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Tuesday, May 25, 2010
 Rand Paul Really Doesn't Get It...

 

And neither do most of the people commenting on his comments.

As you may know by now in Rand Paul's interview with Rachel Maddow on MSNBC a few nights ago he said that he did not favor the governing being able to force private business owners not to discriminate based on race, posing the issue as one of federal government vs. a business owners right to "free speech".

But what Rachel Maddow and pretty much everyone else who has commented on Paul's statement has failed to realize is that Rand Paul's statement is completely off the mark in the first place. The Civil Rights legislation that prevented private business owners from refusing to serve blacks or providing separate entrances and quarters for blacks was actually something that many business people in the South wanted!

This is what Rand Paul and other such Libertarians completely fail to understand: in many cases businesses want government regulation of business.

Paul posed the issue as one of protecting the rights of private business owners to discriminate if they wanted to, and of the duty of customers being to avoid the business owners that discriminated in order to drive change, but that view completely misunderstands the reality of what was going on in the segregated South.

It wasn't the business owners who were discriminating because they were racists, the business owners were discriminating because their customers were racists! The reality is that most of the business owners in the South wanted to serve blacks, and why wouldn't they have, black money is as good as white, a dollar is a dollar after all. In the interview Paul said, "I think it‘s a bad business decision to ever exclude anybody from your restaurant."

But, the reason that they either didn't serve blacks or made them use separate entrances and quarters is because their white customers wouldn't tolerate it. If a white restaurant owner served a black family sitting in a main dining area the white customers would walk out, and so the business owners had to discriminate in order to avoid losing their white business, and thus being forced out of business, but the reality is that white business owners did want to serve blacks, but they couldn't.

And that is why the Civil Rights legislation that forced all businesses to serve blacks was actually welcomed by many white business owners in the South, who actually had wanted to serve blacks all along, but couldn't due to pressure from customers. Once the government took the situation out of the hand of the customers, however, the white businesses were free to run their business how they wanted to, and this is where Rand Paul goes so horribly, horribly wrong.

You see, Libertarians and Conservatives always try to paint the issue of regulation as one of government vs. private industry, but in reality that is actually seldom the case. Indeed most of the major business regulations in place in America today have been lobbied for by private industry. It is a false notion that an unregulated market provides "freedom" and that regulation necessarily restrict freedom, its simply not true any more than claiming that a roadway with no laws provides greater freedom of travel than a roadway with speed limits and stop lights and traffic lanes, etc. Those rules and regulations imposed on the roadway actually facilitate travel and lead to more freedom of travel, not less.

Forcing all businesses to serve blacks equally was actually good for business, and what many business owners wanted because it allowed them to run their business how they wanted to instead of how their customers dictated. It allowed them to actually serve more people and make more money. The same is true of many forms of business regulation, from the Pure Food and Drug Act of 1906, which was lobbied for by food maker H.J. Heinz in order to provide consumer faith in processed foods to almost all regulations today, industries prefer some degree of regulation because it helps the good actors in the industry to focus on doing business right without having to complete against what are detrimental practices in the first place and without having to worry about other businesses ruining the reputation of their industry. For example, all it takes is one beef exporter to export meat tainted with mad cow disease and a foreign country is likely to ban all meat imports from America, thus meat producers want government regulation in order to ensure that their competitors don't ruin their business for them.

Another good example is the recent problems we've had with the sub-prime mortgages in the housing market. This American Life ran a story in 2008 about the mortgage meltdown, in which one underwriter said that when the sub-prime trend began he was against it and tried not to write those types of loans. He could see clearly that this was a horrible business, but in the end he had to because the market dictated that he had to. If he didn't write that type of business he would have gone out of business right way because his customers were asking him to write those loans, and if he didn't they would have gone elsewhere. He fought it, he opposed it, he know it was bad, but in the end he had to do it because that was what the market dictated. It wasn't how he wanted to run his business and he knew that it was going to cause problems own the road, but he had no choice.

So he wrote sub-prime loans, and when the crash happened he went out of business. He was very angry and very upset about it because he knew all along that it was a bad idea and didn't want to do it but he was trapped by market forces. Either he was going to go out of business right away or he was going to go out of business later, and the thing is, is that he was a good business man who knew all along that this was bad idea and he didn't want to run his business that way.

The reality is that proper regulation of the mortgage industry could have saved his business because if his competitors had been prevented from making those unrealistic loans in the first place, then he wouldn't have had to make them either and he could have run his business way he wanted to, the right way.

Libertarians and Conservatives are completely misguided when they present all regulation as government vs. private interests, indeed most of the federal regulation on the books today actually protects the private interests of those being regulated and much of it was lobbied for by the very industries who are subject to the regulation. And furthermore, so-called Liberals and the mainstream media mostly just play into this false dichotomy and perpetuate this false reasoning from the other side of the coin, not stopping to point out that the premise is false in the first place, and that the reason that Rand Paul is wrong about his views on laws forcing private businesses to serve blacks is not because "racism is bad, no matter what", (which is true), but he's even more wrong because the laws were in fact in the best interests of private business owners and what many private business owners in the South wanted in the first place, in order to put a stop to the "dictatorship of the market", which was forcing them not to serve people that they ultimately wanted to serve. It's not because the business owners were racists that they weren't serving blacks, they weren't serving blacks because if they had done so they would have lost all their white customers, that is, until the government came in and put a stop to it and allowed the businesses to operate freely, the way that they wanted to.


Posted by rationalrevolution.net at 10:17 AM EDT | Post Comment | View Comments (4) | Permalink
Updated: Tuesday, June 8, 2010 7:07 AM EDT
Tuesday, April 27, 2010
 Socialist? More like moderate Republican...

Topic: Commentary

Listening to the media, especially the right-wing media, and the Tea Party crowd, one would think that president Obama is implementing massive liberal, progressive, and even "socialist" agenda, but this is far from the truth. Like the last Democratic president we had, Obama is pursuing a center-right agenda, implementing what were once considered Republican policies.

Polls show that there is little enthusiasms among Democratic and progressive voters, but the commentators on these polls can't seem to figure out why. They just claim that progressives are satisfied since they have someone they voted for in office and are thus complacent, or they claim that the "momentum" has simply shifted to "the other side".

The reality is that Obama and the Democrats are losing support because they have done nothing to earn the support of progressives. Obama is trying to "rule from the middle", and in the process he is actually shifting the country more dramatically to the right than George W. Bush did, because what Obama is doing is he is allowing center-right policies to be labeled far-left socialist policies, in the process redefining progressive polices as center-right policies, and leaving real progressive policies so far out in the cold that they aren't even discussed in the media anymore or even given mild consideration by Democratic politicians.

So let's take a look at Obama's "radical socialist" record. Since in office President Obama has:

  • Continued the wars in Iraq and Afghanistan

  • Backed president Bush's bailout of America's wealthy capitalists

  • Signed in an economic recovery act comprised primarily of tax breaks, with little or no direct job creation

  • Signed in a market driven health care reform package based on prior conservative plans

  • Is pushing for privatization of major components of the space program

  • Is opening up more land and coastal areas for oil and gas extraction

  • Has pushed for a freeze on all non-military discretionary spending

  • Is now pushing for what amounts to very modest financial reforms

Obama the radical socialist? More like Obama the moderate Republican.

The economic recovery package that conservatives like to rail against is a prime example of Obama's center-right policies. The reality is that the economic recovery package signed into law by Obama has not been very effective, and the reason that it hasn't been effective is because practically the entire bill was just tax breaks. Instead of engaging in direct spending and creating a works program in the spirit of FDR to put people to work, he signed in a bill whose single largest component was tax cuts, and whose second largest component was funding to the states to plug holes in state budgets, allowing states to avoid raising taxes. So the overall effect of Obama's economic recovery bill was tax cuts and the prevention of tax hikes at the state level.

The health care reform bill put together by the Democrats and signed by Obama was patterned on the health care reform package passed by Republican governor Mitt Romney, and advocated for by the Heritage Foundation, one of the most conservative and extreme anti-socialist organizations in America.

Indeed the Heritage Foundation supported all of the major elements of "Obamacare" for years, right up until both Obama and Hillary Clinton began using their ideas in the 2008 election, at which point the Heritage Foundation reversed its course, claiming that it no longer supported the approach.

So yeah, we got "health care reform", a right-wing version of it. The healthcare reform passed by the Democrats is nothing like what progressives advocated for, which was either a single-payer system or at least some form of government run non-profit national insurance plan.

So while wild-eyed irrational mouth foaming racists rage against Obama because his name is foreign, he's black, and he's a Democrat, the reality is that he is pushing forward what amounts to a very moderate center-right agenda that could have easily been advocated by Republicans just a few years ago.

The president is losing support because he is losing support among so-called liberals and progressives because the president and this Democratic congress have given American progressives nothing to be happy about.

I voted for someone that I thought might be a progressive, and instead all I got was George Bush Sr...


