Solving the Crisis of the 21st Century. Part II, Chapter 1 of Let's Do What Works and Call it Capitalism
By Dan Riker
Part II. Solving the Crisis of the 21st Century
"Never has uncontrolled capitalism been more dangerous to more people than it is now in the era of the giant multinational corporations that no longer identify with the nation."
"American history, as analyzed in Part I, shows what has brought change in the past, and it can do it again. America needs a new progressive movement. "CHAPTER 1. IT'S TIME FOR OUTRAGE AND ACTION
"The Republican vision of how to build a future is clear. Protect tax loopholes for millionaires and billionaires and leave everyone else to pick up the tab. Their vision boils down to one sentence: 'I got mine, the rest of you are on your own.'"- Sen. Elizabeth Warren (D-MA), May 28, 2014 speech, Portland, OR
"...the great special business interests too often control and corrupt the men and methods of government for their own profit. We must drive the special interests out of politics....every special interest is entitled to justice, but not one is entitled to a vote in Congress, to a voice on the bench, or to representation in any public office. The Constitution guarantees protection to property, and we must make that promise good. But it does not give the right of suffrage to any corporation."Nearly two thirds of the America's population burst into the middle class in the 30 years following the end of World War II, riding an unprecedented wave of technological progress and economic prosperity. During that time the United States experienced the lowest disparity in wealth and income in its modern history. Even the number of people in poverty was reduced by half. It was a magical era for tens of millions. They lived the American Dream. Now after 30 years of conservative economic policies, many of those middle class gains have been lost, and today's young people do not have the opportunities their parents did. For them, the American Dream is a fading legend.- Theodore Roosevelt, "The New Nationalism" August 31, 1910.
But where is the outrage? Why are the American people so passive about what has happened? The “Occupy” movement has shown some outrage, but with no plan of action for anyone to follow does it actually dissipate whatever energy there is to do something about the scandal that is contemporary American government?
Today, the United States is in a position similar in many important ways to what the nation was facing in 1901 and in 1933. There now is the economic disparity that existed in the Gilded Age at the turn of the 20th Century, and again in the 1920s, and enormous numbers of people are working in jobs that do not provide a living wage. Government policies favoring the rich have been implemented mostly by Republicans, but not reversed by Democrats. They include the lowest tax rates of major Western countries on the wealthy and the big corporations, many of which escape paying any taxes.
Meanwhile, Republicans want to make up for the financial benefits they have provided the rich by gutting the safety net programs that benefit the poor and the middle class, including Medicare, Medicaid, Social Security, welfare, unemployment compensation and food stamps. They also have stymied efforts to repair highways and bridges, reform immigration laws, and improve the medical care of veterans. Republicans oppose any increase in the minimum wage and they are trying to further weaken unions. Republicans refuse to do anything about climate change, or the nation's dependency on fossil fuels. They have blocked all efforts by the Obama Administration to spur the economy. They repeatedly have tried to kill the only halfway progressive program the Obama Administration managed to get approved, the Affordable Care Act, which is providing low cost medical insurance to millions who had no insurance previously.
The cruelty and selfishness of the Republican agenda harken back to the depiction of out-of-control capitalism in Upton Sinclair's The Jungle, in which workers were interchangeable parts that could be used up and thrown away, while the owners got rich from their labor.
The laissez-faire capitalism supported by the wealthy and the Republican Party contains the seeds not only of its own destruction but of the nation's as well – unbridled avarice and greed that concentrate power and wealth in the hands of an elite that feels no obligation to the public, or to the nation as a whole. Never has uncontrolled capitalism been more dangerous to more people than it is now in the era of the giant multinational corporations that no longer identify with the nation. Indeed in his 2012 history of Exxon-Mobil, Steve Coll quotes a former Exxon-Mobile CEO as saying his company is not an American company: “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.”[1] And now, because of Supreme Court decisions, corporate interests can spend unlimited amounts of money on behalf of political candidates they support.
If our nation and our people are to survive free and secure, our democratic government must gain some control over those multinational corporations - not be controlled by them.
