Two Capitalisms

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Joel Hirschhorn--With a kind of religious fervor, American conservatives love to talk about their love of capitalism, as if it has a singular definition and can always be counted on to serve public and national interests.  The intelligent way to think about capitalism is that it can be of two kinds.  The good kind is patriotic and stakeholder oriented, the bad kind is selfish and shareholder obsessed.

The global economic downturn is strong evidence of the dominant second form of capitalism that has caused so much human suffering while it has served the rich and powerful.

When those with power take actions purely to serve corporate financial interests even though it greatly harms employees, the middle class and the national economy then the bad kind of capitalism is being pursued.  Think of the mass export of good jobs, especially in manufacturing, the preference for imported goods, and the investment of capital to build new manufacturing and research facilities in other countries.  Maximizing financial returns to reward corporate bigwigs and stockholders even though the actions greatly harm the US economy and society results from US companies practicing bad, immoral capitalism.  Think of this development as the conquest of Wall Street over Main Street, of those who make money over those who create and make products, of those who promote economic inequality over those who value the middle class.

The power elites that have succeeded in perverting capitalism have also succeeded in making much of the American public so dumb and distracted that they no longer function as informed and effective citizens, which has allowed the government to be hijacked by the rich and powerful through a two-party plutocracy.

Selfish capitalism was exemplified by the role of Fannie Mae in creating the economic disaster by perverting the housing market, as conservativeDavid Brooks correctly concluded; he noted the “leadership class is fundamentally self-dealing;” it practiced “shameless self-enrichment” which produced disastrous results.

To be clear, the conflict is not between capitalism and socialism, the way right wing ideologues talk, but between the good and bad kinds of capitalism, which those on the left need to learn how to talk about.  Bad, greed-driven, too-big-to-fail capitalism has ruined the US for all but the rich which have sucked off much of the nation’s wealth.

A fine analysis by Harold Meyerson on the difference between the highly successful German economy and the dismal US one drives home the crucial differences between the two forms of capitalism.  The need is for the US to learn from the more successful German, good form of capitalism and develop policy reforms that could rejuvenate the US economy by curbing the bad form of capitalism.  The ideas that Republicans keep advocating are all wrong because all they want to do is promote bad capitalism, which only serves the interests of the rich and powerful, not ordinary Americans, not the middle class, and not workers.  Peter Coy has also assembled great information on what can be learned from other nations.

The German economy makes the US one look like it is on its deathbed.  The German tripartite system has business, labor and government working together.  Faced with the same competition from low wage developing countries and the entire globalization condition, Germany has a booming manufacturing sector that constitutes almost twice the share of the economy than that in the US.  And even in the current global economic recession German unemployment is 7 percent.  The tripartite system has kept German labor unions strong and, therefore, protects the middle class whose pay has risen at roughly the same rate as top incomes.  This is in stark contrast to the rich-getting-richer and union–busting situation in the US.  Indeed, the top 1 percent in the US are seeing their proportion of total income rise dramatically, even as their German counterparts are seeing their share of total income shrink.  German corporate boards are required by law to have an equal number of management and employee representatives.  By law!

Germany’s stakeholder capitalism benefits the many unlike the US where selfish capitalism benefits the upper class and brutalizes everyone else. Corporate power has not captured the German government the way it has hijacked the US government.

One powerful and highly successful public policy used by several democracies with strong capitalistic systems in the current economic downturn is providing companies with funds to keep workers on the payroll until demand improves.  This directly fights unemployment and puts government dollars directly in the pockets of workers, in stark contrast to the many billions of dollars the US has spent which have not helped fight unemployment nor helped ordinary Americans, because the billions have flowed to corporate and financial interests.  This more sensible approach that boosts consumer demand and spending has been used by Singapore, Germany and Japan, for example.

Steven Pearlstein recently examined the history of IBM and noted its “outmoded ethos – namely that the company exists not simply to maximize profit for shareholders but to maximize the benefits it can offer to customers, employees and the society as a whole.”  Exactly right.

If President Obama was as smart as he and so many others think he is, and if he was a genuine leader and seeker of deep reforms, he would learn, respect and work like a dog to apply the best practices other nations are using to get better and fairer economic results.  But as the Center for Public Integrity found, Obama has showered benefits on big time funders of his presidential campaign.  Will he be a forceful advocate for capitalism with a human face?

Don’t hold your breath.

If Republican presidential hopefuls and crony capitalists cared as much about serving the public interest as serving corporate desires, than they would stop their nonsensical free market claptrap embracing selfish capitalism and seek a more patriotic form that puts the nation first.  Time to stop talking about cutting taxes.  Pursue new and better ideas.   Face reality, a free market that provides freedom for corporate and financial interests to victimize the public must be changed.  Admit that!

