Capitalism in America, Part 2

Dear Friends,

In my last post, I said that capitalism as practiced in the United States has failed us both economically and politically, but deferred the discussion of its failure politically to this post.  The United States is supposed to be a democratic republic, i.e. a country where the majority rules except as limited by its constitution.  In the United States, our constitution has always contained a number of very un-democratic features.  Some of these features have been removed, e.g. slavery and only white male landowners can vote.  Others continue to exist, e.g. the Electoral College and each state gets two Senators.  In recent decades, gerrymandering by both major parties and voter suppression, primarily by Republicans have been added to these structural impediments to make the United States even less of a democratic republic.  Capitalism has failed us politically because as it is practiced in the United States, capitalism protects and enhances the money and power of the already rich and powerful at the expense of all the others and has, therefore, encouraged this movement away from a true democratic republic.

Electoral campaigns in the United States are bribery contests.  They are not at all democratic.  According to the Pew Research Center, the percentage of American adults who contribute to a political party, campaign or organization has grown from 11% in 1992 to 15% in 2016 and 32% of households with income over $150,000 make such a contribution compared to just 7% of those with family income of less than $30,000 (here).  Making political contributions is for the wealthy.  According to Open Secrets, only 0.68% of US adults made political contributions in excess of $200 in 2016.  Of the $4,533,700,000 in political contributions in 2016, $2,606,200,000 or 57.5% were given by just 45,129 people or 0.018% of US adults.  The Open Secrets website has lots of very interesting and disturbing data (here).  If you have time, take a look.

There can be no logical or intellectually honest argument that our elected officials are not impacted by the people who make big contributions more than they are by those who make little or no contributions.  Consider for example that in the days leading up to the passage of Trump's tax bill, somewhere around 55% of the American people we opposed to the law and about one-third were in favor of the law.  Nevertheless, Congress passed it because the big Republican donors demanded it.  Or consider that when the FCC repealed the net neutrality rules 80+% of Americans were in favor of keeping them, including over 70% of Republicans, but the big Republican donors demanded the repeal.   I could go on and on, but you can provide examples of your own.

While there is some debate around the edges of the amount of influence of money in our elections, there is a clear consensus that it is extremely influential, particularly in state and local races.  Capitalism in the United States has led to gross inequality in both income and wealth and hence power, including the ability to contribute to and hence influence the outcome of elections.  Capitalism has allowed rich donors the ability to unduly influence local elections which has enabled state legislatures to gerrymander both state and congressional districts.  This gerrymandering in recent elections has led to the Republicans winning far more seats in state legislatures and Congress than the number of people voting for them (in the aggregate) would justify.

Here are a couple of paragraphs from an Associated Press analysis (here):

The AP scrutinized the outcomes of all 435 U.S. House races and about 4,700 state House and Assembly seats up for election last year using a new statistical method of calculating partisan advantage. It’s designed to detect cases in which one party may have won, widened or retained its grip on power through political gerrymandering.The analysis found four times as many states with Republican-skewed state House or Assembly districts than Democratic ones. Among the two dozen most populated states that determine the vast majority of Congress, there were nearly three times as many with Republican-tilted U.S. House districts.Traditional battlegrounds such as Michigan, North Carolina, Pennsylvania, Wisconsin, Florida and Virginia were among those with significant Republican advantages in their U.S. or state House races. All had districts drawn by Republicans after the last Census in 2010.The AP analysis also found that Republicans won as many as 22 additional U.S. House seats over what would have been expected based on the average vote share in congressional districts across the country. That helped provide the GOP with a comfortable majority over Democrats instead of a narrow one.

While gerrymandering often has racial overtones because people of color tend to vote for candidates from the Democratic Party, voter suppression efforts lead by state legislatures are more overtly racial and with the same effect to keep the rich (primarily white) in power.

We should try to remove the influence of money from politics, but money will always equate to power.  Our form of capitalism protects and enhances the wealth (and therefore power) of the already rich (white) and prevents all others from achieving a level of income or wealth to challenge the economic and political status quo.  We need to constrain our current capitalism so that it provides for true equality of opportunity which is the only way that we will be able to say that capitalism as practiced in the United States is an economic system that advances the economic interests and provides better living conditions for all in a sustainable manner.  How to accomplish that result is the topic of another post.

Thanks for reading and please comment,
The Unabashed Liberal

Capitalism in America, Part 1

Dear Friends,

I am in France for a couple of months and as I reflect back on America from outside its borders and as the year ends, I consider the idea that capitalism as practiced in the United States has failed us both economically and politically and that is why we are where we are today - in a real crisis.

