Let’s get real here. As I have pointed out repeatedly on this blog, the current incarnation of the Republican Party is in no way a fan of capitalism. Oh, they like making money for themselves and their “investors.” (That’s George W. Bush’s word, by the way, not mine.) However, when it comes to the rest of us, they couldn’t care less. And as Abramoff, Enron, Halliburton and the Mafia have shown over the years, it is possible to make lots of money outside of the capitalist system.
I know we’ve been trained to squeal with glee because the Dow Jones Industrial Average is right around 17,000. Such a thing is definitely good, but the high stock market has little to do with the overall economy. And as it exists now, it’s not really capitalism.
The way capitalism should work is as follows.
Someone identifies a need in the marketplace, and fills that need by creating a product or service. They find a price they can charge for that product or service and make some money. See? It’s not difficult. Unfortunately, that system has been bastardized over the past 34 years or so, with neocon Republicans in charge, and I think we’ve all forgotten how capitalism should work. If we’re to pull ourselves out of this current economic mess, we’d better figure it out, and do so quickly.
For example, Americans need cars. For years, Ford made cars. People purchased those cars. Ford hired people to build those cars, and paid them enough to create a greater market for their own product. Ford workers went home and spent money on groceries and food, but they also bought Ford cars. The money they spent created more jobs, and the money those people made created more jobs, and so on. That’s how economy should work. Working people spend money and create more jobs for working people, etc. Money flows through the system and everyone gets what they need, for the most part. In order to grow, Ford needed investment, so they issued stock, which is an equity share of their company’s overall value. People would buy a share of Ford stock, and thus invest their money in the company, so that it can make more cars, and make more money, hire more people, who would then spend more money in the economy, and everyone becomes richer.
That is capitalism.
On January 20, 1981 at noon, our economy changed, and our view of capitalism changed, and not for the better. The neocon model of economy is not a capitalist model; in fact, it stands traditional capitalism on its ear, and is unsustainable. Its formal name is “supply side economics,” and, ultimately, it’s a sham, the economic equivalent of selling snake oil. Supply side ignores the consumer completely, and puts all the emphasis on the company and the investor. If you’ll recall, there was once a time when a family could afford a house and a car on one income. It used to be that people could work as a waiter or waitress in a small restaurant for their entire working lives, and at least make enough to at least take care of the family. Back in the day, people worked for one company for their entire productive life. And most people lived a decent life with one job and no credit card. Yet, such a thing is impossible these days. And no, Republicans, it’s not Obama’s fault. The real reason is the Republican love of “supply-side.”
Thanks to the Republican infatuation with “supply side economics,” which is also known as “trickle-down,” companies no longer make money solely by selling goods and services, nor do they have to sell more every year. In many cases, large companies make lots of money by shifting money from one pocket to another, and using trickery to make themselves good on paper. As a result, the economy is relatively rocky, compared to where it had been before the right wing stepped in.
These days, people rarely work for the same company their entire life. Many get laid off every time there’s a downturn. Jobs pay less and less, and the gap between rich and poor has grown to ridiculous levels. For example, a recent study by the Economic Policy Institute shows that the CEOs of the largest restaurant chains in the country made nearly $11 million last year, which is roughly 721 times what the typical minimum wage worker makes. (Source) If that doesn’t sound like much, consider the CEO made as much in his or her first three hours of work on his or first day as the minimum wage worker made all year, assuming that worker works full-time. In the overall economy, according to data collected by the AFL-CIO, the CEOs of large companies make an average of 331 times as much as the average worker. (Source) Yes, that means, if you’re the average worker, the head of your company made more on his first day last than you made all year.
It never used to be this bad. During the 25-year post-war boom, when Democrats and progressives worked together to create a nation that was the envy of the world, the ratio of CEO pay to the average worker averaged around 20-to-1. Even after the difficult 1970s, with massive inflation and stagnant pay rates, the ratio in 1980 was 42-to-1. But after 20 years of Reagan, Bush and then a GOP Congress trying to push supply side down our throats, it was 120-to-1 in 2000. (Source) Now, it’s at its highest rate since 1928, and we all know what happened in 1929, don’t we?
