Saturday, October 23, 2010

A Question of Balance

It struck me recently in a Facebook discussion with one of Betty's cousins (technically a first cousin once removed, if anyone cares)  what the real problem with the current conservative "small government" idea is.  The problem is checks and balances, arguably the wisest thing our Constitution writers ever did.  In the problems of their day - big states vs. little, legislative vs. executive, etc. - they set up a system where neither side had control.  The bicameral legislature and other structures made it very difficult for one side to dominate the other.  One side could not tyrranize the other.  This concept is a very large factor in the success of our republic so far.  Indeed, it is a major reason that our government is not even larger than it is now. 

But we have a problem now.  Business, specifically "Big Business", is now effectively out of control.  In the recent banking crisis, the government bailed out several of the largest banks, because if they went out of business the ensuing chaos could have ruined the entire American economy.  They were making high-risk loans, and why not?  It wasn't their risk.  Either the borrowers repaid, or the government covered the loss, lest the entire country collapse.  The automotive industry got a similar bailout, for a similar reason.  So the Fortune 100 are immortal; if they screw up, no matter how stupidly, they have the U. S. Treasury to fall back on. 

Someone, somehow, has to provide a balance.  In the late 19th century, as America transformed from primarily agricultural to primarily industrial, we had a similar situation.  Corporations and industrialists simply went to Congress or the state legislature with bags of cash, and went home with empty bags and favorable legislation.  Bosses and supervisors followed their employees to the polls and directed them how to vote.  These abuses were overcome, but only with great difficulty.  Not coincidentally, the labor unions began organizing in this time.  After the Roosevelt era reforms, labor unions were strong enough to be a counterbalance to corporate power. 

But now, the unions are too weak to be an effective balance to the corporations.  This is unfortunate; Big Labor is the most economically sensible balance for Big Business.  So what is left?  Only Big Government.  This is hardly ideal, but I see no better alternative.  Benito Mussolini himself said that Corporatism was a more accurate name for his system than Fascism.  I really don't like living in a system where a CEO can move a headquarters, disrupting thousands of lives, just because he wants to. 

Thursday, October 7, 2010

The Class War in the USA

{Okay, back to hell-in-a-handcart rants.}

It has been a tactic of the fright-wing demagogues to shout “class war!” whenever someone notices that the middle class is shrinking, and that this shrinking is encouraged by government policies. Is class warfare a bad thing? Yes, especially when it is in progress and my side is losing, because we have been convinced that the war isn’t happening. People have been convinced that policies that help the rich get richer are somehow magically good for them too. What is frightening is the persistence of this belief even after the experience of the 21st century so far.

The zero decade had massive parallels to the 1920’s – uncontrolled financial system, bubbles in land and stocks, rapid introduction of new technologies, growing acceptance of formerly unacceptable behavior. The teens are shaping up as a replay of the 1930’s – massive unemployment, economic stagnation, a growing sense of fear in the employed and of hopelessness in the unemployed. I just cannot shake the fear that the late teens or early 20’s will see a replay of the 1940’s. And this time with nukes. Yes, I fear that the end of civilization, or even life as we know it, is again a real possibility.

The class war? It is a major contributor to the trajectory I see our society moving along. It is happening because the upper class, like nearly everyone else in this country, has no awareness of history. Yesterday is old news; last year is antiquity. Henry Ford was far from perfect as a human being, but he did one of the best things anyone has ever done for America. He paid his workers much more than he needed to. He was no altruist; he did it for perfectly selfish capitalist reasons. But, unlike so very many business people, especially now, he thought past the next quarter’s balance sheet. This high pay rate did two long-term things for Ford and his company. They could get the cream of the workforce, which forced other manufacturers to follow suit. And with the extra pay, workers could afford luxuries, which at the time a Ford car definitely was.

The result was that Henry Ford got fabulously rich, richer by orders of magnitude than he would have been had he not paid his workers so well. And the workers, indeed the whole country, got much richer. Of course the real world never runs smoothly; the consequences also included the boom of the 1920’s and crash of the 1930’s. But after the reforms of the Roosevelt administration, enabling the rise of the big industrial labor unions in the 1950’s, the middle class grew to a near majority of the population. Even with the Cold War and the Vietnam war, the 1950’s and 60’s were a happy time in America. Many of the good things of that era, most notably the civil rights movement and the War on Poverty, were made possible by the affluence of the large, stable and comfortable middle class.

The oil shock of the early 70’s followed by the inflation of the late 70’s, on top of the Vietnam defeat, shook the confidence of the country. The upper class, meanwhile, had felt put upon by the Roosevelt reforms that kept relatively tight control over financial institutions. When Ronald Reagan was elected, the campaign began to convince people that government was the root of all evil. This could not have succeeded if all Americans were not so ignorant of history. The rich did not realize that a big and healthy middle class made them richer, and that a regulated financial system gave them greater security. The middle class forgot their parents’ stories of the Great Depression; they forgot that while labor unions were far from perfect, overall life was better with them than without. And large numbers of the poor bought the line that social conservatism and economic conservatism were the same thing.

The result of these factors is the devastation of the middle class. While most of the loss of high-paying low skill jobs is the result of foreign competition, the widespread disrepute of labor unions is a major factor. But now the educated middle class also sees itself in danger. I’ve gone into this elsewhere. Ariana Huffington is one of the few known people who have seen the likely end of this trend: the USA as a third world country, where the rich have nearly everything and everyone else is poor.

Ironically, the loss of the middle class will reduce the wealth of the wealthy. The rich in third world countries have less than the rich in developed countries with a healthy middle class. Why? The middle class is the class that spends money, and thus keeps the economy moving. If no one has any spare cash after food, clothing and shelter, then economic activity ends there. The supply-side vs. demand-side debate of the eighties was easily the silliest public discussion since the founding of the republic. You need both; that this isn’t obvious to anyone astounds me.

Many people have said that for a lot of acquisitive people it really isn’t about the money; it’s a grand game and money is how you keep score. Such people are much less interested in what they have than in having more than others: where do I rank? These are the people who don’t mind a class war and the end of the middle class. Whether I get more or everyone else gets less, I win! Only relative wealth matters, not absolute. This attitude, and those people, will be the death of the USA as a major country.