As you know, I am very disillusioned with the Democratic Party so much so that I began to consider joining the Democratic Socialists of America.  Statements by leaders of the Democratic Party establishment make it clear to me that the Democratic Party has lost its way.  When Nancy Pelosi was asked why the Democratic Party did not move to the left on economic issues the way it has on social issues, her response was "We're capitalists.  That's just the way it is."  She then went on to explain that capitalism in the United States had taken a turn to working only for those in power, but she still defended the idea of capitalism as is.  She would never criticize her Wall Street donors or suggest significant changes to the economic status quo.  In that regard, she epitomizes the Democratic Party establishment.

I have decided not to join the Democratic Socialists of America even though I agree with many of their positions, e.g. $15 an hour minimum wage, Medicare for all, pro-union, anti-discrimination of all kinds, etc.  I will not join them because I am not ready to completely abolish capitalism in the United States.  I am, however, ready to fight to change the way capitalism is practiced in the United States.

Capitalism and socialism are different forms of economic systems, but I believe the ultimate goal of any economic system must be to advance the economic interests and provide better living conditions for all in a sustainable manner.  In the United States from time to time, capitalism has done a good job of working towards this goal and at other times (such as the last 3 to 4 decades) has done a terrible job.

One way to measure whether or not capitalism is advancing the economic interests of all Americans, is to look at the wealth and income disparity in the country.  It is important to remember that wealth disparity and income disparity, as the names imply, are not the same.  First let's look at wealth disparity.  The following chart is from an article on WhoRulesAmerica.net entitled Power, Politics, & Social Change by G. William Bomhoff (here).  

Table 4: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2013.

	Bottom 99 percent	Top 1 percent
1922	63.3%	36.7%
1929	55.8%	44.2%
1933	66.7%	33.3%
1939	63.6%	36.4%
1945	70.2%	29.8%
1949	72.9%	27.1%
1953	68.8%	31.2%
1962	68.2%	31.8%
1965	65.6%	34.4%
1969	68.9%	31.1%
1972	70.9%	29.1%
1976	80.1%	19.9%
1979	79.5%	20.5%
1981	75.2%	24.8%
1983	69.1%	30.9%
1986	68.1%	31.9%
1989	64.3%	35.7%
1992	62.8%	37.2%
1995	61.5%	38.5%
1998	61.9%	38.1%
2001	66.6%	33.4%
2004	65.7%	34.3%
2007	65.4%	34.6%
2010	64.6%	35.4%
2013	63.3%	36.7%

Sources: 1922-1989 data from Wolff (1996). 1992-2013 data from Wolff (2014).

As an update to the chart, in 2016 the top 1% held 38.6% of the wealth, according to the Federal Reserve (here).  As you can see, we had the worst disparity in wealth right before the Great Depression and the stock market crash of 1929.  We then had lower rates of disparity during the 1950s, 60s and 70s.  But starting in the 1980s disparity has been constantly on the rise hitting a high in 1995 followed by modest declines and a major decline with the early 2000s recession.  Since then disparity has continued to rise and 2016 provides the worst disparity since the Great Depression.  There can be no doubt that with the passage of the Trump tax bill, wealth disparity will continue to rise.  

Income inequality has shown a similar disturbing trend as can be seen from the following chart.

Figure 3. Share of total income earned by people in the top 1 percent of the income distribution

Source: World Income and Wealth Database.

As you can see there is a close correlation with the changes in the wealth disparity.  The disparity peaks just before the stock market crash of 1929, drops to much more reasonable levels during the 1950s, 60s and 70s and then begins its march upward with just little blips for recessions to once again be close to an all time high.  David Leonhardt has a piece in The New York Times (here) entitled "Our Broken Economy, in One Simple Chart".  He provides another look at this subject.

This data demonstrates that capitalism as practiced in the United States is not serving the economic interests or improving the living conditions of all.  Data is equally clear that capitalism as practiced in the United States is not providing a sustainable model.  Perhaps the best demonstration of that fact is global warming and pollution.  Businesses operated under the United States version of capitalism are not required to account for the secondary costs and damages to the society of their actions; consequently the businesses make more money and the society bears the ecological cost of their activities.  At certain times in the Untied States, legislation has attempted to require the businesses to pay these costs as with the superfund legislation but even in the best of times, these efforts were too little too late.  The Trump Administration has done everything it can to eliminate or reduce the requirements that force businesses to pay for the secondary expenses they place on the society.

Global warming is an existential threat to the earth, and the United States has contributed more carbon emission over time to this crisis than any other country.  Yet even under the Obama Administration, capitalism as it is practiced in the United States failed to provide a sustainable economic model and under the Trump Administration, we are even worse.  The continued use of fossil fuels will destroy the earth and our capitalist system has no mechanism for curbing their use.  Capitalism, left unchecked, will never provide an environmentally sustainable system.

There is no doubt that capitalism as practiced in the United States has failed in its ultimate goal to advance the economic interests and provide better living conditions for all in a sustainable manner.  In another post, I will discuss how capitalism has also failed us politically.

Thanks for reading and please comment,
The Unabashed Liberal