Why Capitalism Thrives–and how it self-destructs


When America’s decline began

Republicans were wrong when they said that President Obama made the economy get worse after George Bush got us into unnecessary wars and gave huge tax cuts for the wealthy. The economy has actually getting worse since 1980, when President Reagan took our country’s economy on a hard turn to the right.

At a 1982 Republican congressional dinner, President Reagan famously said: “We’re the party that wants to see an America in which people can still get rich”—as though people hadn’t been getting rich enough in the previous five decades under more progressive governments.


The Chicago Boys

In the early 1980s, Milton Friedman and the “Chicago boys” (libertarian economists from the University of Chicago) convinced Reagan, Margaret Thatcher and other world leaders that corporations weren’t profitable enough, and that their taxes and labor costs were too high. This led to international agreements that gave tax breaks to corporations operating in foreign countries, and allowed them to abandon their own higher paid local workers in favor of lower paid workers in other countries.

These changes contributed in the “fabulous” economy of the ’80s: soaring corporate profits, a great stock market, a rapidly expanding wealthy class—and stagnant or declining working class wages relative to inflation.


To make matters worse, in 1992, Bill Clinton and a coalition of Republicans and conservative Democrats gave us NAFTA, which turned a trickle of industries leaving our country into a giant sucking sound, as the unfairly ridiculed H. Ross Perot correctly predicted. Today, corporations’ freedom to abandon American communities and workers and outsource to those countries with the lowest wages and worst working conditions has given them total control over how new advancements in technology and productivity are shared.

As a result of globalization, workers are virtually powerless to negotiate for higher wages or decent working conditions, even during a time of exploding productivity. In addition, corporate executives and their investors want all the benefits of scientific advancements and new technology for themselves. They feel no obligation to share with workers, even those who, over many years of service, were responsible for their previous successes in this country.

Today, if technology doubles the productivity of workers, they don’t see their pay increase or their working conditions improve—half of them get fired. They then enter the labor market and exert further downward pressures on general wage levels.

In addition, America’s pro-wealth, anti-labor coalition makes sure that the descendants of the established wealthy are better educated, better financed, and better positioned to take advantage of the economic environment that they set the rules for. They’re doing everything they can to cut funding for tax supported public education, unemployment insurance, Social Security, Medicare and Medicaid.

Of course, they pay more taxes than the bottom 50% of citizens. After all, they’re the only ones with any money left after they’ve met the expenses of daily living. They use this fact to justify their belief that wealth, social position and political power should be inherited, and that future taxes should be paid only by those who work for income. According to them, there should be no taxes on inheritance, capital gains, and or dividends, and workers should be grateful for whatever wealth trickles down to them from the job creators.


Admittedly, the ideological war between the economic elites and everyone else didn’t start in 1980 with Ronald Reagan. It’s been going on since the beginning of time and it’s been present throughout our entire national history.  However, for a relatively brief period, roughly 1932 to 1980, working class citizens of a large country actually gained some parity between themselves and those who controlled its government and its economy.


Republican closet aristocrats consider that period of history an anomoly that shouldn’t be repeated. Democrats believe that, with the proper government fiscal and monetary policies, it can again be achieved.


Different economic ideologies create different sets of winners and losers.  Republican views will benefit some classes of people at the expense of others, and Democrats’ will do the same.  To see who benefits and who loses in each case, go to Brief-3 here or from the top menu.


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