Will Obama Reboot Capitalism Anew?
Over six million people are now out of work, and unemployment figures released today show that now-record number is continuing to climb. Meanwhile, still-profitable American corporations manufacture goods for American consumption using Chinese labor and pay virtually no income tax by keeping their profits offshore.
A hundred years ago, Republican President Theodore Roosevelt tried to reign in some of the most toxic behaviors of capitalists that he found incompatible with modern democracy by pushing thro
ugh congress a law that banned the practice of corporations giving money to politicians. He slowed down the robber barons a bit, but three consecutive Republican presidents in the 1920s led us straight into the Republican Great Depression.
osevelt, his distant cousin, rebooted capitalism in the 1930s, ushering in an era of regulated capitalism - embraced by Republicans like Eisenhower and Democrats like JFK - that b
rought us the largest, strongest, and most stable middle class ever seen. We also became the world's economic superpower, as the world's largest importer of raw materials, exporter of finished goods, and banker to the world. We imported iron ore and exported televisions and cars and washing machines. The rest of the world was in debt to us. A worker with a high school diploma could find a job that paid enough to raise a family and have a safe and comfortable retirement.
The Reagan Revolution of the 1980s was the third "rebooting" of capitalism in the 20th Century, and continues to this day. Scorning the "regulated" part of "regulated capitalism," economic Reaganites from the Gipper himself to GHW Bush to Bill Clinton to GW Bush flipped our economy upside down. Today, after just thirty years of "free trade" and "right to work" and other oxymoronic nostrums applied as policy, we've become the world's largest importer of finished goods and the world's largest debtor. We now export minerals to Asia, and import back from them televisions, cars, and washing machines.
At the moment, nobody knows.
Reagan began the war on working people when he busted PATCO in the first year of his administration, and then began the process - largely uninterrupted right up to a few months ago - of dismantling the protections organized labor had enjoyed since the New Deal. When Bill Clinton totally abandoned the national industrial policy that Alexander Hamilton had put into place in 1791 with NAFTA, GATT, and the WTO, we made the shift from a "Made in the USA" to a "Do you want fries with that?" economy. And the near-total deregulation of the commodities (including energy) and financial sectors begun in the last years of the Clinton administration and put on steroids by Republicans during the GW Bush administration led to a shift from a "Do you want fries with that?" economy to a "How much would you like to borrow from us?" economy.
Now the manufacturing jobs are shipped overseas, and we're left with lousy jobs and maxed out of credit cards. Many of the few manufacturing jobs that will be created by the Obama stimulus plan will be done in American factories, but the profits will go back to Denmark, Japan, Norway, and other countries whose "green" companies are buying or building our manufacturing facilities.
All of this seems just fine with the Summers and Geithners of the world, and many of the Democrats who rolled over in the face of Republican opposition to the "Buy American" provision that was thus and then removed from the Stimulus bill. "Cheap credit" seems like a goal rather than a warning. And, tragically, several democratic senators have already signaled their fealty to the Robber Barons by refusing to endorse the Employee Free Choice Act.
One can only hope that - like the Obama reversal on the possibility of prosecution of Bush war criminals - our new president will change course and take us back to a "Made in the USA" economy. Like Franklin Roosevelt famously (and perhaps apocryphally) said, perhaps Obama is waiting for us to pressure him to "Make me do it."
This is a well-meaning article, but rebooting the system will require much more that mere regulation and redistribution; the system is fatally flawed, and requires comprehensive, fundamental, structural reform. Anything but this will not do the job, and we will be revisiting these repeated crises all over again.
Think about this basic inconsistency of the present system: financially the world is living on drafts upon the future (the credit/debt-money system); economically it is living on the products of the past. Without having to go into mathematical proofs, the empirical evidence shows that the resulting effects of this are:
1. total prices increase at a faster rate than incomes are distributed to pay them;
2. the increasing shortfall is filled with increasing accumulations of debt.
This is the reason why current levels of debt are about (at least) 1.5 times more than the amount of money, and the divergence is growing.
This is obviously an impossible situation; over time it can only get more impossible, until at some point it becomes terminal.