Posted by rationalrevolution.net at 10:32 PM EDT | Post Comment | View Comments (24) | Permalink
Updated: Sunday, May 2, 2010 7:28 AM EDT
Sunday, April 18, 2010
 And the plot thickens...

Topic: Commentary
Paulson & Co. not charged in SEC suit against Goldman 
 
So, John Paulson, the hedge fund manager who had an income of $3.7 in 2007, received a large portion of that income by colluding with Goldman Sachs to setup a massive "investment" that was designed to fail and then "betting" that it would fail.

And yet, Paulson is not charged with any wrongdoing and his company, at least for now, is continuing on doing its same old thing. Keep in mind that Paulson's hedge fund is one of the largest in the world.

But here is the real issue. Paulson has been receiving billions of dollars a year in income for the past 5 years (people STILL keep erroneously saying that he "earned this income"), and yet he has paid hardly any taxes on it, a mere 15% on the overwhelming majority of it.

So the question that I pose to all of these "free-market supporters" and defenders of these types of incomes is this:

What economic good has Paulson produced? The whole concept of income is the idea that individuals are compensated for the economic benefits that they produce.

Point to the value that Paulson, and people like him, have create. Point to the billions of dollars in economic benefits that have been created by Paulson and his ilk, show it to me!

You can't and never will because these people aren't creating value, they are taking value, not only are they not creating a damned thing, they are undermining the economy and walking off with billions of dollars a year for doing it, AND what they are doing is perfectly legal, which should tell you something about how perverse our financial system is, when it bestows the largest rewards on people who are flat out destroying the economy.

I mean think about it. This individual's income is larger than most corporations, its larger than whole cities, his income by itself is enough to fully fund the operation of the vast majority of American municipalities. His income by itself for the year 2007 alone is enough to comfortably support 1,000 American families without them having to work again for the rest of their lives. How can anyone see this type of situation and not think that something is massively, massively, wrong with our financial system. There is no way that any individual is creating that amount of value, and if they are getting income for value that they are not creating then by definition this means that something is very wrong with our economic system.

This is just one of the more direct examples of how our economic system is bestowing massive rewards  on the people who are destroying the American economy, while the working-class that actually produces value is undermined by the super-rich who profit from destroying value, who are redistributing value from the working-class to themselves through manipulations of the financial and legal system.

And yet the "movement" that is getting all of the headlines in the media is the Tea Party movement, which claims that taxes on the rich are too high and there is already too much regulation of the financial industry....


Posted by rationalrevolution.net at 8:56 AM EDT | Post Comment | View Comments (2) | Permalink
Tuesday, March 30, 2010
 How Reagan Sowed the Seeds of America's Demise

Topic: Announcements

How Reagan Sowed the Seeds of America's Demise 

This article explores the economic legacy of Ronald Reagan, and how the policies of "Reaganomics" have led to the decline of the American middle-class, both economically and in terms of political power. This article presents the case the the rise of income and wealth inequality in America over the past 30 years is a product of massive redistribution of wealth, facilitated by Reaganomic policies.


Posted by rationalrevolution.net at 12:01 AM EDT | Post Comment | View Comments (13) | Permalink
Updated: Saturday, April 3, 2010 8:54 AM EDT
Thursday, January 7, 2010
 American Conservatives are Socialists, They Just Don't Realize It

Topic: Commentary

I've always been fascinated by the contradictions in American political ideology. I think the biggest contradiction in American political ideology is within the so-called "Conservative" movement, and its interesting because the contradiction is so fundamental.

Generally speaking, conservatives are social collectivists. Social conservatism, in the most general and universal sense, is rooted in the public enforcement of collective social values. Liberalism is literally the transcendence of the individual over the collective, i.e. the freedom of each individual to believe and act according to their own desires, even when their beliefs and actions are abhorrent to the community.

What is so fascinating about American politics is that the "Conservative" movement of the past several decades has become solidly pro-capitalism, when it is in fact capitalism that is ultimately responsible for just about every ill that conservatives rail against in America.

An important thing to understand about conservatism, and American conservatism in particular, is that there is a populist basis for conservatism. When we look back at the liberal revolutions of the 18th and 19th centuries, of which the American Revolution was one, these were generally populist revolutions for liberalism against elite ruling minorities who were seeking to conserve the traditional, feudal, social and economic systems. The rise of capitalism itself was a part of these liberal revolutions. I get the sense that many people today really don't understand just how radical capitalism really is.

Just speaking anecdotally, two of the most fundamental statements that I hear from American conservatives are: #1 that "they", or "the community", have lost control of the culture (i.e. "liberals" have forced an unwanted culture upon them/America) and #2 that income should be based on work.

If you share those two beliefs (which by the way, both self described conservatives and leftists share these views) then you really are fundamentally against capitalism.

Today's conservatism is a different form of conservatism than the conservatism of the 18th and 19th centuries. Conservatism during that period was plainly a defense of the ruling establishment. If you were a conservative during the 18th and 19th centuries it meant that you were a supporter of monarchy, of theocracy, and of the established aristocracy, i.e. you were against democracy, against religious freedom, against market economies, etc., and so the idea of "populist conservatism" wasn't really considered at the time.

Today, however, we have to recognize that there really can be, and is, a populist basis for conservatism. So what is populist conservatism? From the most fundamental perspective, regardless of any political ideology, populist conservatism rooted in natural human desires to maintain a socially enforced moral code. I do think that conservatism in the general sense is a natural tendency within any social group. Society of course is a social group. Culture is the set of beliefs, ideas, and practices that are produced and held by a social group. Social groups tend to develop self-protecting mechanisms, which are conveyed in the beliefs, ideas, and practices of the social group. These protective mechanisms are inherently "conservative". They work to conserve the culture of the group.

For good or bad, better or worse, social groups tend to produce cultures that protect the collective interests of the social groups. Often times individuals within these groups can be victims of the culture, which is exactly what liberalism is all about, minimizing the collective power of the social groups, in order to grant more freedom to individuals to believe and act as they wish.

What true conservatives really want (I'm not talking here about libertarians, who are often lumped in with conservatives due to them often siding with the Republican party in America) is strong community based collective social power.

So, why do conservatives feel that they don't have strong community based collective social power in America? Well, firstly, because they generally don't have it, for multiple reasons. The most basic reason is of course the U.S. Constitution, which is a fundamentally liberal document, that goes to great lengths to limit the power of the majority in order to protect minority rights, and by minority in this sense I don't mean racial or ethnic minority, but minority beliefs and practices.

But the protection of minority rights in the constitution has only a passive impact on the culture. The most direct impact on the culture comes from capitalism.

Conservatives talk a lot about "family values", and there is good reason for that. The family has the greatest vested interested in its members, particularly its children. In a general sense the family is the most basic social structure, and the social structure in which those within the group have the greatest vested interest in promoting the well being of the individuals within the group and of the group itself. Families tend to be the social group that inherently has the best interests of its members, particularly its children, at heart, and thus is the social unit that typically instills the best "values" within its children. This of course is not always true, as child abuse cases and cases of delinquent parenting prove, but it is generally true.

Beyond the family the local community, often embodied in organizations like churches, schools, and local government, and in a loser sense simply in neighborhoods etc., also has a vested interest in the well being of its members, again, especially the children.

Thus the cultures produced by families and local communities tend to be sets of beliefs and practices that both protect the interests of the local community and that have the best interests of its individual members in mind. Again, there are always exceptions to these generalizations, and often those that don't fit into the social mold become victims of the community itself.

This is where industrialization and capitalism come in.

Industrialization and capitalism go hand in hand, indeed they both gave rise to one another. Capitalism is an economic system in which the rights to newly created value are granted by the ownership of capital, i.e. the owner of the property that is used to create goods and services is the owner of the goods and services produced via the use of said property. The workers, whose labor produces the goods and services, do not have any rights to the products of their labor, unless they themselves are also capital owners, as is the case with small business owners, etc.

This system of property rights of course makes capital quite valuable and played a major role in promoting the increasing development of capital in the form of industrialization and the development of modern corporations and intellectual property rights systems, etc.

How is culture expressed? Culture is expressed primarily in the products that we produce. Our culture is reflected in the homes that we live in, the clothing that we wear, our hair styles, the transportation that we use, the songs we sing, the images we display, the stories we tell, etc., etc.

During the 20th century the industrialized world was transformed from a place where culture was locally produced by communities to a place where culture was produced by highly centralized international corporations.

There are distinct differences between locally produced culture and corporate produced culture.

Locally produced organic culture is the product of local self-interest, i.e. the self-interest of the community. Locally produced organic cultures tends to reinforce beliefs and behaviors that are protective of the community (note here that this is not always necessarily positive, as the community may be run by the mafia or be abusive to minorities, etc.). Locally produced culture has a natural tendency to be conservative. For example clothing styles that are a product of organic locally produced culture will tend to reinforce the sexual behaviors that are collectively deemed in the best interest of the community.

