We need a new economic system because the old has failed. American Capitalism has failed so many people in so many ways. We need to transform our economy to one that works for the most people possible. We need a new form of capitalism.
What is the state of American capitalism today? As Professor James Galbraith has stated American capitalism is not what we are told by politicians, media or textbooks: benign competition leads to a greater good for most people. We are far from that. The defining feature of American capitalism today is predation – where a class of people – the oligarchs – feed off the demise of people not within this class. This oligarchy, or as Professor Galbraith calls them the predatory class, has control over the government and the capital in our economic system.
There are other features of American capitalism:
1) Financial sector that is too big.
The following is from a really good article by Simon Johnson, The Quiet Coup:
From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
That is too much concentration of wealth in one sector because with that comes great political power as shown by the various Wall Street bailout plans. According to the International Monetary Fund (IMF), the various bailout efforts by the Federal Reserve and Treasury Department will cost taxpayers $1.9 trillion. Of course the Fed and Treasury dispute those numbers.
2) Lack of Corporate Accountability
Corporations are suppose to operate in the best interest of its shareholders but not today. What we have today is “managers’ capitalism” as John Bogle calls it. Corporations are operated for the benefit of its managers and not shareholders. These managers are not held accountable either because managers are protected by securities laws and corporate governance laws or interconnecting board of directors. We see huge executive compensation packages and bonuses being paid by corporations who were not even profitable. We have executive compensation system that favors short-term gains at the expense of long-term profitability of companies.
3) Globalization
Corporations pushing for lower costs and better profit margins by reducing labor costs. This means that corporations search the globe for foreign countries that will offer them lower labor costs at the expense of U.S. workers.
4) Destruction of the middle class
This financial crisis, which was caused by the financial oligarchy, has destroyed trillions of dollars of middle class wealth by the loss of savings (particularly retirement saving), home equity and personal income as a result of unemployment. But the demise of the middle class was happening even before this financial crisis as shown by income inequality in the U.S.
Between 1969 and 1997, the share of total household income controlled by the lowest income group has decreased from 4.1 percent to 3.6 percent, while the share to the highest income group increased from 43 percent to 49 percent, according to the Census Bureau.
In 2006, the top 5 percent of households in terms of income were making some $297,405, compared with the lowest fifth of the population, who had an average household income of $11,352, according to Census data.
A top heavy distribution like this does not favor a strong middle class and it portends the destruction of the middle class in the U.S. But this high concentration of income is a problem for other reasons as Professor Richard Levins has said:
"By the 70s, we had a very different distribution of income and wealth that, in my view, favored middle class. But by 1980, that trend has gone back the other way to where we have a very large percentage of income and wealth in the hands of barely one percent of the people… When you have that kind of wealth in very few hands, these people become politically and economically very, very powerful,"
This oligarchy or predatory class has hijacked American capitalism. American capitalism has created an illusion of economic growth and corporate profits based on debt. American capitalism has replaced good wage paying jobs with unregulated loans and more consumer debt. This house of cards has fallen. It is time to replace it – future generations are counting on us to do.
Part 2: New Capitalist Manifesto
Comments
you go Rebel
It's really true and these predators also pay enormous sums to leave a swath of public relations, marketing psuedoscience rhetoric to hide what anyone driving through pretty much any town in the United States can plainly see....the destruction of the U.S. middle class.
I also hypothesize, and I believe history, theory as well as the data backs this up....when one destroys a nation's middle class, invariably they destroy the nation and it's entire economy.
If 70% of our economy is consumer spending
then it is absolutely important to have a strong middle class. If we want sustainable growth and not these violent boom/bust cycles than a strong middle class is essential.
Is there a wave theory that says the more frequent cycles the more intense the amplitude?
1970s - oil shock
1980s - International debt crisis
1990s - internet bubble
2000s - credit bubble
These shocks are coming more frequent and possibly more damaging.
RebelCapitalist.com - Financial Information for the Rest of Us.
yes, standing waves
From physics, there is something called standing waves. They can reinforce each other and create a monster wave.
I think NDD has really looked into business cycles and might be able to shed more light, but as I understand it, the original intent of regulation, Keynesian economics, even socialism was to minimize those economic cycles.
But our lovely predators want those wave peaks so they can make out like bandits.
The center of American Capitalism: Article I, Section 10
We need a constitutional amendment to replace this as a part of any new captialist manifesto- specifically on trade treaties and individual state currency, and perhaps something on chartering corporations being limited to a state as well (no more respecting the laws of other states, the way the Supreme Court destroyed usury laws). #1, #2, and #3 are all caused by the United States of America becoming the Federated States of America- an experiment in free trade that I believe has failed.
When it comes to economic systems, the dream of Marx & Smith has indeed failed. Nations are simply too big, and international free trade has been nothing but a disaster for the majority of the people involved. There should be no reason for Congress to get involved in say, a tariff trade swap between Oregon and Idaho, but because of Article I Section 10, such protectionism is impossible, and thus a financial sector centered in a single city 3000 miles away gains power. That's completely illogical, and I say, detrimental to both Oregon and Idaho.