It is a tragic game of cat-and-mouse, except the mouse (income; money) is trying to chase the cat (prices; debt)! The cat keeps getting bigger relative to the mouse, and at some point the cat will turn and swallow the mouse whole.
The root cause of this unsustainable and terminal situation is the credit/debt-money-creation mechanism, what was traditionally called 'fractional reserve banking'; this is the snake in the house, which must be gotten rid of, otherwise it will keep biting, and eventually kill all the inhabitants.
The debt-money machine is a Terminator; it is automatic and set to destroy humanity. We made it, we have to change it.
Regulating a Terminator machine without changing the way it works is obviously not a solution.
There are many so-called monetary reform proposals which suggest doing everything and anything but get the snake out of the house.
The only serious monetary reform solution I am aware of for the USA is the American Monetary Act, developed by the American Monetary Institute, and based on the research of over 3,000 years of history, i.e. based on the facts of human experience. This draft legislation contains the 3 essential elements of meaningful reform that will deliver a lasting solution:
1. It restores the monetary system to society, but does NOT nationalize the banking system (this would be very dangerous; combining the present banking system with the law-making system could risk a totalitarian tyranny).
2. It keeps banks doing banking, but stops banks from being able to create money using 'fractional reserve' methods (this is what always brings us to repeated crises).
3. It introduces additional money into the economy in beneficial and accountable ways (this means what is physically possible and socially desirable can always be made financial possible, without fuss or favor).
I trust you will be able to see the vital importance of making this solution known to as many people as possible.
I wasn't sure where to write this, so I added it here. Yesterday, after hearing about Sen. Collins'/ Republicans' action to delete pandemic funding from the last budget bill, I called our illustrious MN Rep. Michele Bachmann with the following spontaneous rhyme. I know it's not Whitman, but it gets the message across:
An Ode to Michele Bachmann
Mercury, arsenic and the swine flu
are part of nature too.
They're still not good for you,
just like CO2!
I believe just before I got back here at work you said that you were the only person out there really challenging the hedge funds in regards to holding Chrysler hostage. I wanted to let you know that yesterday after a flu-briefing to the State of Michigan, Governor Jennifer Grandholm called out those same hedge funds and named three specifically; Oppenheimer was one of them but I cannot remember the others. After only a minute or so they cut her off (ABC local affiliate). I don't know if it was on purpose.
I decided this morning to look into finding more info on this and see who was reporting on it. The only report I found in the short time I had was out of Italy.
Kudos to you and Gov. Granholm - keep up the good fight - we sre out here waiting for our chance. Keep giving us the tools.
This is my first attempt at joining the discussion. I hope I am doing it correctly. 3 things on my mind.
Last week I was in the grocery store and struck a conversation with a woman who told me she and her husband were retired and not sure how they would survive the coming hard times especially since they were on Soc Sec and were not going to get a cost of living increase for 3 years. So I tried to do the 'win the water cooler war' thing and mentioned corporate raider and reckless betting with our retirements and tax structering etc ( I didn't have time for much but thanx to Thom I had some ideas ready to hand) She told me that people who make the top 1% and pay proportionately tiny rate of tax 'deserve it because they worked hard and earned it.' I asked her if she thought the AIG guys who got bailed out and then got the bonuses 'deserved it' and she said 'they were an extreme case and we would agree to disagree' . She had her grocery bags loaded up and left so that was the end of our mini debate. but I have been stuck on it for days. And it occurred to me the issue for her and Why someone would speak and think and work against their own interest was that maybe she thought it was some Horatio Alger sort of 'America Land of Opportunity' and that she might 'Get Lucky' and succeed BIG too.
The other two things are some books. As Thom was speaking about world population and birth control I wanted to tell you about a very good book called
'Fatal Misconception ;The Struggle to Control World Population' by Matthew Connolly
And another book I just read called "The Alchemy of Air' by Thomas Hager about the Haber Bosch Process. Maybe if you haven't already done so one or both of there authors might be guests on the show.
Thanks to Thom and all the Thom H. team, you guys are inspiring me to step up and speak out even though I have been deeply cynical about the politcal process and my place in it.
