Trickle down crisis ‘solutions’

The other day I was talking with a local Democratic congressional candidate. I asked him for his views on the current economic situation. He said we have a liquidity problem and that we have to get money to the small business people so they can start borrowing again. While I agreed that small business needed help I thought that FDR’s approach of feeding the money in at the bottom rather than the top of economic food chain was preferable both because it would immediately help the people who needed it most and the money would immediately go into circulation because of those needs. He said that this situation was not like the one in the Great Depression. He said that this one was one of restoring liquidity to the economic system and that small business, which would hire more people as business improved if they could get bank loans, rather than public works was the quickest way to do this. He pointed out, as many people do, that the New Deal recovery was not fulfilled until the full employment of World War 2. I was struck by this comment from one who had earlier expressed admiration for Franklin Roosevelt. To me it was an indicator of just how far Reaganesque, profit-first, economics has permeated Democratic thinking. Let me explain.

First, the Great Depression was understood as a liquidity problem. I can remember my mother, who by instinct was a saver (She cut up and hemmed old towels to make washcloths.) say that people needed to spend more. There was a national campaign against hoarding. Second, the lesson to be learned by the fact that the New Deal was not completely accomplished until World War 2 is that government provision of jobs does work. It was war, that is government, production that spurred the economy along with the fact that there were fewer workers, which should tell us something about overpopulation. I have asked myself repeatedly why Democrats will do almost anything to preserve the dominance of the free enterprise system. As long ago as the 1870’s the economist Henry George was concerned about eliminating the boom and bust cycle of capitalism. Obviously this occurred because capitalism always overshot the mark due to the over speculation it generated. George saw taxation as the appropriate device for controlling this repeated over speculation. Indeed that was the basic mission of the Federal Reserve established after the great depression. It did not work this time because the people let themselves be gulled by Reagan’s irrelevance about ‘Welfare Queens” and the need to get “government off our (corporate) backs” by way of deregulation.
That this should happen well within the lifetime of many who suffered in the Great Depression, demonstrates the need for this lesson to become a part of the American way. Not free enterprise, but regulated enterprise in which the economy’s sole justification is the welfare of the people. Even Adam Smith recognized this when he expressed concern that corporations like the East India Company could dominate a country’s economy and politics.

Taxation as a control mechanism is better suited to ameliorating the boom and bust cycle than the usual practice of trying to deal with depressions by wasteful corruption-prone tactics of money infusion on those occasions. Taxation has the advantage of being continuously available as problems arise. It can be increased to reduce the excesses of wealth underlying speculation as well as being reduced to stimulate an economy. Further it can be targeted on specific parts of an economy if they are seen to be the problem. An example of this latter is the proposed Tobin tax, named after James Tobin the economics professor who first proposed it, which would place a small tax on the billions of dollars of investment transactions that fly around the world electronically 24/7 in order to transfer some of the wealth of the northern hemisphere to the poverty-ridden southern hemisphere.

Underlying this view is the need for the American people to abandon their insane belief in the sanctity of the free enterprise system. It is a controlling mechanism used by the wealthy. The profit-driven free enterprise system has, and can have, no regard for human beings other than as cogs in an economic machine that regards them as either assets (customers) or liabilities (seniors, the ill, children etc.). Citizens have to be disabused of the manipulative Horatio Alger myth that because some people can “make it” all can and if they don’t it is their fault not the system’s, no matter how prone the system is to the influence of wealth. This myth has caused great unnecessary suffering. The people should understand that the “taxes are bad” mantra of conservatives is designed by the wealthy to control the welfare of those less fortunate. Joe the Plumber’s complaint about taxes being too high and robbing him of what he earned despite the fact he would benefit from Obama’s tax plan serves to underscore American’s ignorance of their current tax “system” and the extent of the indoctrination they have been subjected to. What do we expect when so many of television’s news readers (I refuse to call them reporters.) are millionaires themselves.