Our crisis today is more complicated than any that we have previously faced because we never before had the loss of jobs we have suffered in the past 30 years, to foreign competitors and offshore outsourcing, as well as to automation and corporate consolidation. And, for the first time in our history, we have seen the evaporation of opportunities to advance into middle class jobs from the low paying jobs that do not provide a living wage. Middle class jobs no longer are being created in the numbers they once were. Since the Great Recession began in 2008, the weakest job sector has been the mid-range.
In addition, the middle class jobs being created usually require specialized skills and/or experience, a college education, and, in some cases, even post-graduate education. Yet the costs of college and post-graduate education have increased dramatically, making it increasingly unattainable for millions.
In his 2014 book, Capital in the Twenty-First Century, discussed in the Preface, Thomas Piketty wrote that those who control capital, the wealthiest individuals and corporations, are likely to become far richer in the 21st Century. Much of the future wealth will be inherited and it will generate greater returns than work. He believes that what he calls “Patrimonial Capitalism” will make the rich so much more wealthy and powerful that they will pose an existential risk to democratic institutions, if they are not already. Short of violent revolution, or a global tax on capital that he proposes but does not think is likely to be adopted universally, he does not see much of a prospect they can be controlled.
Piketty wrote that one of the known historic ways that wealth and income inequality have been reduced was through expansion of knowledge and education. The incomes of millions of “Baby Boomers” have been significantly higher than those of their parents because so many achieved far higher levels of education. However, Piketty pointed out that in the last 20 years, when the rich became dramatically richer, the tuitions at elite American universities skyrocketed in lockstep with the incomes of the rich.
“Research has shown that the proportion of college degrees earned by children whose parents belong to the bottom two quartiles of the income hierarchy stagnated at 10-20 percent in 1970-2010, while it rose from 40 to 80 per cent for children with parents in the top quartile. In other words, parents' income has become an almost perfect predictor of university access.”[2]And Piketty added, “the average income of the parents of Harvard students is currently about $450,000, which corresponds to the average income of the top 2 percent if the U.S. income hierarchy.”
The impact of less educational opportunity already can be seen in social mobility, which is the lowest in the United States in history. In fact, the United States, once the land of opportunity, now offers less opportunity to advance than almost any other Western nation. America now has a new type of “exceptionalism:” the majority of our people are exceptionally worse off in most areas of modern civilization than the people of other developed nations. Most European counties have higher educational levels, better and less expensive health care, longer life spans, less poverty and more social mobility, and thus, more freedom.[3]
Nobel Prize winning economist Joseph Stiglitz is not as pessimistic as Piketty, although his analysis of our problems is not inconsistent with that of the French economist. Stiglitz believes that the problems of inequality of wealth and income can be solved. In his book, The Price of Inequality, also mentioned in the Preface, he describes how the rich have gotten much richer in recent years:
We have created an economy and a society in which great wealth is amassed through rent seeking, sometimes through direct transfers from the public to the wealthy, more often through rules that allow the wealthy to collect “rents” from the rest of society through monopoly power and other forms of exploitation..[4]And he added that much of the income of the top is not coming from labor but from, “what we have called rents. These rents have moved dollars from the bottom and middle to the top, and distorted the market to the advantage of some and to the disadvantage of others.”[5]
And this is the issue that challenges the honesty of those who argue for unfettered free markets. The rich do not let the markets decide their fates. They manipulate the markets to their advantage, and try to prevent others from doing the same. They have been doing it since the first great “robber baron,” John Jacob Astor starting bribing public officials to gain economic advantages and property, and employed his own private armed forces to kill off his competitors in the fur trade.[6]
Republicans support government largesse for rich individuals and corporations who make enormous contributions to them, but they do not want any for the middle class and the poor. They are perfectly happy to have their supporters receive government contracts without bidding, but they do not want to help the long-term unemployed. This double standard hypocrisy has made millions of Americans very cynical about their government.
Stiglitz has a long list of reforms that could end this double standard and improve the nation's economy while reducing the inequality of income and wealth. They include curbs on the financial industry and banking, strengthened regulation of corporations and greater restrictions on antitrust and monopolistic behavior, reforms of corporate governance, bankruptcy law, the tax system and the legal system. He also wants an end to government giveaways and hidden subsidies to corporations.
