Thomas L. Friedman, quoting one of his favorite authors, wrote in Wednesday's New York Times(1):
“' Socialism for the rich and capitalism for the rest' happens...when government intervention does more to stimulate the financial markets than the real economy. So, America's richest 10 percent, who own more than 80 percent of U.S. stocks, hae seen their wealth more than triple in 30 years, while the bottom 50 percent, relying on day jobs in real markets to survive, had zero gains...
Quoting Ruchir Sharma, chief global strategist at Morgan Stanley and author of The Ten Rules of Successful Nations”, Friedman directs our attention to an essay written by Sharma and published last July in The Wall Street Journal entitled “The Rescues Ruining Capitalism” in which Sharma asserts, according to Friedman “that easy money and increasingly generous bailouts fuel the rise of monopolies and keep 'alive heavily indebted 'zombie' firms, at the expense of start-ups, which drive innovation'. And all of that is contributing to lower productivity, which means slower economic growth and 'a shrinking of the pie for everyone'. As such, no one should be surprised 'that millennials and Gen Z are growing disillusioned with this distorted form of capitalism and say that they prefer socialism”
Ah, yes, the old Socialist Bogey Man, always under the bed, always terrorizing the dreams of every good citizen. Never mind that Capital is here doing what Capital always does: constantly re-configuring itself into ever few hands; never mind that we are here paying homage to the gods of ongoing eternal 'growth' as if Mother Nature has no say in the outcome; never mind that the solution is always more of the same, always a question of growth and never a question of serious redistribution.
Friedman is quite right to point to the ossification of Capital, a point well documented in the works of Kevin Phillips, the card-carrying Republican consultant to Richard Nixon and author of his 'Southern Strategy'. Phillips spent years pointing to the parallels between the economic trends occurring during the postwar Age of Conservatism in the United States and the decline and collapse of the Spanish, Dutch and British Empires, pointing out that as money was given over from manufacturing and production to the financiers, the economies of the great modern empires ossified and then declined.
Friedman, by way of Sharma, however obliquely gets to the problem:
“In the 1980's,” he writes, 'only 2 percent of publicly traded companies in the U.S. were considered 'zombies,' a term used by the Bank for International Settlements (BIS) for companies that, over the previous three years, had not earned enough profit to make even the interest payments on their debt...The zombie minority started to grow rapidly in the early 2000s, and by the eve of the pandemic, accounted for 19 percent of U.S.-listed companies.' It's happening in Europe, China and Japan too.
“Before the pandemic, the U.S. was generating start-ups—and shutting down established companies—at the slowest rate since at least the 1970s...the number of publicly traded U.S. companies had fallen by nearly half, to around 4,400, since the peak in 1996....
“Alas, though big companies are becoming huge and more monopolistic in this easy money, low interest rate era. They can so easily use their inflated stock prices or cash hordes to buy up budding competitors and suck up all the talent and resources 'crowding out the little guys'”.
In what appears to be a Wall Street version of what is happening throughout the land on Main Street, where Big-Box giants are sucking the life-blood out of every town in America, Friedman simply observes that all of this “is actually making our system more fragile”.
Indeed it is, but is isn't simply that innovation is being stifled or that, as Friedman further observes...”that so many countries, led by the U.S. have massively increased their debt load, if we got even a small burst of inflation that drove interest on the 10-year Treasury to 3 percent from 1 percent, the money the U.S. would have to devote to debt serving would be so enormous that little money might be left for discretionary spending on research, infrastructure or education—or another rainy day.”
We are left with no
choice, as Friedman rightly recognizes, but to spend money now in
order to deal with a sagging economy (we are currently hemorrhaging
three quarters of a million jobs a week), the pandemic (we need
vaccines and a delivery system) and Mother Nature (the Climate Crisis
is upon us). But there are already cries coming from ReSCUMlickans
to reign in on spending, and soon there will be demands to cut, cut,
cut and, given the sluggish nature of the economy, cuts will only
prolong the agonies.
Yes, we can all agree with Friedman that the day of reckoning will soon be upon us. What will happen, of course, is that the reckoning will come in the form of an assault once again upon the New Deal; cuts in unemployment, food stamps, housing, education, environmental protection.
Friedman doesn't go into that, but we are familiar enough with the history of the last half century to know what is coming. Let me suggest another approach, one rooted in our collective experience, and one that works.
First, deal with monopolies by the rigorous enforcement of anti-trust and move to impeach any federal judge that delivers an opinion designed to weaken the law.
Second, and this is a big one: RAISE TAXES ON WEALTH. Here the experience of the Second World War is instructive. The taxes upon the wealthiest Americans reached a zenith of 94 percent by the late 40's setting the groundwork for an explosion of the Middle Class. Government invested in infrastructure: highways, schools, space, housing and prosperity was widely shared.
Third, Tax wealth at much high wages that work. As Adam Smith, the founder of modern Capitalism has pointed out, work produces wealth. Wealth being, in Karl Marx's words 'dead labor' does not replicate itself. How this works is that if individual income as well as capital gains are taxed at much higher rates than wages, capital will move from individual investments back into the industry that produces it. This was our experience coming out of Depression and War, when spending rescued capital and government taxation and regulation made it work.
Fourth, take another lesson learned from the War, sell bonds. By embarking upon a national campaign of selling savings bonds, we stop funding our debt by massive borrowing from foreign capitals and keep the money in the country.
Fifth, and President Biden already has begun to do this: government spending must at all costs be directed at domestic manufacturing, keeping much needed money and technology in the country.
Sixth, and again the Biden Administration, reversing the ignorant mendacity of Caesar Disgustus, has already instituted: invest heavily in our crumbling infrastructure, including high speed internet, highways, railroads, mass transit, education, housing and Green technology. Our ancestors, never so stupid as to openly declare that the government should not direct technology, would have long since used the immense power of government to move us from dependence upon the fossil fuel industry. They did so when they built canals to replace horse-drawn roads and paths, when they built railroads to replace canals, when they built highways to replace railroads, when they built aircraft to replace roads. All of these things were done with massive government assistance.
All of these lessons were lost on The Generation of Swine who, blinded by greed and mesmerized by the cheap pulp fictions of Ayn Rand, the pseudo-intellectualism of William Buckley, the charlatanism of Ronald Reagan and the demagoguery of Caesar Disgustus have wandered down the rat-hole of conservative sophistry. These are lessons lost. Lessons that, blinded by the right, we have refused to learn.
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Friedman, Thomas L. “Capitalism and Socialism, American-Style”, The New York Times,
Wednesday, January 27, 2021. Page A23
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