Supply side economics is not capitalism, and let’s face facts; nothing actually “trickles down” to anyone. While those who are already rich make tons of money finding Chinese manufacturing firms to make cheap crap they can sell to you cheap, most Americans have no choice but to buy that cheap Chinese crap because their wages keep dropping. And the American consumer really gets screwed. You buy that Chinese crap at the dollar store which was made in factories employing slave labor, the company that sold it to you pads its bottom line, to make their investors happy, and all is right with the world, from their view. It no longer matters when a company lays off 10,000 workers; it’s saved all that money on pay and health insurance, and its bottom line looks good, and it doesn’t matter if the retailer provides zero customer service and doesn’t even clean its stores. As long as it keeps its payroll under control and provides a dividend, all is right with the world.
Unfortunately, supply side economics is not sustainable, as we have seen repeatedly. The two biggest recessions since the end of the Great Depression both occurred during the neocon “supply side” experiment, and the series of boom-and-bust cycles since 1980 have damn near killed us, economically. We have to get back to an economy that just grows naturally, as people start businesses and grow businesses through rational investment and increased revenues.
This should be common sense, or at least basic math. Which is better for the economy; ten families making $10 million each, or 2,000 families making $50,000 each? Both of those scenarios involve the same amount of money. Republicans who adore supply side economics will tell you there’s no difference, but then, that’s what makes them neocons. They’ll tell you the ten families making $10 million will invest in things that will bring everyone else wealth, but that’s not realistic. What are they investing in exactly?
The simple answer is, they’re investing in companies that make things for those 2,000 families. The 10 wealthy families couldn’t possibly eat as much as the 2,000 working-class families. On average, those 2,000 families will buy nearly 3,000 vehicles, and gasoline for them. The 10 wealthy families will perhaps buy 40-50. The 2,000 families also need clothes, shoes, haircuts and other consumer goods and services. Whereas the rich families will spend a lot of their money, the other families will spend all of their money, and possibly even take on some debt. There is no way to spin it; the middle class generate more economic growth than rich people. The more the middle class thrives, the better things are for everyone else.
Not only has supply side economics ruined our economic model, it’s made us stupid and short-sighted. A few years back, the Bentley Motor Company, one of the most prestigious car makers in the world, shut down its factory for a month during the Great Bush Recession, because sales were down. But they kept all of their employees, and paid them during the shutdown. Why? Because they sell great cars, and their workers are trained to make great cars. Even now, after most were bailed out, can you imagine an American company doing that? Nowadays, every American company is all about the bottom line, and making it look good for investors for the current quarter, or perhaps fiscal year. Because of supply-side economics, we’re all about the now, and no thought is given to two years from now, let alone five or ten years down the line.
Supply side is also why outcomes no longer matter to most large companies. They couldn’t care less if you’re happy with their product or service, as long as they have your money. Consider that neighborhood shopping districts have been decimated and replaced by a handful of sterile chains who sell foreign-made crap at discount prices, and rarely have anyone in the store who knows anything about the product they sell or the service they provide. The only thing keeping entrepreneurship alive at all is the Internet. Think about it; it’s unusual to see a small mom-and-pop shop open up in most neighborhoods; every new store is a chain or a franchise. And we flock to them.
Thank the supply side economics championed by Republicans for 34 years for all of this. It’s the reason home prices skyrocketed and crashed in the 1980’s, and it’s why they skyrocketed even faster in the 2000’s and caused an even deeper crash. It’s why nearly every family needs two incomes just to survive, and why every parent has a growing need to put their children in day care. It’s the reason people can no longer count on having one job – or even one career – for their entire working life, It’s why factories have moved overseas, and it’s why locally based entrepreneurs have been replaced by chains whose main purpose is to churn out product made by others as cheaply as possible. It’s also why factory farms have replaced family farms, and why our environment is in such grave danger right now.
Supply side economics has caused our economy to stagnate, as the only “industry” created has been an “investment” industry, the sole purpose of which has been to make phony wealth by selling money that doesn’t actually exist.
We need to restore our system to real capitalism, and we can’t do that with the current GOP running things, based on “trickle down.” Modern Republicans don’t care much for capitalism. There’s a reason the neocons call this concept “trickle-down;” it’s because the rich are pissing all over us.
If you’re tired of becoming inferior and poorer, and waiting for the rich to help you out, you need to vote for Democrats and demand that they restore the economy to its former status. It’s called capitalism.