Part III contains my proposal for a national progressive program that incorporates some of Stiglitz's ideas, some that are well-known and generally supported by progressives, and some of my own. But how can these ideas be implemented when we have a broken political system that has both caused an enormous crisis in the nation and is incapable of solving it? That is the subject of this Part II.
What Piketty and Stiglitz both recognize, along with many others, is that there now really is an enormous crisis. In the past 30 years the middle class has been hollowed out, and opportunities for others to join the middle class have been reduced. The concerted program by Republicans and their wealthy financiers includes subversion of public education, which will further diminish opportunity, limitations on voting rights to prevent political change, further reductions in union rights and public employee benefits to weaken the largest remaining stronghold of union membership, and restoration of elements of racial and sexual discrimination of the past.
These dangers to democracy, equality, personal freedom, economic opportunity and security are greater than anything in recent history. And to make the situation far worse, the government cannot even begin to deal with them because a political crisis exists today unlike any seen since the Civil War. The political system is polarized by extreme ideologies, political, social and religious, reflecting the deep divisions among the population. As a result, the government is grid-locked, unable to do anything except make the situation worse.
Why did the American people put the Republicans back in control of the House of Representatives in 2010? Democrats did not turn out to vote in 2010 like they did in 2008 and 2012, but did they really want the Republicans able to block Obama's programs like they have been able to do? There is an absurdity in United States with a near majority of the people supporting a political party that operates almost entirely against their interests because it is completely devoted to helping the rich get richer, and has no interest in restoring the viability of the middle class to which most of its supporters belong, or want to belong.
In a short column in The New York Times on Piketty's book, Paul Krugman wrote, “one thing that strikes me is the remarkable extent to which American conservatism in 2014 seems to be about defending and promoting patrimonial capitalism even though we aren't there yet.” And he added, “In short, the GOP is more and more a party that consistently, indeed, reflexively, supports the interests of capital over those of labor.”[7]
Not counting the racism that has shown itself in some of the virulent opposition to President Obama, why do millions of middle class and lower middle class people vote Republican even through they are hurt by the party's policies?
Perhaps the problem is that the people really have not been given a true alternative and have not been shown how that alternative actually will work for them. Perhaps the Democrats and Republicans are not different enough from one another. Perhaps many people are disillusioned because they voted for a Presidential candidate who promised “change we can believe in” but has not changed anything truly significant. Some polls have shown Americans growing more cynical of government and its ability to solve problems, and it is not hard to understand that.
By the time Barack Obama finishes his second term, Democrats will have held the Presidency for 16 of the 28 years since Ronald Reagan left office, yet most of his conservative program that wrecked the middle class still is in place. Not all of that can be blamed on Democrats not always controlling Congress. The budget developed by the Progressive Caucus of the House of Representatives, praised by many economists, including Paul Krugman and Dean Baker, as better for the country than the budgets of either the White House, or the Republicans, did not received even a majority of the votes of House Democrats and no support from the Democrat in the White House. This has to change.
The problems the nation faces today cannot and will not be solved by private enterprise. It is going to take massive government action and large amounts of money. It is going to take new leadership dedicated to problem-solving.
It may be that there has not been either the right kind of dynamic leadership to bring about the changes the nation needs, or a large enough, and well organized enough movement for change that could be led. The ending of legal segregation and racial discrimination in the 1960s did not come about simply through one or two elections, or one set of protests, or through one or two leaders. It occurred because there was an enormously well organized movement over many years that had clear goals, determination to succeed, incredible courage, and developed both widespread support and outstanding leadership.
American history, as analyzed in Part I, shows what has brought change in the past, and it can do it again. America needs a new progressive movement. That's how real change can occur.
[1] Coll, Steve. Private Empire ExxonMobil and American Power. New York: Penquin Press, 2012. p. 71.
[2] Piketty p. 485.citing G. Duncan and R. Murname. Whither Opportunity? Rising Inquality, Schools and Childrens' Life Chances, New York: Russell Sage Foundation, 2011.
[3] Ibid, p.484.
[4] Stiglitz, p 266.
[5] Ibid p. 267.
[6] Myers, pp. 93-175.
[7] Paul Krugman. “Working for the Owners.” The New York Times, March 22, 2014.