Clothing styles produced by corporations, however, have completely different motives behind their development. And to understand why these motives matter we have to address fundamentals of human behavior and the role of social pressures.

Human beings, as anyone should know, have certain natural behavioral tendencies. Many of these tendencies are "socially destructive". This is a battle we have been fighting for thousands of years, its where the concept of things like sins come from, etc. Sins are basically socially destructive human behaviors. As with all social animals, the individual and the collective are in a constant state of conflict. Individual interests are often at odds with social interests and we constantly play a balancing game both individually and as a group of weighing these interests against each other. Liberalism, in the traditional sense, is the elevation of individual interest over the collective interest.

So, for example, if we take the issue of sexual behavior, a community may have a collective interest in promoting monogamy, in suppressing teen pregnancy and pregnancy, in suppressing adultery, in suppressing the potential for transmission of sexually transmitted diseases, etc. These interests may be expressed in a local culture by the promotion and adoption of conservative dress codes that are not sexually evocative or revealing, etc., and so by adopting standards of dress that diminish sexual expression, the community then feels that it is promoting its interests in socially regulating sexual behavior.

But, individuals within the community still have a desire to engage in sexual expression and behavior. So there will always be a general desire by individuals within the group to step outside the bounds of the culture to satisfy their individual desires, and there will be particular individuals within the group who have an acute aversion to the norms of the community and seek to subvert the norms of the community but may be unable to do so due to social pressure and/or lack of physical ability to be creators of their own culture.

So in the traditional sense we know that communities tend to promote collective interest through their own locally produced culture. The desires of individuals within the community, however, may be, and often are, at odds with the collective interests. (For example a group of 10 people have one small pie to share between them. The collective interests is to give everyone an equal, relatively small, piece of the pie, yet each individual within the group may prefer to have all, or at least more, of the pie to themselves.)

But what of corporate produced culture? Cultural artifacts produced by corporations are produced for a profit. The interest of the corporation is not the same as the interest of the community in which the corporation operates. The corporation prospers by satisfying individual desires. So even though a community may have an interest in promoting modest dress, a corporation will have an interest in promoting sexually expressive dress. Why? Because sexual expression is a core human behavioral desire. Teens especially have a natural biological desire to be sexually expressive, and indeed to make themselves stand out from the group sexually, and thus wearing sexually expressive clothing that goes beyond the typical clothing of the community is a natural desire of teens. The community, however, has its desire to enforce its culture on teens in order to regulate their behavior in the best interests not only of the community, but theoretically also the best interests of the teens themselves.

But the objective of the corporation is profit. Profit is gained by selling commodities to consumers. You sell commodities to consumers by making products that satisfy their desires, or at least claim to do so. Satisfaction of desires always goes back to baser human instincts, many of which are at odds with collective social interests and indeed are the motivators of so-called bad behavior that we as a social species have been struggling with for thousands of years.

So capitalism and industrialization in the 20th century resulted in a situation where culture was almost exclusively produced by corporations, which is to say, by a relatively small numbers of people who produced large quantities of products, from food to clothing to music to movies. The relative centralization of production that occurred with industrialization meant that culture went from being produced organically by local communities in ways that supported community interests to being designed by small numbers of people in international corporations, who designed culture specifically to serve their own interests, i.e. the profit interests of the corporation. Doing so inevitably meant catering to the base desires of the human psyche, which in many cases is exactly what traditional culture had evolved over thousands of years to suppress.

Capitalism is a product of the liberal revolutions of the 18th and 19th centuries. Capitalism promotes liberalism and thrives in liberal environments. Capitalism thrives in liberal environments because permissive social environments allow corporations to more strongly appeal to human desires and to a wider array of desires, thus allowing for broader markets and stronger sales. As long as things like freedom of speech and minority rights are protected, markets within a capitalist system will themselves drive the culture towards greater permissiveness since this creates greater opportunities for profit. It doesn't matter if you are infavor of a permissive liberal socieity or against, you should still understand the role that capitalism and markets play shaping society.

The loss of control over the culture that conservatives lament is actually a direct product of capitalism. It is a product of culture that is produced by corporations for the self-interest of the corporation, instead of culture that is produced by families and communities for the self-interest of the families and communities.

While conservatives often rail against "Liberals", they really should be railing against capitalism. Indeed, most so-called "Liberals" in America are not in fact Liberals in the classical sense of the word, they really are light socialists, but the thing is, most so-called conservatives are too.

I think the two main reasons that the American conservatism is so conflicted are racism and the Cold War. American social conservatives were never strongly pro-capitalist, especially in the South, until after World War II, and even more-so after the enactment of Civil Rights legislation in the 1960s.

Certainly the dominant big S "Socialist" movements of the 20th century included what can be called progressive platforms, i.e. they included support for things like racial and gender equality, support for reproductive rights, and were largely anti-religious. These things clearly put social conservatives at odds with 20th century Socialist parties and the big S Socialist movements, however "socialism" in the broader sense is not necessarily progressive, indeed there were several socialist movements in the United States during the 19th century and early 20th century which were religiously based and highly conservative. In fact the Mormons began as a socialist movement, and Mormons today retain many elements of their socialist roots. The Amish and Mennonites are also types of socialist societies, which are of course highly conservative.

Traditional American social conservatives were always populist. That populism was heavily tied to the Democratic party and in opposition to the wealthy and Wall Street until a socially progressive platform was adopted by the Democratic party in the 1960s, at which time Republicans adopted a socially conservative platform in order to court voters dissatisfied with the Democratic party. In addition, I believe that corporate America came to be seen by conservatives as a place still ruled by white people for white people, whereas the American government came to be seen (wrongly) as an instrument of undermining white interests in order to promote the interests of minorities, specifically blacks. And this is how, from the 1960s through the 1990s, racism played a role in shifting populist and anti-corporate conservative Americans into a position of being rabid pro-capitalists, along with the patriotic associations between capitalism and America during the Cold War, even though capitalism is actually the root cause of many of the conflicts that conservatives have with modern American culture.

The idea that taxes and the government were the primary enemies of American society became popular in the 1980s as government social programs were portrayed as benefiting minorities, especially blacks, and anti-taxation mentality was infused with the idea that taxes were a means of taking from white people and redistributing their income to black people. That sentiment was never directly expressed, but it was clearly the undercurrent of the Republican resurgence in the American South which took place during the 1970s and 1980s, after the passage of the Civil Rights Act and LBJ's War on Poverty.

And thus a mentality grew within the Conservative movement in the United States that "free-market capitalism" must be great, because that's the framework in which "white people succeed" (without the government dragging them down), because the anti-religious Communists just had to be wrong about everything, and because the opposite of whatever so-called American "Liberals" said must be true.

But the reality of course is far different. The reality is that many of the so-called ills of society that American Conservatives lament are products of capitalism, and some of these so-called ills aren't necessarily ills. For example, the rising divorce rate in America and other modern economies is largely a product of two things: greater women's equality, which gives women greater ability to leave abusive relationships, and the change in the economy from a home based economy to an economy where work is performed almost entirely outside the home where husbands and wives work separately.

But its not necessarily the case that an increasing divorce rate is a bad thing in the first place. Certainly the fact that people are less likely to remain in abusive or unhappy marriages today than they were in the past has to be a good thing. Low divorce rates in and of themselves tell you nothing. We know that in the past, and today in societies where women have few rights and economic opportunities, divorce rates are lower, but also that many women stay in loveless and abusive marriages, where cheating is rampant, where they are physically abused, where one or both partners is depressed, etc. and the families of the American past weren't all like those in 1950s sit-coms either.

However the other leading cause of divorce, the modern economy, is something that could be considered a problem, although there is no clear answer to it. It is doubtful that any modern market-based economy could fully resolve this problem. Certain types of socialist systems could address this type of issue, but many such systems have their own problems as well. Families in groups like the Mennonites and even the Mormons do work together at much higher rates than the average American family however, and have lower divorce rates for that and other reasons, not all of them good.

Instead of addressing ways in which American capitalism has disrupted family structure, though, Conservatives do things like point fingers at homosexuals and somehow blame them for increasing divorce rates among heterosexuals.

What is ultimately so frustrating about misplaced Conservative angst in America, however, is that there is actually a lot of common ground between American conservatives and progressives. Indeed I would say that American conservatives and progressives are in agreement on many core fundamental issues.

American conservatives and progressives often talk past one another because political discussions often go straight to the issues of cause and prescription instead of focusing simply on desired outcomes. When this happens disagreement about causes or approaches in handling issues derails the conversation and common ground is never reached.

For example, lets just go back to divorce rates. No one really is in favor of high divorce rates. Everyone, including conservatives and progressives, would like to see more married couples stay together when children are involved. But when this type of issue comes up, the focus immediately goes to causes, with Conservatives blaming "Liberals" and "gays" and progressives immediately getting defensive and/or calling the other side bigots (which they often are). But in this disagreement the fact that both sides agree that they would like to see divorce rates go down is lost, and thus no progress is ever made toward a solution because common ground is never found, and also because the Conservatives are pointing fingers at scapegoats and not addressing the real root causes of the problem.

