the middle class and creates a new class of royalty.

Theirs is the capitalism that created the wealth disparity of the 1920s and that we've had since1980. The 1920s enriched the top 1% at the direct expense of the bottom 99%, and caused the Great Depression. Since 1980, Republicans have been destroying the middle class and are creating the next depression.

News media interviews and debates about election 2022 issues usually result in meaningless sound bites and economic clichés. They are designed to increase viewer ratings. The debates, especially, are often limited to 3 minute comments in order to appeal to the 90% of voters with a short attention span. Forget about any serious discussion in the national media about the most important issues facing our nation’s economy.

This website is for the 10% who want to understand our actual economic history and what has made our country the success that it still is—at least for now.  You’re also the 10% who, over the long term, can affect the voting of the bottom 90% through your day-to-day communications.

To explore this theme further, go to Political campaigns, and how Schlitz put “gusto” into its beer.

Republicans are today’s anti-capitalists, and they are destroying the world’s greatest economy

Capitalism, as it has been sold to the American public, is an economic system that benefits the wealthy, the middle class and the poor. It has lasting qualities because it benefits a total society.

It not only allows individuals to rise from poverty to affluence, but it also enables most citizens to achieve a decent standard of living relative to their station in society. The U.S. was progressing in that direction from, roughly, 1932 to 1980. Roosevelt’s New Deal and a succession of progressive federal governments gave our capitalist system the necessary tools for success.

Since 1980, however, Republican and conservative Democrat politicians have been doing their short-sighted best to destroy this system. Their motivation is to maximize corporate profits and investor returns by keeping a lid on labor costs, and they have been incredibly successful. In effect, they have created a pseudo-capitalism, or what has become known as “vulture” or “crony” capitalism.

U.S. economic priority #1:
An effective industrial policy

Leaders of both major political parties, conservative economists, and apologists for America’s investors are in major denial. They refuse to admit that the past 40 years of globalization have been a disaster for our economy. Our abandonment of any semblance of an industrial policy  has affected mostly those Americans who actually work for a living. Eventually, it’ll be a disaster for everyone, even the investors who have benefitted from it.

There’s NO way our assembly-line workers, engineers, scientists, accountants, architects, etc. can—or should be forced to—compete with workers in countries like China, India, Mexico, and Indonesia, who are making one tenth to one fourth as much income.

From its very beginning, globalization (not the same as traditional international trade) has been a deliberate strategy to maximize corporate profits by keeping a lid on labor costs. And the best way to do that is to expand the labor supply to include the whole world.

It’s a big issue, so check it out here.

Taxes, entitlements and regulations are essential to capitalism

Social Security, Medicare and Medicaid are not “socialist” programs. They are essential ingredients of a capitalist economy that works as intended. Entitlements such as these compensate for the unavoidable disasters of fate and the inevitable failures of a free market to adequately reward honest work.

In the same way, minimum wages and government protections of the rights of labor to organize and collective bargain are not “communist” actions. They are essential to the development and maintenance of a thriving middle class in a capitalist economy. Labor legislation, such as the Fair Labor Standards Act of 1938, gave more balance in the power relationship between employers and workers. Workers actually were enabled to get a fairer share of their own productivity. Result: less money was hoarded in bank accounts and more money entered the economy.

Regulations of the financial industry restrained the ruinous risk taking of overly ambitious bankers. Federal minimum environmental standards prevented corporations from transferring some of their costs of production onto the taxpayer (toxic waste cleanup and loss of natural resources). Progressive income taxes ensured that those who benefitted most from our country’s economy, infrastructure, and federal fiscal policies also paid the most to support them.

Closet aristocrats and pseudo-capitalism

Throughout our entire history closet aristocrats have used “capitalism” as a cover for their support of an economy that creates a business class of royalty. Their pseudo capitalism always comes at the expense of everyone lower on the economic ladder. Since 1980 they’ve been increasingly successful, and their plans to “save” entitlements like Social Security are to fundamentally change their nature.

When progressive Democrats talk of reforming entitlements, they’re talking about eliminating fraud and waste, and making sure the programs benefit the citizens they are supposed to.

On the other hand, when Republicans and Blue Dog Democrats talk about reforming entitlements, they are talking about reducing or eliminating benefits, even to those who need them.  In other words, they want to eliminate the entitlements’ historical roles in making our capitalist system successful.  In their view, entitlement expenses (taxes) lessen their ability, and divine right, to enjoy their royalty status.

If the voting public was ever confused which politicians actually believe in true capitalism (one that works as it did for most of the past century when America built its middle class)—and which ones are closet aristocrats—recent Congressional debates should have removed all doubt.

The much ballyhooed fact that the richest Americans pay the most tax is close to irrelevant. How could it be otherwise if it were not for the fact that they make the most money and the bottom half of the population is broke, or worse, after meeting the expenses of daily living? What is most relevant is how much wealth people have after they have paid their taxes.  And who, incidentally, caused the government economic policies that favored the wealthy and powerful, at the direct expense of everyone else?

It’s Déjà vu all over again

We’re repeating the conditions that caused the Great Depression. In 1929 the top 10% of Americans made 49.3% of all income. They had received a succession of three significant tax reductions during the previous decade, middle-income Americans had lost their purchasing power, and investors had no incentives to finance new businesses. Of course, many fortunes were made by those investors who still had most of the money, by buying bankrupt businesses and real estate.  The same thing is happening today, as investors who made out like bandits before the economy bubble popped, and who can pay cash to purchase forclosed houses.

In 2007, the top 10% made 49.7% of total income. Closet aristocrat politicians were again successful in giving huge tax breaks to the wealthy and, in addition, they forced America’s workers to compete with the lowest paid workers in the world. Again, middle-income Americans are tapped out of purchasing power and our richest investors have no incentives to invest in this country. Anyone watching the guru advice on the cable financial channels knows that sophisticated investors should put much of their money into gold or silver, or the developing world—and less in  the U.S.

So, 1929 turned into an economic disaster and our economy today is looking frighteningly similar. We’ve abandoned the kind of capitalism we had from 1932 to 1980, when the federal government reversed the economic policies of the Twenties. Between 1932 and 1980, the top 10% made only 32-37% of total income, and the increasing prosperity of middle-income Americans made financing new businesses in this country attractive to investors.

At this point, anti-capitalist Republicans are still winning, and it’s way past time to replace closet aristocrats with genuine capitalist Democrats.

Check out Ian Fletcher’s excellent book about America’s disastrous adoption of free trade without a sensible industrial policy. It is Free Trade Doesn’t Work. He was an Adjunct Fellow at the US Business & Industry Council at the time he wrote it.

Free Trade Doesn't Work
The biased conservative
financial press

Read what America's five most prestigious financial publications, The Wall Street Journal, Forbes, Fortune, Barron’s and Bloomberg Business Week have been reporting over the years.

If you didn't before, you'll now understand the anti-worker agenda of America's Republicans and conservative Democrats. (more...)

The most Important
Two-Minute Video...

...for election 2020. Voters have been thoroughly conned into believing absurd economic myths. This video was instrumental in convincing even unionized workers into voting for Republicans and against their own best interests.

Republican think tanks are making massive use of this same propaganda technique today: using hafl-truths to tell deliberate lies. (more...)

Republicans and blue dog Democrats have abandoned traditional U.S. values...

...for those of countries like Mexico, China and India. Globalization (unregulated international trade) is a deliberate strategy to give corporations the power to pit nations against each other.

It’s worked beautifully up to now—for investors and corporate executives—but it’s becoming a disaster for everyone else. (more...)