Finally, it should be a matter of common sense and taught as a part of the American ethos, that redistributive taxation is necessary to preserve democracy. Without it the wealthy will be in a much better position to accumulate additional wealth than will those who lack wealth. This will eventually produce a society of the rich and the poor, which is and always has been inimical to democracy. We have glossed this fact by saying democracy requires a large middle class. This is simply a sociological way of stating the same economic fact, which in taxation terms, we call the graduated income tax. Wealth must be controlled in the interest of preserving democracy. This, to my mind, should be an essential feature of the economic education of the citizenry.

As a footnote and perhaps a future column I would point out that, unlike the Great Depression, we no longer have a manufacturing-based economy. We have so dramatically outsourced and robotized manufacturing that finance has now replaced manufacturing as the largest segment of our economy. How this nation will recover using our current ‘service’ economy is far from clear.

Also, how much will the rest of the world let us increase our enormous global debt in order to finance rebuilding our infrastructure and the alternative energy resources we need, e.g. wind farms from Texas to North Dakota.

Another, deeper issue, is whether a manufacturing economy can be grown without disastrous effect on our environment. Our productivity of the last 200 or so years has decimated the natural environment and has allowed human population to become unsustainable. These highly relevant issues seldom come up in the contemporary discussion of what is now the world’s economic crisis.

Bob Newhard

On Religion, Morals and the Public Weal

The current bellicose, undemocratic, and corrupt presidential administration was put in power by the most religious movement in this country since the last fit of religiosity in the series of Great Awakenings to which this country has been subject. What are we to make of this?

These are the people who claim they are the moral majority. The discrepancy between this claim and the president and administration they put in power are in glaring contrast. Why so?

I believe that there is more to such a contrast than mere hypocrisy. What we are looking at is, I suggest, a reflection of the American’s self absorption. By self absorption I mean that the American value system is far more focused on the individual than on the society.

Notice that the so-called moral majority is concerned mainly with personal behaviors, although they do oppose some societal practices, e.g. teaching evolution. Their heavy emphasis and activism has been focused on abortion, same-sex marriage and other “misbehaviors” of private life. These are said to be personal sins and society must suppress them.

The result of this moral predisposition is to analyze and account for social issues in terms of individual responsibilities or individual failures. This approach fails to consider the complex relationships that a modern mass society generates and the consequences that flow from this fact. It also inhibits the ability to treat social and political arrangements as systems and therefore to look for systemic problems. Thus we know that there is a high correlation between crime and poverty and yet we address crime solely as an individual responsibility not as a consequence of a misdistribution of societal wealth.

For example, this intense focus on individual “responsibility” assumes that in a society of 300 million we can know of the personal failings of those in power as one might have in an early Puritan village. Additionally, when we try to compensate for this lack of knowledge of individuals by passing laws against proscribed behaviors we create far worse problems. Examples are the ten-year crime wave prohibition unleashed and the disastrous cost in lives and wealth of our ongoing war on drugs. These are direct consequences of the American proclivity to “personalize” social problems. That this is an old mistake is evidenced by Plato’s Republic in which knowledge is the primary human virtue. To make knowledge effective in society Plato advocates rule by a philosopher king, in other words a dictatorship of the wise. This proposal was made in the context of the world’s first constitutional democracy. What Americans have done is to substantially amplify this by applying it to a complex society of 300 million and substituting the values of an essentially tribal religion, Christianity, for Plato’s knowledge.

This failure to distinguish between social problems and moral issues is routinely employed by dictators and would be dictators. Note G. W. Bush’s and Ronald Reagan’s reference to nations as evil. The leaders of a nation may in some sense be evil, although it is interesting that increasing amounts of “evil” are being reduced to psychological and genetic factors by science, but it is ludicrous to call a nation evil.

One of the most egregious manifestations of this disposition is found in the continuing refusal by Americans to see America as part of the world. We are a nation apart. For such a nation there is only one role in this highly integrated planet and that is to dominate the rest of the world. Until Americans firmly reject this posture they will have no peace and the level of human suffering and death will continue to escalate. The neocon criminals who sought to impose an American imperium on the rest of the world must be publicly and vigorously rejected to begin compensating for the harm we have done.

Bob Newhard