The problems that Conservatives have with modern American society are never going to be resolved as long as they themselves remain obstacles to solving them. The reality is that the primary driver of change in American society over the past 100 years has been capitalism. Until American Conservatives understand that, they will continue to point fingers at scapegoats and cling to irrational and distracting arguments about the issues they hold dear, and it is unfortunate because the reality is that many Americans, from the "far right" to the "far left", are actually in agreement on some of these issues.


Posted by rationalrevolution.net at 6:48 AM EST | Post Comment | View Comments (1) | Permalink
Monday, December 28, 2009
 Against the health care bill, and why...

Topic: Commentary

Against the health care bill, and why...

I've gone back and fourth in my support for the health care reform going through Congress right now, but I'm now pretty firmly in opposition.

I will say though that I think that in many ways the reform legislation will bring about some modest improvements over the current situation, but I don't think that the reforms going through Congress are going to lead to significant long term improvements, and these reforms will likely make meaningful improvements in the future even more difficult.

I think that the basic approaches taken by both the House and Senate are just fundamentally wrong. Indeed I think that the guiding principles laid out by President Obama were fundamentally wrong.

When President Obama laid the foundation for reform he said that one of the key factors guiding reform should be building on the existing framework that exists in America, which means building on the employer based health insurance system.

I viewed that as a mistake right off the bat.

One of the primary goals of reform should have been elimination of the employer provided insurance system. Elimination of the employer based insurance system would have garnered significant support from businesses and employees, and could have laid the groundwork for the adoption of a single payer system in a way that would have been clearly understood as providing a benefit to a large number of people. Everyone, whether they have insurance or not, knows that not having your insurance tied to your employer would be better than having it tied to you employer. Everyone knows that employers not having to hassle with insurance is better for employers.

But here is the key issue. The legislation coming from Congress is most fundamentally off track in that it more tightly integrates the private insurance industry with government. The result of this legislation is going to be to make us more dependent on private insurers, to increase the revenues of the private insurers, and to more tightly integrate private insurers into the fabric of Washington. All of that means that its going to make any meaningful reform in the future more difficult, and that is the most fundamental reason to be opposed to this legislation.

By requiring employers to provide insurance this legislation makes the system more reliant on employer provided insurance.

By requiring everyone to buy insurance from a private insurance company this legislation makes private insurance companies more powerful, despite the regulations put on them.

By not including a meaningful government run competitor to private insurers the most powerful cost control mechanism is surrendered.

By focusing on "competition" and "markets" the legislation only makes standardization and streamlining more difficult.

By heavily regulating private insurers instead of providing public alternatives the private insurers become more tightly integrated into the fabric of government.

The legislation does call for steps to be taken to streamline processes and to standardize forms and payment methods, etc., but on the other hand focuses on increasing competition in the insurance industry, which means encouraging more different carriers to exist in a market which just makes standardization and streamlining more difficult.

I find it ironic that the Republicans have made so much noise over this legislation, because really this could just as easily be a Republican bill. The fundamentals of the bill are reliance on "markets" and the private insurance industry.

The reality is that the profit margins in the insurance industry aren't huge. They run roughly 2.5%-3%. So even if we eliminated all profits and nothing else changed, it wouldn't bring costs down that much, and fundamentally, using competition as the driving force of cost reduction can primarily only affect profits. Higher competition theoretically leads to lower profits margins, but attacking the profit margins isn't going to get much.

The bigger gains are to be made in the areas of system wide streamlining, efficiency gains, and behavioral changes, and these types of gains are best made through the use of government run and/or single payer systems.

My view of the on issue is basically this: In areas of an economy where systematic integration is minor or relatively unimportant, competition and diversity in the market place are good things. However, in areas of the economy where systematic integration is heavy and critical, monopoly systems are superior.

In fact, computing is a perfect example. The reality is that Microsoft established a virtual monopoly in the personal computing and business computing markets, especially in America. Lots of people complained about this, including myself, for a variety of reasons, but the truth is that the rapid and relatively smooth adoption of computing in America from the 1980s to today was only possible because of Microsoft's virtual monopoly.

The fact that everyone was using the same operating system, the same core productivity software, etc., made computing more successful. Monopolies inherently make standardization easier for obvious reasons. What if there had been 20 different operating systems each with about 5% to 10% of market share, and there had been 20 or 30 different widely used word processes and spreadsheet applications, etc. each with their own proprietary file formats, unable to open each-others files, (actually there were for a brief period until Microsoft consolidated the market) etc.

That would be a nightmare of inefficiency. What the health care reform bills do is they remove the anti-trust loopholes for the insurance industry and they keep the state-line rules in place, thereby seeking to encourage the development of dozens or even hundreds of new insurance companies.

Instead of trying to preserve or promote "competition" in the insurance markets to drive down profits, they should be encouraging consolidation to improve standardization, and of course the ultimate consolidation is single-payer.

And there were a few little things that really annoyed me as well, for example the methods of paying for the bills. Neither bill, in my opinion, did a good job of paying for itself. I do agree with the cuts to Medicare, that program has to be financially shored up, and this was a good opportunity to do it. The bills do some of it, but of course not entirely. The tax on indoor tanning was a good idea, but it seems highly out of place since its the only such tax in the Senate bill.

These bills were the perfect opportunity to put in "vice taxes", on things like"junk food", e.g. on sodas, candy, certain condiments, and things like Twinkies, etc. That way the bills would have made more sense, by attacking the health care issues on multiple fronts, both the causes of health problems (everyone agrees that our nation's obesity is a leading cause of our higher costs) and the problems with delivery. They should have put in a provision to identify foods and other products (cigarettes etc.) that are unhealthy and to tax them as a means of paying for the health care system. I would even be in favor of taxes on lifestyle products and services that are identified as particularly likely to cause harm or be unhealthy, such as stake boards, skydiving, etc. and I do many such activities, but I would rather see taxes applied there as long as they are modest (10% or less) because it makes sense to tax the things that are the causes of increased health care costs in order to pay for health care reform and services, and it involves choices, such that if people's behaviors do change, then the taxes collected would go down in relation to the reduced need for services, instead of taxing things that have no direct relationship to the need for services.

The regulations implemented under the bill will all have a cost to them, but since all insurers will be bound by these same regulations, implementing them won't really hurt the bottom line of the insurance companies, they will just pass the costs on to consumers in the form of higher premiums and fees. And this is where the compromise weakened cost control aspects of the bill really come into play.

Some of the benefits of the bill are the following:

Access to Affordable Coverage for the Uninsured with Pre-existing Conditions

Free Prevention Benefits

No Arbitrary Limits on Coverage

Protection from Rescissions of Existing Coverage

Prohibits Discrimination Based on Salary

Clear Summaries, Without the Fine Print

Yes these are all good things, but they all have a price. Without some external force all insurers will just raise prices in order to pay for these benefits.

The reality is that the profit margins of the insurance industry simply aren't the area where meaningful cost savings are going to come from. It was a mistake to make the legislation so focused on attacking the profit margins of the insurance industry, it was a mistake to increase our reliance on the employer based insurance system, it was a mistake to not fundamentally direct the health care delivery system away from a profit driven model.

In every country where they have been successful at providing both universal and lower cost health care, they have done so by removing profit motive from the delivery system. Nothing in the Senate bill even moves in that direction, and the House bill only does so with the weakest of steps.

The health care problems in this country, especially as they relate to cost, are never going to be solved until the issue of profit motive in the system is addressed. These bills don't address it, and indeed they do some things that will increase the role of profit motive in decision making and in the future design of the health care system, and it is for those reasons that, despite a few good individual items in the bills, I am ultimately opposed to them.


Posted by rationalrevolution.net at 1:15 PM EST | Post Comment | View Comments (1) | Permalink
Tuesday, November 24, 2009
 He's no F.D.R....

Topic: Commentary

I, of course, was a supporter of Barack Obama during the 2008 elections, and I still think that of the options we had he was the best choice, but it appears pretty clear by now that he simply isn't getting the job done. I do think that F.D.R. is the appropriate president to compare him to, and in such a comparison he falls extremely short.

Granted, Roosevelt actually had it easier than Obama in many ways. In Roosevelt's day it was much more difficult to mount opposition to the president. There was no real mass media that had the kind of power that today's conservative talking heads have. F.D.R. himself actually became one of the prominent media voices with his own use of the leading media technologies of the time. There were no major television and radio programs voicing opposition to his policies. There was plenty of opposition in print, but the ability to foster public outrage against the president and his policies simply didn't exist during F.D.R.'s time the way it does now. Likewise, the public was at a different place ideologically in the 1930s than it is today after the Cold War. In the 1930s there was widespread public faith in government and public support for collective programs. While F.D.R. was also called a socialist, the term simply didn't have the impact back then that it would come to have after World War II. Likewise, while there certainly were entrenched corporate interests in government, their power and influence was no where near the level that it is today.

