Why Capitalism Thrives–and how it self-destructs

How Sen. Jim DeMint revised history

Every voter should read Senator Jim DeMint’s book, Saving Freedom. Sen. DeMint is the leading Republican supporter of the Tea Party, and is poster boy for those who remember the history of the United States that never was.

On page 34 he accurately describes one part of American history:

After World War II, America was on top of the world. Our powerful economic and military machines saved the world from tyranny and ushered in a generation of peace and prosperity. By the end of World War II, the country possessed nearly two-thirds of the world’s gold reserves and more than half its entire manufacturing capacity.  In 1947, the United States by itself accounted for one-third of the world exports.  Its foreign trade balance was comfortably in the black…

The United States achieved the self-sufficiency and freedom of action George Washington hoped for: “to give it, humanly speaking, the command of its own fortunes.”

After giving this historically accurate accounting of what happened to our economy from 1941 and 1947—and unintentionally describing how we got out of the Great Depression—he then totally reversed direction on the next page:

As power began to concentrate in Washington, DC., and the federal government began to take an ever-expanding role in planning and controlling more of our culture and economy, America began to transition from a wealthy and independent nation to one now characterized by debt and dependency.

(Note:  according to Demint, when the federal government had almost total control of the economy from 1941 to 1947, it achieved “the self-sufficiency and freedom of action George Washington hoped for,” and “command of its own fortunes.”  This is the direct opposite of where we are now.)



Historical distortion via omission

Through omission, he thus implied that America was on top of the world because of the kinds of economic policies he recommended throughout the rest of his book: lower taxes for everyone, total reliance on the private sector for economic stimulus, the elimination of government regulations, and the downsizing of entitlement programs like Social Security, Medicare and Medicaid. He then specifically claimed that America began its decline after 1948 because it abandoned those policies.

What does history actually record? During and after World War II—from 1941 to 1948—we emerged from the Great Depression and began the biggest economic expansion in world history. How?

Actual history of the U.S.

In 1941, the federal government raised the top income tax to 91%, where it remained for the next 20 years, and instituted an excess corporate profits tax. Taxes on inheritances, dividends and capital gains were the highest of the century. During the first three years of the war, government deficit-spent seven times the amount it spent during the entire eight years of the New Deal.

The federal government took unemployed people off the streets and paid for their military service, and created millions of good-paying jobs in the defense industry and their support industries. The government stopped the production of cars for the private sector and coordinated the production of airplanes, tanks, guns, etc. It rationed everything from sugar to automobile tires. That’s how government—by stimulating an economy that had been abandoned by investors—began the creation of the biggest and most prosperous middle class in history.



Senator DeMint’s perversion of U.S. History

Sen. DeMint’s contention that government became more intrusive after 1948 and restricted the freedoms of individuals and businesses is opposite reality. In 1947, a coalition of Republicans and conservative Democrats passed the Taft-Hartley Act over President Harry Truman’s veto. The rationale given at the time was that it was ok for government to control the economy during wartime, but in peacetime it should get out of the way and allow the free market to work its magic. After all, it was said, corporations know more about how to create a good economy than do government bureaucrats.

A key provision of the legislation allowed individual states to pass “right to work” laws, which enabled them to keep unions—and their high wages and worker protections—from entering them. This thinly disguised bit of legislation gave corporations the ability to pit states against each other in offering the lowest wages and fewest worker protections. Thus began the exodus of industries from the non-right-to-work states of the North and Northeast to the right-to-work states of the South and West.

Of course, workers in the right-to-work states benefited from the influx of industries to their areas, but it was at the expense of workers in areas that lost industries. The biggest beneficiaries were the corporate executives and their investors as they increased profits by reducing overall labor costs. Fortunately, because of federal minimum wage and worker protection laws, there were barebones limits placed on states’ ability to compete in the race to the bottom.

The disaster of NAFTA

NAFTA and the proliferation of free-trade agreements are today’s global equivalent of the Taft-Hartley Act. Taft-Hartley gave corporations the power to pit our states against each other, but free-market globalization gives them the power to pit nations against each other. Unfortunately, there is no world government to set barebones limits on the extent to which nations can offer low wages and the fewest worker protections. Again, although some of the world’s workers temporarily benefit at the expense of other workers, the biggest beneficiaries are the corporate executives and their investors.

(Again, If you want to know which political ideology you should support in the coming election, a good place to start is to critically read Sen. DeMint’s Saving Freedom, and compare it to the views of actual historians like T. H. Watkins, The Great Depression, and the Durants’ The Lessons of History. They’re light years apart and both views can’t be right.)


Voters’ should note: Republicans have consistently voted in favor of free market international trade agreements. They and Senator DeMint are following the same pro-wealth, anti-worker political agenda, and they support the same kinds of  legislation that destroys a legitimate capitalist economy. 

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