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Executive compensation is inversely proportional to morality and ethics.
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Maximum jobs, not maximum profits.
From Britain to America to
From Britain to America to Asia, people are rising up and protesting debt as being normal and accepted. Why is this happening?
“Just as the rich rule over the poor, so the borrower becomes the lender’s servant.” Pvbs 22:7
It is quite interesting after reading that verse from the Bible that God cautions us away from debt just as the protesters are doing. Taking the verse into context of the whole chapter of Proverbs, one could say that only a fool would be in debt. However, in today’s current economic systems and philosophies, debt is the main instrument of economic success of the entire world.
What happens to an economic system that is based on what God considers foolish?
Wheee...
Wheee.
We need a new form of capitalism.
. . . As Professor James Galbraith has stated American capitalism is not what we are told by politicians, media or textbooks: benign competition leads to a greater good for most people.
The defining feature of American capitalism today is predation – where a class of people – the oligarchs – feed off the demise of people not within this class. This oligarchy, or as Professor Galbraith calls them the predatory class, has control over the government and the capital in our economic system.
Capitalism is an outgrowth of British colonialism, and has always been as predatory as its predecessor. Its theology-- oops, ideology-- is British, not American, and the dumbest-- or most naive-- thing the founding fathers don't seem to have understood is that a nation's politics and economy are an integral system, not two separate things. So they created a better political system without also revamping the economic system. As a natural consequence, "American capitalism" at its worst aped the British model, and at its best only grudgingly acquiesced to the regulation and moderation of the worst of its predation, not by itself but by the government and unions-- but only for a while which is over.
A tick on the back of a wildebeest is obviously a parasite. Less obviously, the "noble" lion is in reality just a parasite on the wildebeests as a herd. Neither predator can exist without its prey. Neither parasite can live without its host.
Now look at what Galbraith said again. If capitalism's defining feature is predation, it's a predator, which is just a nicer way to say parasite-- a parasite on everyday human trading activity-- on a world scale in this modern day and age. It's not and never has been a complete economic system in and of itself. It has to have prey. That's what the British colonies were. That's what our "banana republics" were-- some of American capitalism's prey. That's what the "developing nations" are now. They're the herd "multinational" western capitalism feeds on, and "globalization" is its vainglorious attempt to domesticate, or at least fence in the herd so it's easier to prey on them. And as you are aware in you own way, it's working hard to reduce the United States to where it's just one more nation in that herd.
We don't need "a new form of capitalism".
(a) It's a predator, so it's not even half of a viable economic ecology.
(b) It espouses "the law of the jungle", so it's an animal loose in a human world.
(c) It notoriously operates on greed and fear, which is exactly what we try to raise our children not to do anymore.
Using the latter image, we don't need a new form of childishness, we need a more mature system. And I don't mean socialism or any other currently existing model. What we need doesn't exist, and won't unless we grow up enough ourselves to work together to figure it out.
And for that to happen, this conservative/liberal, Republican/Democrat "we're the goodguys" bullshit has just naturally got to stop. Harping on the rightness of what you already know ain't how you figure out anything new. In fact it's the single biggest impediment to learning anything new.
I hope that stirs the pot a bit.
:-)
Regards,
Al J
sold out core values
Our country is an experiment in cultural globalization that is not capable of providing jobs for its own people. The past 20 year period is not about some grand plan to pull the world up by the economic help of a global economy interacting for the common good. It is about looking the other way, on environmental destruction, compromising our core values to finance agendas, create personal prestige, and direction of revenue to political origins, all while portraying globalization as a noble vision for the common good. Economic globalization by a free market society that all people can benefit from can not be achieved by interlacing our countries economy with a communist country that controls the size of their middle class workers to benefit their currency valuation, while controlling the distribution of wealth to the privileged few. In other words they control the amount of have and have not's in their population, so the crooks can get rich. Our country has become dependent on imports for our largest employers. We can not even act, with legislation to keep our water and air clean from foreign ships bringing in foreign manufactured goods, all at the expense of American jobs, because we are not economically free. Ballast water laws affecting mostly foreign ships and the price of foreign manufactured goods would rise according to a 2009 report for congress,-- but this would hurt the plan for economic globalization which will carry our country on the coat tails of a communist country until the next global crisis. Nobel winners call for tariffs to help create jobs,-- report for congress says national ballast legislation to cause cost of imports to rise. It just might have same effect as tariffs without a trade war, what dose this administration do??? It offers incentives to foreign ships bringing foreign goods into our country, if they decide to volunteer to install technology to protect our water. Sadly the time has come for our country to face this piper.
Failure of ethics, not capitalism
What has failed in America is good old-fashioned business ethics. The desire to build great businesses that serve human needs, to treat workers fairly and inspire loyalty, to work as a team disregarding social or financial status - were uniquely American traits. No more. All that matters is money, money, money - by hook or by crook, no matter who gets hurt. America will recover ONLY when it returns to its roots: creating global businesses that enrich America as well as the bankers.