But despite all these things, the reality is that Obama isn't even making an effort at even approaching the mantle of F.D.R. What made Roosevelt the ideal man for the situation is that F.D.R. was a technocrat. Roosevelt was a strong forceful leader who led from the driver's seat, who took the reins of power, strengthened the power of the executive, used the bully pulpit, and cast the special interests aside almost completely. F.D.R. truly is the closest thing to a dictator that this country has ever had, but he was a benevolent dictator in a time of crisis when that type of strong leadership was needed.

What we need in the White House today is a benevolent dictatorial technocrat. In some ways Hillary Clinton does fit this role, but her problem would always have been too much baggage and the fact that she is just not likable. What made F.D.R. successful was that he had overwhelming charm and magnetic appeal, and this is essential for any president using a strong arm. Obama has the charm and the appeal, but he's no technocrat and he's demonstrated no ability to take on the special interests.

America today faces a vast array of complex problems that have been festering for decades. The vast majority of the problems have been created by the entrenched special interests, who have profited from the system and who have a short term interest in maintaining the status quo. Still other problems are created by the American public itself and will require sacrifices and adjustments on the part of the public to address.

This is why we need a president who can be a dictatorial technocrat. We need someone who can design policy around what is the best for the country without being cowed by the special interests and even by public interests. F.D.R. was able to do this largely by using the public against the special interests, which he was able to do by constantly engaging the public to shape public opinion himself. This is where Obama has fallen woefully short, which is surprising given his rise in the campaign based on his rhetoric. That is the area where he should be doing well, and yet he isn't. Clearly F.D.R had the courage of his convictions, but its not clear that Obama does.

What I always like to consider is this: what is the difference between the current system or proposed legislation, and what would be designed by an objective specialist working in a vacuum.

Good policy, in my opinion, is policy that is close to what an objective specialist without outside pressure on him/her would create.

When we look at the policies and systems in place in America today, the entire thing is a mess. All of our policies and systems are riddled with problems, which is almost all a product of the horse trading and vote buying that takes place in the political process. The current health care proposals in the House and Senate are perfect examples of this as well, and demonstrate that even with a Democratic President and Democratic majorities in Congress, we still can't produce effective legislation. The process of "appeasing" the centrists and the entrenched powers in the medical and insurance industries, as well as seniors, has produced absurd, ineffective, and wasteful legislation. Its a situation where more power and less need to appease special interests would likely have resulted in better legislation.

And the really bad thing is, is that I think Obama's term in office right now is a critical time in history, and if he does fail to deliver meaningful reform, as it appears he will, then the results can be quite devastating. Things are made all the more precarious by the fact that there is no clear place to go from here. The Republicans not only have no solutions, they are complete idiots at best. Every policy idea I've seen from them in the past year is of course the exact opposite of what needs to be done. They go farther out into absurdity with each day, and even the serious ones are completely delusional with no pragmatic agenda for fixing America's problems. A case in point is a recent article in the Wall Street Journal by two Republican representatives proscribing a return to the "policies of Reagan" to fix the economy. In the article they denounce the national debt and decry the Obama administration's deficit spending, while saying that "doing what Reagan did" would fix the economy, i.e. cut taxes...

 

Umm... When Reagan came into office the country had virtually no debt at all, taxes were fairly high on the wealthy, and interest rates were extremely high. Reagan cut taxes on the rich, raised taxes on the poor, cut interest rates massively (well the Fed did), and engaged in massive deficit spending.

When Reagan left office there was so much alarm over the national debt he had wracked up that George Bush Sr. was forced to raise taxes once he got in office to prevent a total budget disaster. Indeed the problem we are in today is because of the massive debt hole that the previous three Republican administrations have put us in, all based on Reagan's legacy of massive debts.

We can't cut interest rates anymore, they are already at zero. We can't cut taxes anymore either, hell the problem is that taxes have been too low for the past 30 years, except under Clinton. You can't get out of debt by reducing your income. The fact that Republicans can't seem to get beyond Reagan, and on top of that can't even seem to honestly look at his policies, means that the party is completely bankrupt of ideas at best and is simply dishonest and intentionally subversive at worst.

So we can pretty much be assured that the Republicans aren't going to make any positive contributions to fixing America for years to come, if ever. And yet the Democrats have shown themselves to be impotent as well. I suspected as much but wanted to give them a chance and was hoping for the best.

I do think that there are a few good people in the Democratic party with good intentions and good ideas, but its clear when they have control of every branch of government and they still can't get anything done now that they aren't going to be able to do anything any time soon either.

Think about the fact that it took F.D.R. 12 years in office with Democratic majorities in Congress, and with him stacking the Supreme Court, to make the progress that he did in fixing the American economy and putting the country on solid footing for the future. Its inconceivable, and technically impossible, that such an opportunity will come again. If Obama fails to gain traction and fails to bring about major reforms, then the next 20 years in this country appear to be very bleak indeed.


Posted by rationalrevolution.net at 7:45 AM EST | Post Comment | View Comments (7) | Permalink
Monday, August 24, 2009
 Reaping what Reagan Sewed...

Topic: Commentary

So much of what is happening in the economy and the healthcare debate in America right now can be traced directly back to the agenda that was set in motion with the presidency of Ronald Reagan during the 1980s.

In demonstrations against the healthcare reform ideas of President Obama around the country we hear the familiar refrain that "government is not the solution to our problem; government is the problem," as famously voiced by Ronald Reagan during his First Inaugural Address, and conservatives also decry any potential that healthcare reform could add to the national debt by increasing the federal budget deficit.

Here is the situation. The federal government is currently massively in debt. The reason that the federal government is massively in debt is because the Republicans have intentionally put the federal government into debt.

When Reagan came into office in 1981, he brought with him a team of economists and political ideologues who had up to that point been outside the reins of power. The presidency of Reagan was truly a revolution in this country. Radical new agendas and policies were put into effect during the Reagan years and a new ruling class of ideologues came to power that would influence the highest levels of politics in this country for generations.

One of the major policy agendas that was put into place during the Reagan presidency was the use of massive deficit spending as a political weapon.

You see, Reagan and his cabinet were ideologically opposed to government domestic spending programs. Reagan and his allies believed that so-called social spending was actually counter productive, i.e. that a dollar spent by the government to help the poor or provide services to the public actually had a counter effect, making the poor poorer and the needy needier.

Their view was that they had to put a stop to social spending. They also knew that many of these programs were popular and hard for politicians to vote against. So their belief was that in order to put a stop to social spending they first had to effectively bankrupt the government. So, what they did was they massively cut taxes on the wealthy, raised taxes on the poor, and gave tiny token tax cuts to the middle class, resulting in an overall reduction of tax income to the government when adjusted for inflation (many Reaganophiles claim that the cuts increased revenues by 80% (or more), but this is only true in pure dollar terms, not inflation adjusted terms. Tax revenues grew at the lowest rate under Reagan compared to those that came before and after him). The next part of the agenda was to massively increase military spending. The only thing harder to vote against than popular domestic programs is military funding. So what Reagan did was he cut government revenue and increased government spending, but with almost all of those increases going to the military.

The result was the largest budget deficits since the presidencies of FDR and Truman during World War II. The big difference, however, is that taxes were very high during their presidencies and the debt was paid back down quickly after the war. There was no plan on paying back the debt racked up by Reagan however.

Indeed the bleeding incurred by Reagan was so dramatic that his successor, Republican George Bush Sr., was forced to raise taxes even after he promised not to. There was nothing else he could do, as Reagan had set the govenrment on a path to bankruptcy had something not been done.

 

 

What happened during the Reagan years is basically that the government pulled out a massive credit card and charged everything. Its like you had a grandpa that as he was getting old he started buying lots of nice things for the family: a new car, new furniture, and of course just giving family members cash. Then grandpa died and you found out that all of that stuff that grandpa bought you was on credit cards and that grandpa had racked up hundreds of thousands of dollars in debt, and today what we find out is that we are still legally obligated to pay the debt. So while it seemed like fun and games and a great time when grandpa was alive buying you stuff, now you see that it was all an illusion and that the fun during those times was bought with a lie and that now you have to pay for the careless finances of your grandpa - that what seemed like a nice thing at the time is now wrecking your finances.

That is the presidency of Ronald Reagan, but its even worse, because Reagan didn't even invest in the country so we don't even have anything to show for it. You see, Reagan was fundamentally against domestic spending - he and his cronies thought it was wrong. They reduced spending on everything from education to welfare to highway and bridge construction and maintenance. So, if they reduced spending on so many things, then how did they rack up this massive debt?

 

 (Note: Income Assistance includes Unemployment Insurance)

Military spending. Its all been military spending for the past 30 years that's been driving up the debt.