Our (United States) economic problems are rooted in need to adjust into a workable world economy based upon true entrepreneurial capitalism rather than the predatory version that presently rules the world system. We need a universal currency and a standardized labor value world wide. With a universally accepted labor/management/owner bill of rights based upon the best of any system now in existence, most of the economic problems that face the world, the United States included, would be solved. Anything less than this is only a patch to a global problem.
Anyone who has observed the economic challenges being faced by the European Union would know that the United States is struggling with similar economic problems. They would also observe that the EU constitution is a modern version of our own constitution. We both have the the right "rules on the side of the barn" (Orwell's, Animal Farm). We just need to apply them, and ask the rest of the world to follow the example.
tracey darling - Are you aware of what proportion of tax the top 1% pay in federal income taxes? For the tax year 2006, the top 1% of income earners paid 39.89% of all federal income taxes. For the same year, the top 5% of earners provided 60.14% of all federal income taxes. The bottom 50% shouldered 2.99% of the burden.
So how exactly are "the rich" not paying their fair share?
Another important piece of legislation to protect our economy is to reinstate usury laws. The reason it is important to limit the amount of interest that can be charged, is that when it is unlimited, people in jobs that are just pushing money around can make outrageous profits that it's not possible to match in manufacturing businesses, thus unbalancing our economic spectrum in favor of financial fictions over real manufacturing, which then dies because "you can't make any money at it". The problem is you can make too much money at financial speculation, so it wins. We must limit what can be made in the financial businesses to an equivalent of what can be made in manufacturing if we want anyone to do manufacturing.
Usury is also a religious issue: it is forbidden in the Bible (and the Koran), so we should be able to get the Religious Right behind reinstating usury laws also, if we approach it correctly. Can you imagine it? A coalition of the left and right against the neocons? :-)
tracey darling -- You quoted your encounter in the grocery store as as saying, "‘deserve it because they worked hard and earned it.’"
I want to point out that I don't think those CEOs and other executives didn't work any harder, and in many cases less hard, than the workers in the business making far less money. They are not being paid for their "hard work", they are being paid for their connections, egos, fancy educations, and ability to bullsh*t in a job interview. Much of that means they are being paid for already having money. They are Economic Royalty.
In 1776 we changed the world by choosing to make our new country led by The People, instead of just another monarchy. It's time we complete what we started in 1776, and make business democratic too.
sorry about the bad grammar -- I didn't proofread, and should have.
Kim - Regarding your idea about usury laws, I have a similar proposal. We should limit the salaries of actors too. They're pretty much just talking and moving around, and if we don't limit their outrageous salaries, it will unbalance our economic spectrum in favor of play acting over real manufacturing. Manufacturing will then die, because "you can't make any money at it." We must limit what can be made in the acting businesses to an equivalent of what can be made in manufacturing if we want anyone to do manufacturing.
Oh, never mind. It actually sounds like a silly idea, now that I've written it out. How could the money actors make have any possible effect on the profitability of manufacturing?
Remember that Obama asked his supporters to "keep the pressure on him" when he got into office. Right now is what he means! He is now inside the power bubble and is no longer the activist candidate for president. this is the time when public pressure will have to be the tool that ends the Wall Street bailouts and shift the momentum to the Main Street bailout. If the money had been given to the working poor, it would return to the economy 3 fold instead of moving offshore, to numbered swiss accounts and Saudi Arabia. Time to wake up and smell the coffee. Enough is enough!
I have a good way for you to illustrate your explanation of taxes and wages.
Many people have at one time or another worked in restaurants. And, as you know, servers in restaurants do not get paid a full minimum wage. This is done why?
Because it is assumed that the server will make up for it and then some in tips.
This is the same principle you're applying to wages and taxes. An employer knows what the tax rate is, knows what you're making and what you're willing to work for. If taxes are higher--or, if tipping were suddenly outlawed--the employer knows he'll have to dish out a higher wage. It sort of works the same way and is a good way to explain your concept.
Thank you. You're my #1 talker.
Brady B. Bonk