But what's wrong with the current economic system in America, you ask? Quite simply, the body of American economic policy favors the wealthy over the middle class. For thirty years, the regulatory infrastructure developed during and following the New Deal has been systematically dismantled and the regulators themselves have been replaced by the very people the regulations were designed to regulate. If this were the only problem or even the primary problem, the fix would be easy enough. Unfortunately the process of the dismantling of our economic system is not the problem, but only the symptom. The real problem is the concentration of wealth and power itself. As long as Americans permit the existence of a plutocracy and grants its members free reign to influence and manipulate the wheels of government, treating the symptoms of the problem will be next to impossible, let alone actually treating the problem. The broken economic system is a symptom of the abdication of the power and responsibility of the middle class to constrain the wealthy.
The American anxiety faced today is the direct result of this broken economic system. Let's be clear, it is not capitalism that is in broken, but rather America's current policy and the institutions created to protect our economic system. From the time of the New Deal until the crisis of the Arab Oil embargo, the U.S. enjoyed the longest period of stable growth in the history of modern industrial society. For 35 years the nation enjoyed prosperity, a growing middle class and no major bank crisis. The onslaught of attacks on the regulatory systems that made this prosperity possible, starting with the weakening of the Glass-Steagal Act under Carter and continuing with deregulation-on-steroids under Reagan, continued to entrench the influence of the wealthy in government policy-making. The economic breakdown resulting from these attacks on the middle class started almost immediately, first with the credit union crisis, followed by the a series of boom-bust cycles, recessions and mounting national debt. With each new debt plateau, the security of the middle class faced renewed attacks and further dismantling of safety-net programs and the banking community benefitted from bigger and better bailouts. Each intentional crisis was blamed on the middle class victims and their labor union representatives while the perpetrators continued to concentrate more and more of America's wealth into fewer and fewer hands. These onerous events could fill volumes, but for the sake of brevity, it suffices to say that the end result was the economic meltdown of 2008. Unfortunately for the politicians and the wealthy special interests they represented, this meltdown came about 6 months too early to enable them to blame it on the new, less friendly, Obama administration.
The solution to the problem, the concentration of wealth and power in America, cannot be solved overnight or with the stroke of a pen. Nor can the American economy be solved by those who currently make up the corporate community. To be sure, it is the proper role of government to act on behalf of all Americans to solve this problem. According to capitalism.org, ". . . a proper government's only responsibility is to protect the rights of the individual, by banning the initiation of force, thus making all relations between men peaceful, i.e., free from the threat of violence and fraud." We might add to that statement, "and to be free of threat to the welfare of the individual and his or her family." Ezra Benson, former Secretary of Agriculture under Eisenhower, says "" all governments have a right to enact such laws as in their own judgments are best calculated to secure the public interest; at the same time, however, holding sacred the freedom of conscience. Today, the economy is held economic hostage by a hostile plutocracy (represented by giant hedge funds) and psychological hostage by multinational conglomerates and a media oligarchy that is owned largely by these wealthy special interests. Until Americans can re-establish a geographically and ideologically diverse entrepreneurial community, the same tired, old plutocrats will continue to use the same tired, old techniques to intimidate Americans and any government we elect into strengthening policies that help them consolidate their wealth at the expense of middle class America.
The act of incorporation is not evil in and of itself, but corporations have neither conscience nor soul. There was a time when every corporation was required by law to contain a paragraph in the corporate charter submitted to the state that created it that one purpose of the corporation was "to serve the public interest." In fact, Adam Smith opposed the idea of corporations "except in cases where there is a clear public benefit." With the slow degradation of the corporation into a device whose sole purpose is the creation of profit for its shareholders, it has become an instrument for the wealthy to hide behind, to use to propagate the illusion that benefits accrue to the public at large and to avoid any responsibility or accountability for the harmful consequences. In reality, 85% of corporate America is owned by the wealthiest 20% of Americans (top 1% owns 34.6%) and the bottom 40% owns less than 1% of America's wealth. The bottom line is that when government favors corporations over workers, it is favoring the wealthy over the middle class. The most egregious evidence of the government favoring the wealthy over the middle class came in the form of the Supreme Court decision in Citizens United v. Federal Election Commission this year that corporations are have free speech rights. Forensic psychologists refer to people with no conscience as sociopaths. The Supreme Court has ruled that corporations (now considered people) that have no conscience can spend unlimited funds to influence the elections of the federal government.
More could be said about the fundamental design flaws of the current U.S. economic policy. In fact, the wealthy favored by this policy would argue that it is not fundamentally flawed. However, it is more important to consider what it means to replace the current economy with a new one. The US economy today more closely resembles the controlled economies of the USSR prior to the collapse of the Berlin wall than it does the model of free enterprise America enjoyed after the end of WWII. America needs to decentralize industry and encourage small business. In fact, the federal government should redefine small business. A community consisting of family-owned businesses employing neighbors is more likely to show compassion to employees than a corporation whose charter subjects it to risk of lawsuit from wealthy shareholders if it puts employee welfare ahead of profits. While smaller, decentralized business communities are more responsive to the needs of the community and the citizens of which it is composed, there is something to be said for economies of scale that exist in larger enterprises. However, these economies of scale could be just as easily achieved via a network of coops comprised of small business owners, acting in concert to manage distribution and warehousing of products and providing employee benefits that are more efficiently provided by larger organizations.
The first step to restoring the economy is to reduce barriers to entry for new entrepreneurs. Big multinationals have created barriers to entry including insurance, licensing and zoning requirements and restrictions. Further barriers to entry are created by the financial community by rationing capital. The federal government cannot act to remove all barriers to entry for the would-be entrepreneur, but it can certainly eliminate any federal policy that inhibits them from stopping job-creating businesses. As a second step, the federal government can also create an investment bank designed to promote small businesses. Also, the federal government could set aside 50% of the $3.7 trillion federal budget for contracts to small business. As a third step the feds could makes some changes to unemployment insurance. As an alternative to doling out weekly payments barely enough to sustain a worker's family, the government could provide an entrepreneurial option, granting a sum equal to the maximum benefits to fund a business plan that employs other unemployed workers. This grant could subsidies equal to the unemployed workers' benefits to improve the startup's chances of success. All of these changes could be implemented without increasing the federal budget and would, in fact, provide federal revenue in the form of payroll and corporate income taxes paid by the otherwise unemployed workers. And of course, instead of sitting at home only consuming the production of those lucky enough to be employed, these re-employed workers will actually be producing new goods or services.
America is in decline similar to that of Holland, Spain and Britain before us. We can spend our time pointing fingers and excusing our own inaction or we can rise to the occasion and act to insure that we do not continue the drift into poverty, obscurity and irrelevance. Of course, those who profit from the misfortunes of others will fight tooth-and-nail to prevent this sort of change from occurring which is exactly the reason why it must.