By 2008 military spending accounted for roughly 30% of the total federal budget, not counting entitlements (Social Security, Medicare, Medicaid), which are paid for with their own separate taxes. It is the single largest expenditure of the federal government. As of 2008 combined military spending and payment on the debt accounted for almost half of the entire federal budget, leaving only 53% of all the revenues collected for domestic spending.

Since Reagan, conservatives and Republican administrations have followed the agenda set in place during the Reagan years: to drive up the deficit in order to use it as an anchor around the necks of anyone who would seek to engage in domestic spending. This is one of the things that Bill Clinton got right. During this first year in office, when he still had a Democratic majority in Congress, Bill Clinton passed balanced budget legislation that set his administration on the path to paying down the debt. Once George Bush Jr., came into office however, with Republican control of Congress, they quickly set about engaging in massive deficit spending again, driving the national debt up to record breaking heights.

This is what people need to realize, the Republicans have been using the debt as a weapon against domestic spending ever since Reagan came into office, and you can't understand national politics unless you understand that. The Republicans would basically rather burn taxpayer money than allow it to go to domestic programs. The Reagan brought to power a whole generation of conservatives who fundamentally believe that government is indeed bad, and their belief is that its better to bankrupt the government than it is to have the government help its people. They have been engaged in a war on the federal government for decades now, and deficit spending is the weapon they have used to try an bring the government to its knees. They engage in deficit spending by ensuring that a larger and larger portion of the federal budget each year goes toward military spending and payment on the ever growing debt, which consumes more and more federal money the larger it gets, which is exactly what the Republicans want because they would rather just burn the money on debt payment than see any of it go toward so-called "social spending".

And they know that any time anyone comes into office and tries to engage in any kind of domestic spending, that the national debt which they have racked up will act as an anchor around their neck dragging them down to the bottom of the sea and making any domestic reform programs highly unlikely to succeed.

What enables the Republicans to get away with massive deficit spending, while still being able to use it as a weapon against their opponents, is that they spend the money on the military, which is effectively politically unchallengeable in this country. You can spend a thousand dollars on the military without question in America, but if you spend one dollar on any domestic program, from education to healthcare reform, the conservatives will jump all over it as fiscally irresponsible. The military is seen as patriotic and essential, while everything else is portrayed as unnecessary.

Quite literally, the American military is destroying America. Very literally the American military is killing Americans. Out of the top industrialized countries, America stands at the top of the list in countries where preventable deaths occur, i.e. deaths that could have been prevented had proper medical treatment been given. Those deaths, some 18,000 a year in America, could be prevented with money that is instead going to absurd military programs that build fantastically overpriced and unneeded weapons that sit in warehouses doing nothing. Today the United States spends more on its military than almost all other nations in the world combined.

That military isn't making us safer, it is killing us.

If we can't afford healthcare reform, the reason that we can't is because of out of control military spending for the past 30 years and the Republican's intentional running up of the national debt.

References and additional info:

Reagan and Revenue

The Only Good Option For Health Care is a Public Opiton

WASHINGTON TALK: THE DEFICIT; Reagan Debt Legacy: His Trap for Democrats? (1988)

Budget of United States Government

World Military Spending


Posted by rationalrevolution.net at 10:26 PM EDT | Post Comment | View Comments (6) | Permalink
Updated: Monday, August 24, 2009 10:38 PM EDT
Sunday, March 15, 2009
 Missing the Economic Fundamentals

Topic: Commentary

The more that I listen to discussions on the American economy in the media the more it becomes clear that no one within range of a microphone has any fundamental understanding of economics. This is partly the fault of news organizations and partly the fault of how economics is understood in American in general.

One example is the on-going truism that gets heard even on NPR and PBS programs, much less channels like FOX, CNBC, and CNN, that one of the problems with the American economy right now is "psychological", that the problem is that "consumers" don't have confidence so they aren't out spending their money like they need to be, and that if we can just "restore confidence" then people will spend more money and the recovery can begin.

Sadly, this passes for "economic wisdom" in America, yet its completely untrue and displays a fundamental lack of economic understanding on multiple levels. It shows a lack of understanding of both economic theory and of the cold hard economic data, which anyone commenting on the American economy should be well versed in, but apparently isn't.

First of all, Americans aren't "not spending" because of "lack of confidence", they are not spending because of lack of money. Secondly, "spending", contrary to popular misconception, is not the basis of economic growth (nor is job creation the goal of an economy). Thirdly, the American economy of the past 30 years has been an illusion built on debt, something which has been pointed out by several people over the past 20 years, though often ignored.

Most economists, at least ones that get into the media, and certainly most pundits, still haven't gotten their heads around the fact that the "normal" economic conditions of the past 30 years were always unsustainable. The American economy has been a house of cards and lies for decades, which is also why the economic predictions of most economists who talk about the recession "bottoming out" this year and the recovery starting in 2009 or early 2010 are baseless.

A lot of this goes back to the state of American economics in general, as it is taught in universities and certainly has it is discussed in the media, even in more serious economic publications like The Wall Street Journal, The Economist, and Forbes, etc.

American economics has become completely devoid of any kind of science, and I believe that this is the case in large part because people don't like the facts that are made clear if you truly understand real economics. The level of delusion in American economics is really astounding, perhaps the greatest academic failure in recent times.

In America economics has become a tool for justification of the status quo, not a means of understanding relationships of productivity and consumption. In America most economics has become completely based on observations of correlation, NOT causation.

Even top economic professionals, some of which currently testify before Congress on matters of the economy, talk about the economy in terms of trends and historical events. These economists have no real predictive ability, which is what science is all about. Their only means of "prediction" is assuming that the future will be like the past, but they have no idea why the past was even like the past. They don't address fundamentals, they just look at graphs and numbers and supply/demand curves, etc.

What is an "economy"? An economy is the production, exchange, and consumption, of goods and services in a population. What is the basis of an economy? Production. Production, production, production.

Historically, from thousands of years ago until the modern industrialized era, production has been the only or primary limiting factor to economic growth. The prosperity of a society was governed by its ability to produce goods and services. What set one standard of living apart from another was the ability of the workers in that society to effectively produce material goods that could be used to improve quality of life.

With industrialization that changed. With industrialization it became possible to produce more material wealth than people could legally acquire. The reason for this was economic disparity. The reason for the economic disparity was that the workers who produced the goods and services were not paid the full value of their contribution in producing those goods and services, with the "surplus value" being siphoned off by executives and stock holders, i.e. capitalists.

When we look at the world economies today we see that there are two things that distinguish one economy from another: the productive capacity of a society and the consumptive capacity of a society.

Today, places like China and India are in the process of building productive capacity. Poverty in India at least is largely due to India not having enough productive capacity to meet the needs of all of the people in India. In China, however, that is largely untrue, there they have tremendous excess productive capacity, but most of that productive capacity has been used to supply goods and services to the West, not their own people. This is somewhat puzzling considering that China is ruled by a so-called Communist regime, but clearly they aren't real Communists, or else this situation wouldn't exist. It remains to be seen what they will do. They should be able to actually increase wages in China and start a transition from being an exporter to becoming an nation of domestic consumption of their vast productive capacity. If that does indeed happen it may be considered one of the first successful transitions to real Socialism, but that remains to be seen and given that they were investing in the US and moving towards more market driven labor markets that may not happen.

The US is a totally different story however. In the US our productive capacity currently far exceeds our legal ability to consume the potential products of production, hence this current "economic crisis". Here is the thing to understand: Our society has the ability to create vastly more wealth, i.e. goods and services, than what we are currently doing, and the only reason that we aren't working at creating this wealth right now is that the workers who create the wealth are not legally allowed access to it.

We have car manufacturing plants all over the country that easily could continue pumping out cars. There is nothing stopping us from making cars as fast or faster than we were 2 years go (maybe its best for the environment that we aren't though). The only thing that is preventing this from happening is that, despite the fact that there is a demand for these goods in terms of need, the people who need those goods aren't allowed to have them. The reason that those people aren't allowed to have them is because they don't have enough money to pay for them. The reason that they don't have enough money to pay for them is not because they haven't been working to create comparable wealth themselves in order to exchange that wealth for a car, rather it is because a significant portion of the wealth that most people in America have created over the past 30 years was never given to them, it was instead siphoned off from the pool of collective value that they shared in producing under the legal entity of a corporation and used to give executives millions of dollars a year in unearned income and used to return profits to share holders.

Those shareholder profits and that executive pay was all the product of the value created by the workers. We are talking about trillions of dollars of redistribution over the decades from workers to the wealthiest 1%. Since the workers were never given that value, which they created, a disparity grew in the economy between the productive capacity of the society and the "consumptive capacity".

Over the past 30 years 90% of Americans have been producing more value than what they have been getting paid for. Likewise, the top 1% have been receiving more value than they have been creating.

