Skip to main content

View Diary: Are we on the verge of another 1848 or 1917? (283 comments)

Comment Preferences

  •  But is a fleeting moment in history? (25+ / 0-)

    I hope you saw, this past week, Bob Swern's diary on Tom Piketty's new book on capitalism and inequality. In his review of the book, New York Times writer Thomas Edsall provides an excellent summary of the historical trends that allowed the rise of the middle class, and what some economists call "the golden age of capitalism":

    According to Piketty, those halcyon six decades were the result of two world wars and the Great Depression. The owners of capital – those at the top of the pyramid of wealth and income – absorbed a series of devastating blows. These included the loss of credibility and authority as markets crashed; physical destruction of capital throughout Europe in both World War I and World War II; the raising of tax rates, especially on high incomes, to finance the wars; high rates of inflation that eroded the assets of creditors; the nationalization of major industries in both England and France; and the appropriation of industries and property in post-colonial countries.
    The one important trend Edsall missed was the effect of mass college education that was created by the G.I. Bill. Millions of people who before World War 2 never would have dreamed of going to college, suddenly had the means for a higher education. The resulting increase in innovation and wealth creation unleashed by that unique tidal wave of college graduates in the 1950s and 1960s is incalculable.

    The creation of the middle class was supported and promoted by a literal jungle of government programs, from the federal government surveys and Corps of Engineer water projects that made the arid west more hospitable to human habitation, to the USDA laboratories that perfected frozen foods. But the fundamental point you have to infer from Edsall's summary is that the historical trends that allowed the New Deal basically reversed the power relationship between capital and citizens. The most egregious depredations and exploitations of capital - speculation, usury, and economic rent seeking behavior - were banned altogether or strictly limited.

    The conservative movement of the past three quarters of a century has been pretty clearly directed at removing those bans and limitations on capital. The result, not surprisingly, has been to shift the balance of power away from citizens and back toward capital. Those on the left who are now engaged in a full throated denunciation of capitalism are, I believe, making a huge mistake in not distinguishing between the social democratic capitalism of the New Deal legacy, and the predatory financial capitalism that has emerged since Reagan.

    And we must be clear about the vital role of heavy taxes on the rich. Conservatives and Republicans and such as VCLib argue persuasively that placing more taxes on businesses and the wealthy undermines job creation. But the historical facts show otherwise. The highest rates of growth in the U.S. economy in the past century occurred under the tax regimes that took as much as half the income from rich people. The reasons why this would lead to higher economic growth is not hard to understand, but very, very few on the left bother to learn this, and use it in arguments showing that the conservatives are liars.

    First, the rich generally do not like actually investing in the creation of new industrial capacity and technological progress as much as they like investing in speculative schemes that make only paper profits.

    Second, too low a tax rate encourages rich people to take profits out of a company. When tax rates are higher, it make more sense to reinvest profits back into the company, and write them off as capital expenditures. That's why we have corporate balance sheets showing marvelous piles of cash, tens of trillions of dollars sitting in off shore tax havens, and never ending programs of stock buybacks, while at the some time we have a disastrous drought of capital spending.

    Third is the simple fact that more widely distributed income results in more widely distributed demand. This was the basic cause of the First Great Depression, as explained by Franklin Roosevelt's Federal Reserve chairman Mariner Eccles.

    Let's look at a company of 1,001 people that has $100 million in sales and $10 million in profit. There are 1,000 employees and one CEO. If every employee is paid $25,000 a year, that's $25 million. Let's say the CEO is paid $10 million. From this company of 1,001 people with a total payroll of $35 million, how many new cars can local auto dealers expect to sell?

    The answer is: not many. $25,000 a year is not much on which to live. Buying a new car is pretty much out of the budget of people with so low an income, except if they're still living at home with their parents and not supporting a family. Only the CEO making $10 million can really afford to buy a new car.

    But what does the local market for new cars look like if the CEO's income is cut in half, and the $5 million is used instead to increase the pay of the 1,000 employees? Each employee gets $30,000 a year instead of $25,000, or an extra $417 a month. $417 is more than enough for a new car payment. Suddenly the local market for new cars is tens, hundreds of times larger than it was before.

