American history is riddled with disingenuous moments wherein leaders, seeing their preferred system of capitalism threatened by bottom-up production, give the smallest concession to expanded liberty possible in order to avert crisis. It is our economic defense mechanism. When threatened by socialism in the 1930's as a response to the stock market crash and Great Depression, America produced the New Deal, which included a plethora of racist programs designed to make sure some division remained among The People to keep them from united for a democratic economy (as well as to secure the political support of racists).
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American history is riddled with disingenuous moments wherein leaders, seeing their preferred system of capitalism threatened by bottom-up production, give the smallest concession to expanded liberty possible in order to avert crisis. It is our economic defense mechanism. When threatened by socialism in the 1930's as a response to the stock market crash and Great Depression, America produced the New Deal, which included a plethora of racist programs designed to make sure some division remained among The People to keep them from united for a democratic economy (as well as to secure the political support of racists).
I recently was tasked with giving a presentation to my graduate-level Economic Analysis class in Seattle University's MPA program. After listening to unenthusiastic presentations about economics and The Seahawks, presentations about the economics of oil, I felt it necessary to take a look at a larger issue, income inequality in America in the context of rising GDP.
Capitalist economic theory assumes that if GDP rises, the real wages of the population will rise, promoting the quality of life, encouraging innovation and expansion, allowing governments to collect enough revenue to solve market failures and to correct negative market externalities. As Robert Reich points out in Inequality for All, which is available on Netflix, this theory is not currently at play. GDP has been growing at the same pace as productivity in general, a trend which seems tautological. Theoretically, the income of workers should be increasing, given their increased productivity, which has been a major contributor to the rise in GDP. However, real wages of workers have mostly stagnated, and in some cases, have declined. Childhood poverty, along with corporate profits, are at all time highs in America. It is said that for the first time, the youngest generation of Americans is expected to have less opportunity, less upward mobility, less financial security, than the generation of their parents.
This has happened through the use of political money to control the political process: rich folks spend money in the political realm in order to secure record profits for themselves. They created a system, through collusion with political actors, which has stripped the rich of tax responsibilities, which has stripped protection from workers, which is eliminating the middle class.
The capitalists of the 1950's, seeing socialism and even instances of anarchism manifest (or purportedly manifest, as in the case of China or the Soviet Union—which, in my view, were state-run capitalist economies relying on socialist mythology—around the globe, and understood that they needed to open the club of the American Dream to a larger segment of society. A corporation needs new investment to expand, after all. They were aware of the threats which poverty presents to their systems, to their mythology of equality for all under a system of vast income disparities. America responded to its abhorrent distribution of wealth in the 1929 with open arms, allowing selected segments of society, namely poor white people, to share in the American Dream. After 2007, America has yet to invest in its middle class. The stock market has rebounded and surpassed its pre-recession levels. Corporate profits are growing, lock-step with CEO bonuses. And yet, we are still feeling strapped. We are in unending debt, stuck in traffic, paying tolls, getting arrested for expressing our discontent and petitioning our legislators to address our grievances. White folks have it the best, treated better by the system at every level, from criminality to promotions, to pay and benefits. White men, in particular, are afforded the most opportunity. Beneath them, white women, men and women of color, men and women of non-Christian faith, and that's not even taking into account how these issues of race, sex, and religion intersect with the issues of sexuality and gender orientation.
If one is a capitalist and wishes to preserve capitalism in any form, their only hope is to invite others into the club, taking some of their hoarded fortunes and sharing it with the common people. They will have to do so in a way that accounts for privilege in the context of intersectionality, they will have to push for socio-economic racial and sexual justice. Otherwise, we humans, who are so talented at recognizing patterns, will notice that the story presented by proponents of capitalism are not even remotely corresponding to the economic facts. And we will revolt. We will embrace collective ownership of productive enterprises. We will decentralize entrepreneurial ability in a manner similar to how we decentralized the divine right of kings. We will not allow the few to conduct the affairs of the many, and the minority rights so aptly advocated for by Madison in The Federalist—the right of the few richest Americans to their property regardless of distribution—will be seen for what it is, a thin attempt to reconcile plutocracy with the ideals of modern liberalism, and it will be abolished.
Capitalism has a choice of whether to outgrow its assumptions and motivations to evolve into a socially useful enterprise, or to be put down like a rabid animal who, at best, poses a risk to anything in its vicinity. To invest in the poor and middle class of this country is capitalism's last, and only defense.