The reason that this current economic situation is so bad, and why it has manifested itself so rapidly, is not just because of lack of regulatory oversight or the bad lending practices that led to the housing bubble, etc., those thing are symptoms and manifestations of the underlying problem. The reason why we have had this collapse is that this disparity between value creation by workers and compensation for workers has built up over the 30 years, like the swelling of water behind a dam. During those 30 years various "tricks" were used to mask the problem. These "tricks" included more people per household going into the workforce to maintain the same household income, the growing use of debt to make up the gap between value creation and compensation, and the mass importation of goods from developing economies where workers are paid even less .

The housing crisis was just the crack in the dam of tricks which was the catalyst for the collapse of the existing unsustainable situation.

So why was that unsustainable and unfair situation allowed to exist and build up in the first place? Well, largely through right-wing economic propaganda disseminated via the mainstream media, lack of any serious scrutiny of our economic system by the media, lack of tolerance for dissenting and critical voices on economics in the media and in our society, and lack of real economic education in American universities.

Even today, even while the effects of American economic policies are demonstrating clear failure, the mentality of Americans, especially as it is on display in the mainstream media, is still largely that of right-wing delusion.

Republicans and others still act as though the expansion of government spending over the past 30 years has not been a product of Republican policy, yet it is directly a product of the Republican policy of privatization. Basic economic theory says that privatization will lead to higher costs in government, not lower, and indeed the real data from the last 30 years shows this to be a fact.

Private entities work to maximize profits. If government is the source of revenue then maximizing profits is going to mean what? Its going to mean that private industry now has a greater inceptive to manipulate the government, a greater incentive to lobby for contracts and to spread corruption. Government now has to pay the cost of doing the work plus the profits on top of it. The Military Industrial Complex is the perfect example, a very high profit margin industry that makes millionaires and billionaires of some people, all of which comes from tax payer dollars.

As privatization increased the government budget ballooned. The Republicans claimed the privatization was going to be the key to reducing government spending, but in fact it has predictably had the opposite effect. Indeed what privatization did was provide a profit motive for wasteful government spending.In the past wasteful government spending happened due to incompetence, but now with privatization it happens by design and the Republicans are the leaders of agenda that created such a system.

People still talk about all income as having been "earned" or "made" even when it clearly wasn't. A case in point is the reported 20 million dollar income of the Washington Mutual CEO who was officially on the job for 17 days and received $20 million in compensation. Even the stories bemoaning this fact talked about how he "made $20 million" in 17 days, or how he "earned $20 million" in 17 days. That's the point, he DIDN'T make it, he DIDN'T earn it, it was given to him by taking it from other people, it WAS redistribution of wealth.

The money had to come from somewhere, and he obviously didn't create $20 million in value in 17 days on the job as the bank imploded into failure, so where did that money come from? It had to have come from the workers, investors, and customers of WaMu. It was stolen from them and given to him. He never created any value, but was handed $20 million. The only way to describe that is redistribution. That is just an extreme example, but that has been the status quo for execute pay in America for the past 20 years.

Every multi-millionaire and billionaire in the world today is a recipient of collectively created wealth. There isn't a single individual in the world who has single handedly created billions of dollars worth of value. Every single billionaire and multi-millionaire has received their income by being part of a system of collectively created wealth, whereby collectively created wealth is transfered to them.

And yet, here in the midst of this economic collapse brought on by the wealthy, the dominant narrative in the mainstream media is that any form of tax increase on the wealthy is "punishment of success and hard work".

A recent segment on the Colbert Report that showed news pundits bemoaning a so-called "war on success". You can view the segment via this link: The Word - Rand Illusion

That people could even get on television and make these claims at all shows a deep level of delusion in American society, where even the majority of the people who are getting ripped off by the wealthy believe that they are the ones dragging the wealthy down.

Yes, there are people who don't work and receive welfare. These can be called freeloaders, that's fine, whether it is or isn't their fault, the fact is that they are receiving value that they didn't create. True. But do these people really think that a hedge fund manager with an income of $3 billion in 2008 really worked that much harder and contributed that much more to the economy and society than a school teacher with an income of $30 thousands? To believe that you have to be delusional. You have to have no grasp of reality, no concept at all of what an economy even is or what value creation is. Do these pundits really think that Rush Limbaugh spouting hot air on a radio every day is creating more value than an engineer developing medical technology devices? Do they really think that a basketball player is creating more value than a construction worker who builds homes every day? Do they really think that an executive at a large corporation is personally creating $30 million a year in value for the economy and that the workers doing the actual work to produce the products that the corporation sells are really only creating $30 thousand worth of value a year? Do they really not understand that the executive pay is a redistribution of the value produced by each of the workers to the executives? Do these people really not understand that all capital gains are a tax on worker compensation? Do they really not understand the implications of an economy where over the past 30 years an increasing portion of national income has gone to capital gains, where the the portion of capital gains income going to the top 1% has increased dramatically, and worker pay hasn't beaten inflation in three decades (aside from one brief period where it barely beat it)? Do these people really and truly believe that 95% of the population is holding back the top 1%? Do they really think that the top 1% would be better off without everyone else? I can tell you, the fact of the matter is, is that they would be much, much, much worse off. Their wealth and lifestyles are only made possible by the work of millions of people. It takes millions of people to create the wealth that they personally own. They haven't created it by themselves.

These issues are not addressed in the American mainstream media because when you start to get into them it leads to very challenging questions for the core principles of our entire economic model. The entire economic narrative in America is based on a completely flawed assumption, which is that all income in America is completely fair and exactly compensates the recipient for value that they created. But that fundamental assumption is not true, which is why there can be no meaningful discussion of taxes or redistribution, or anything else. Until you acknowledge that the 30 million dollar incomes of executives for the past few decades have been unearned income that was a redistribution of wealth from the workers to the executives then you can't discuss taxation. Until you acknowledge that capital gains are a tax on labor then you can't discuss taxation. Until you acknowledge that the incomes of rock stars and basketball players and actors and news pundits are a luxury provided by redistributing value created by productive workers to entertainers then you can't discuss taxes. All of those tertiary professions depend upon a base foundation of core productivity. All of those incomes are a tax on the base production of essential goods and services. All of those incomes are only made possible by the work of other people, other people who have less income, not because they don't work as hard and not because they aren't contributing, but because of an unfair economic system that allows technology and the legal system to redistribute wealth from the productive working majority of the poor, middle class, and modestly wealthy to an undeserving super rich. Yes some of the rich have made contributions and do deserve high levels of wealth, but even they have received more than their fair share, more than they themselves have contributed. A part of their wealth is earned, but an even greater part is unearned, it comes for redistribution.

Until that fact is confronted in America no meaningful economic discussion can take place, and likely no real resultion to America's economic problems will occure.


Posted by rationalrevolution.net at 1:13 PM EDT | Post Comment | View Comments (8) | Permalink
Updated: Sunday, March 15, 2009 1:16 PM EDT
Tuesday, February 3, 2009
 The State and Future of the Economy

Topic: Commentary
I haven't posted much here lately because my personal life has been very busy, but there are a few things I would like to say about the current state of the economy.

If you have read much of the economic material on this website then you should have some idea that the warning signs for the current economic condition were visible long before this so called "down turn" happened.

Despite this, I still have yet to hear a single news story or analyst address the real root causes of the economic crisis in America, and around the world. The root cause is growing economic disparity.

Economic disparity has been growing in developed and developing countries around the world over the past 30 years, but in no developed economy has the growth in disparity been as great as it has been in the United States, which now has economic disparity on par with Mexico.

I have presented plenty of data addressing this issue on this website, so I'm not going to present it here again, but the data is clear that ever since the "Reagan Revolution" economic disparity has been growing in America, and in fact it grew at its fastest pace under the presidency of Bill Clinton, despite the fact that the Clinton years were the only time in the past 30 years in America when median income barely beat out the rate of inflation. While the incomes of average Americans did rise slightly under Clinton, the incomes of the top 1% grew more rapidly than any time in American history, far out pacing the rate of increase for average Americans.

Along with this growing economic disparity there has been a direct correlation of growing personal and public debt as average Americans have been encouraged by corporations to live beyond their means.

Over the past 30 years, up until 2008, as America has operated on the basic economic foundation put in place by the Reagan administration, average Americans have spent more money on their own educations, they have worked longer hours, family incomes have grown slightly because more wives have entered the workforce to try to maintain the family standard of living, the personal savings rate has gone down dramatically, the level of personal debt has risen dramatically, incomes for the bottom 90% of income earners have been stagnant, productivity has risen dramatically, incomes for the top 1% have risen dramatically, corporate profits have risen dramatically, taxes have consistently been reduced (primarily on the wealthy and corporations), corporations have directed the largest off-shoring of American production in the nation's history, and, very importantly, the percentage of capital gains income going to the top 1% of income receivers has risen dramatically, while the portion of capital gains income going to the bottom 90% has gone down.