Don’t hold your breath.

Inflation Hits Money and Lies

Op-Ed - by Joel S. Hirschhorn:- How do the powerful keep the US population dumb and distracted?  A key tactic has been using methodologies that produce totally misleading underestimates of key economic factors.  First we learned that official unemployment figures are too low by a factor of two.  Now,  we learn the official rate of inflation hitting consumers is even more inaccurate. 

You will hear about a low inflation rate of less than 3 percent.  In reality, it is closer to 10 percent, according to the highly regarded analysis by John Williams.

It is difficult for any one of us to have first hand evidence that unemployment nationally is really much higher than what the government says, even though most of us know people who are out of work or taking part time work out of sheer necessity.  But when it comes to rising prices hitting our pockets, credit cards and checkbooks we have a much clearer sense of what is really happening.  Gasoline prices have jumped more than 10 percent in recent weeks and for most of us is about a dollar more a gallon than a year ago or so.  Some experts are predicting that $4 gas will soon hit most of the nation and, even worse, that $5 gas may hit us this summer.

Food prices are also jumping like a frog on crack cocaine.  Many of them are masked by smaller weight packaging.  Health care costs, especially insurance premiums and drugs, have also hit many Americans substantially and painfully.  High inflation especially hits hard those people who have seen their incomes decline.  Those on Social Security receiving no cost-of-living increase have every right to be angry.

The federal government is manipulating statistics to intentionally get a low number for inflation as well as unemployment in order to mask just how awful and unfair the economy really is.  Political leaders in both major parties use this propaganda strategy, as if there are simply too few intelligent Americans to see through the lies.  Sadly, they seem to be correct.  And the mass media push the propaganda strategy by continually hyping and spreading the intentionally false data.

“We have inflation now.  If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything.  The government lies about it in the US,” said Jim Rogers back in June, 2010.  It has only gotten worse.
At this time John Williams has correctly described economic reality: “Near-term circumstances generally have continued to deteriorate.  Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem.”  Wow!  How does that compare to all the glib recovery talk by President Obama and just about everyone else in government?

In addition to banks and financial companies too big to fail that benefit the rich, when it comes to the economy plutocrats think it is too bad to tell the truth.

Who is falling for the economic propaganda?  Gallup measures optimism about the economy as a function of age, income and political party affiliation.  Worst of all are Democrats and the young.

Meanwhile the Federal Reserve keeps printing money to cope with the budget deficit and national debt problems, which is a major reason for the sharp increases in gasoline prices.

None of any of this, of course, matters much to the rich and powerful Upper Class that is doing just fine and buying more luxury things.  And the fat cats on Wall Street and in the financial sector are giving themselves huge bonuses and salaries.  Dr. Phil of television fame is selling his $15 million mansion estate so he can buy an even bigger one for $30 million.

Over at Ford, the chief exec recently received $56.5 million in stock and last year pulled down an additional $26.5 million in annual compensation. The latter amounts to 910 times the annual pay of entry-level Ford workers.

In 2011, Americans who make over $1 million will pay just 23.1 percent of their incomes in federal income tax.  In 1961, the Institute for Policy Studies notes in its newly released annual Tax Day report, Americans who made over $1 million — in our current dollars — paid 43.1 percent of their incomes to the IRS.  That was when the middle class was prospering.

If congressional Republicans get their way, the middle class will feel considerable pain from program-cutting tactics to curb the national debt, while the rich Upper Class gets more tax breaks and keeps sapping the wealth of the nation as Democrats lack the courage to fight hard for increasing their taxes.  With rising economic inequality the US is rapidly becoming a two-class society: 20 percent rich and 80 percent poor.

Meanwhile, whenever I listen to Obama and congressional leaders it is like watching a skit on Saturday Night Live or the Daily Show.  They are that absurd.

How many more millions of Americans must experience more pain and suffering, go hungry, lose their homes, lose their jobs, postpone retirement, and go without decent health care before the public snaps out of their stupor?  Not that there is very much optimism among Americans.  In a University of Michigan March survey just 11 percent expect inflation-adjusted income gains during the year ahead, barely above the all-time low of 8 percent in 1980, and only 21 percent expect the economy to improve over the coming year.  But where is the loud political outrage?  Loud enough to scare the hell out of politicians and the rich.

When will Americans rise up as those in Tunisia and Egypt did and before that in former Soviet-bloc nations and tear down their corrupt and dysfunctional government?

Unemployment at 20 percent, inflation at 10 percent, a multi-trillion dollar national debt, and nothing but lies from politicians.  Have you had enough?  Do you still believe that voting in different Republicans or Democrats will fix things?

[Contact Joel S. Hirschhorn through delusionaldemocracy.com.]