    If the CEO in our example is too greedy - or too stupid to follow this logic - to stop insisting that his workers' wages be held down do he can be paid $10 million instead of $5 million, then we the people (remember us - we're the ones trying to Establish a More Perfect Union) have a pretty clear means of bettering our local economy by taxing away half the CEO's bloated salary, and redistributing it in our economy through government programs of some sort or another.

    A conservative is a scab for the oligarchy.

    by NBBooks on Sun Feb 02, 2014 at 09:06:50 AM PST

    [ Parent ]

    •  NBBooks, I've gotta tell you (2+ / 0-)
      Recommended by:
      bobswern, CenPhx

      You are one of the best posters here. First rate analysis backed up by good sourcing all within a solid historical framework.

      Damn! Well done! I have learned a lot from you. Thanks!

    •  More from you (1+ / 0-)
      Recommended by:

      That was very good.  More please!

      One cannot raise the bottom of a society without benefiting everyone above. Michael Harrington

      by tporky on Sun Feb 02, 2014 at 09:57:57 AM PST

      [ Parent ]

    •  "Social democratic capitalism" (0+ / 0-)

      was imposed on capital, against its will, by working people, organized in precisely anti-capitalist struggle.  So the rhetoric of today's left matches exactly the rhetoric of those who imposed social democracy on capital 75-100 years ago.  However, there's also a fundamental difference.  At that time there was a social openness to collectivist solutions that has completely evaporated in modern American society, where the dogma of "rugged individualism" holds total sway.  The collective organizing of 100 years ago, of the Wobblies, the CIO, the Share Our Wealth clubs and the Farm Holiday Association may simply be an imposibility in our times.  Then what?  You really think pols are going top stand up against big money?  And can I laugh in your face if you do?  It wouldn't be...all together now..."pragmatic" to resist the demands of big money.

      So we have this huge problem, the runaway hegemony of capital, and not even a potential counter-hegemonic force.  Exactly what do we do, besides get on our knees before big money?  How do we confront it without seeking to discredit it?

      "Power concedes nothing without a demand. It never did and it never will." ~Frederick Douglass

      by ActivistGuy on Sun Feb 02, 2014 at 11:34:07 AM PST

      [ Parent ]

    •  sent to Top Comments (0+ / 0-)


      “Vote for the party closest to you, but work for the movement you love.” ~ Thom Hartmann 6/12/13

      by ozsea1 on Sun Feb 02, 2014 at 01:56:04 PM PST

      [ Parent ]

      •  How do you do that? (2+ / 0-)
        Recommended by:
        Puddytat, ozsea1

        I keep meaning to but I can never figure out how exactly.

        If knowledge is power and power corrupts, does that mean that knowledge corrupts?

        by AoT on Sun Feb 02, 2014 at 02:55:45 PM PST

        [ Parent ]

        •  It's very easy (2+ / 0-)
          Recommended by:
          AoT, ozsea1

          Click on the date/time stamp of the comment you want to submit and copy the link.  Send that link to Top Comments either by Kos Mail or our G Mail Account ( along with your DK user name and a brief description of why you think it's a Top Comment.

          For ease of access, I recommend that you bookmark the Top Comments DK message page so you can quickly get there when you find an excellent comment.

          Submissions received by 9:30 PM Eastern are included in Top Comments which publishes every night at 10 PM Eastern.

          Hope that helps.

          There already is class warfare in America. Unfortunately, the rich are winning.

          by Puddytat on Sun Feb 02, 2014 at 03:41:27 PM PST

          [ Parent ]

      •  Thank you (0+ / 0-)

        Your submission will appear in tonights Top Comments.

        There already is class warfare in America. Unfortunately, the rich are winning.

        by Puddytat on Sun Feb 02, 2014 at 03:42:07 PM PST

        [ Parent ]

    •  This comment was sent to Top Comments (0+ / 0-)

      and will appear tonight.

      There already is class warfare in America. Unfortunately, the rich are winning.

      by Puddytat on Sun Feb 02, 2014 at 03:42:27 PM PST

      [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site