So, what is the root cause of all of this? Well, quite simply is it "capitalism", i.e. the core structure of an economy where the rights to all newly created value are owned by capital owners. The root cause of America's economic problem is that capital ownership has been both strengthened over the past 30 years by the "Reaganomic" agenda, and capital ownership has been increasingly consolidated into fewer hands.

Now this last part may seem a bit odd, because what about all of these retirement programs setup under the Reagan administration and pursed by following administrations, such as the move from pensions to 401K programs and IRAs? These were claimed by market advocates to be better types of saving systems that would "empower individuals" to make their own decisions and personally own their own retirement accounts, which was supposed to be so much better than pensions and which was supposed to broaden capital ownership. (the rate of return on pensions is higher than most 401Ks or IRAs).

Well it didn't exactly work out that way, and it's not certain that it was ever really intended to. On the one hand yes, the number of Americans who own some stock grew over the past 30 years. More Americans own stock, either directly or indirectly, than at any time in America's history, BUT, and this is a big but, the portion of capital ownership BY VALUE held by the bottom 90% of the American population has gone down!

Why is this?

Well, two things. The first thing is that while more Americans own stocks, either directly or via mutual funds, etc., fewer Americans directly own their own capital than in the past. By this I mean that over the past 30 years there has been a massive loss of small businesses. Now if you only look at the numbers this may not appear to be the case because there are a lot of registered small businesses today and that number has grown over the years, but most of those businesses are not significant. Much of that growth has more to do with paperwork and accounting than anything else, with many of those businesses reporting incomes of under $5,000 a year. These are mostly side businesses and not primary means of income.

So, while the number of Americans owning stock has gone up over the past 30 years, the portion of Americans personally owning their own private, meaningful, capital has gone down. The percentage of Americans working for large corporations has increased over the last 30 years, with now more than 50% of Americans working for a company of 500 employees or more.

So the first thing is that the percentage of Americans owning paper certificates has gone up, but the percentage of Americans owning capital that they personally control, such as their own store or their own farm or their own production facility, has gone down. This loss of personal capital ownership has exceeded the gain of stock ownership, and this is exactly what one would predict would happen in a "free-market" or "free-marketish" capitalist system.

Secondly, while the number of people owning at least some stock has increased in America, the majority of that stock is locked up in retirement accounts. What has actually happened is that the percentage of capital gains income going to the top 1% in America has gone up over the past 30 years while the percentage of capital gains income going to the bottom 90% has gone down. So despite more people owning stock, the percentage of value owned by the bottom 90% has gone down, while the percentage of capital value owned by the top 1% has gone up, and on top of that, the value that is owned by the bottom 90% is mostly locked up in retirement account where it goes unused until after age 65, whereas the top 1% receive on-going income from capital all the time.

So, where does this capital gains income come from? Well, it comes from workers. Workers are the ones who create the value that is owned by capital owners and which is received by executives and share holders. So, as worker productivity has increased over the past 30 years, and as the cost of obtaining an education has gone up, those gains have not been realized by the workers who are responsible for those gains, instead those gains have been taken by executives and share holders.

And that is why we are in the situation that we are in today, despite the fact that over the past 30 years there have been major advances in technology and major increases in worker productivity and major improvements in workforce education. The average American has not benefited from these advances because the average American in a wage earner and does not own a significant amount of capital.

Given that this is the issue, it can be safely said that none of the proposals on how to "fix the economy" being put forward by politicians or even leading economists are going to truly solve the problem. What Barack Obama is proposing is a standard old school approach to fixing an economic down turn, and it probably will have a beneficial effect, but it won't solve the root causes of the problem.

Every time this happens what American leaders do is they implement some policies that temporarily reduce income and wealth disparity, which temporarily masks the issues and lets the economy keep working for a while, but the core problem, as has been understood by economists for over 100 years, is that ownership of capital is not evenly distributed in a "free-marketish" capitalist system, and thus capital owners are always exploiting and stealing value from workers.

The old school socialist approach to solving this problem, by making capital publicly owned, has been shown not to work. Marxist Socialists have correctly identified the problems with capitalism - they have just failed to identify the solutions.

The solution has to be relatively equal, but private, distribution of capital ownership. Instead of having the state own the capital, what the state needs to do is distribute the capital to the individuals, so that individuals directly own the capital and directly receive income from capital ownership.

I've already made several proposals for how to do this on this website, but there are other steps that could be taken as well. What is important to understand is that the spending and taxation proposals of either the Republicans or the Obama administration aren't going to solve this issue. In order to solve this issue a radical change to our economic system has to be made.

Something needs to be done along the lines of the federal government setting up a national investment program where everyone with a Social Security number gets a federal investment account into which shares of full-market index funds are deposited quarterly, and with which everyone can do with as they please. They can sell the shares or save them and collect the dividends, etc. Every citizen in the country, no matter what their  age or status, would receive the exact same number of shares every month.

Everyone would still have their normal job from which everyone would receive the same types of income that they do now, but everyone would also accumulate capital ownership and capital income. This would, initially at least, need to be paid for by a progressive tax that is heavily weighted toward the wealthy, because after all, the currently wealthy in this country (I'm taking here about those with incomes in excess of a million dollars a year and net worths in the tens of millions of dollars plus) have gotten that wealth by taking it from the American, and indeed global, working class. It is an absolute fact that their wealth is the product of other people's work, and the economy will never be fixed and will never be stabilized until the small minority stop draining off the value created by the working majority.

The solution here is not to increase wages or to just increase taxes on the rich, the solution here has to be a fundamental shift in capital ownership from 1% of the population owning and controlling most of the capital to broad based capital ownership, where capital gains income is relatively equal across the board. The financial schemes of the Republicans over the past 30 years have clearly failed to do this.

And this is all the more interesting because the claims of the Republicans and so-called market advocates has been all along that "a rising tide lifts all boats" and that the "ownership society" would bring benefits to everyone. Clearly the evidence shows that over the past 30 years income disparity has grown in America. The only thing that we can conclude from this is that either A) this was by design all along, or B) the policies of the Republicans and "market advocates" have failed to achieve their goals and have indeed backfired. I tend to think that the issue is option A, because every time I listen to what these people say, on the one hand they make the case for their policies by saying things like "a rising tide lifts all boats", or that the goal or effect of market economies is to allow the market to create benefits for everyone, that everyone benefits from market systems, etc., but then as soon as you question these claims and start to point at the data they change their tune and begin to justify inequality. It is as if they really know that these systems are unfair and create inequality, they just lie on the outset to try and advocate policies that they know are actually going to help the rich and hurt everyone else, under the guise of claiming that its going to be good for everyone.

People have to understand the role of capital in a capitalist system. Capitalism isn't about "free markets", its not about trade, its not about small businesses, its not about entrepreneurship, it is not about rewarding hard work. What defines capitalism is the role that capital plays in the economy. Capital is "productive property", by definition. In a capitalist system the owner of the productive property retains 100% of the rights to all of the value that is created with that property. Capital ownership in a "free-marketish" capitalist system will always naturally tend towards consolidation where fewer and fewer people own more and more of the capital, and by their ownership of capital the capital owners will receive a larger and larger portion of the value created by society, not value created by them, value created by everyone else. This is how a small number of people in capitalist economies become extremely wealthy, not by working millions or billions of times harder than everyone else, but by owning the rights to the value created by millions or billions of people.

The corporate executives and hedge fund managers and large investors over the past 30 years have not worked millions of times harder than everyone else, they have just received value that was created by everyone else. The only way to fix the economy long term is to stop that process of redistribution of wealth from the working poor and middle class to the capital owning wealthy. Make no mistake about, the American economy today has been demolished by the wealthy, both directly and indirectly. The wealthy have both siphoned off trillions of dollars of value from workers to their own private incomes, and they have directly made the decisions that have further devastated the American economy, such as off-shoring American production to China and other countries in order to take advantage of cheap labor. This loss of productive capacity was very much a short-sighted profit driven move that transferred trillions of dollars from American workers to into the bank accounts of a relatively small wealthy elite in America, at the expense of long-term national economic viability. Not only was this a stupid move for the long-term in general, but it was even more obviously stupid given the obvious implications of the inevitable rise in the cost of fuel. Inevitably the cost of fuel was going to go up, so constructing a manufacturing system where parts and materials are shipped all over the world so they can be assembled by the cheapest labor possible is an obviously bad move when the cost of shipping was inevitably going to go up with both an increasing demand for fuel and decreasing supply of it. And the decisions to do all of this were made by the "captions of industry", by both the heads of corporations and leaders in government who cooperated with them. These people made large one-time gains from selling America out, and there is no doubt that the fingers of blame for our current economic situation must be pointed squarely at many of the wealthiest people in America today, whose gains came at the expense of everyone else and the nation's future.


Posted by rationalrevolution.net at 5:13 PM EST | Post Comment | View Comments (6) | Permalink

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