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

The Democratic Party needs to look inward to understand why we lost

Dear Friends,

The United States of America is a country where racism and misogyny are fully institutionalized and rampant.  This racism and misogyny existed long before this election cycle, and long before Donald Trump said things out loud that had only been said with dog whistles and in private before.  These pre-existing conditions and their exposure to all those who had previously ignored them cannot explain Hillary Clinton's loss in this election.  The mainly white, more often males, who voted for Donald Trump were no more racist and misogynist this election cycle than they were in prior ones.  So why did so many of them desert the Democratic Party this time when they had not done so in such huge numbers in the past?

My thesis is that historically the Democratic Party was the champion for these people, and they voted their economic interests over their racist and misogynist feelings.  The Democratic Party lost most of these people in the South with the voting and civil rights legislation of the early 1960s.  Unfortunately, the Democratic Party Establishment since the election of Bill Clinton in 1992,  has  attempted to become Republican light and do the bidding of the monied interests and has deserted the poor and middle class.

It was Bill Clinton who fought for and signed the revised NAFTA into law in August 1993.  NAFTA caused a significant loss of good jobs in the United States.  Since NAFTA, low wage workers have seen their compensation decline.  It was also Bill Clinton who supported and signed the repeal of the Glass Steagall Act which was one of several steps at deregulating Wall Street that helped to produce the Great Recession.

Many of the Trump voters lost their jobs, theirs houses and their self-respect in the Great Recession.  Wall Street was bailed out, and there were no prosecutions for any of the wrongs that were done, even when President Obama took over. While many jobs have returned under Barack Obama, they are lower paying jobs with little or no job security or upward mobility.  In 2007 Candidate Obama promised to walk the picket lines with the workers whenever the right to organize was being challenged.  He broke that promise in 2011when Governor Walker in Wisconsin was passing legislation designed to kill unions and thousands of people were protesting.  President Obama, along with the rest of the Democratic Party Establishment, remained silent and certainly did not join the picket lines.  He let them fight alone.  Is it any wonder that Wisconsin, Michigan, Ohio and Pennsylvania all voted for Donald Trump?

Not only has the Democratic Party Establishment turned their backs on the working people of this country, they have sent their sons and daughters to unpopular wars where both sides are using arms supplied by the US arms industry with support and encouragement from the United States government and in particular from President Obama and Secretary of State Hillary Clinton.  To make matters worse, the Democratic Party Establishment supports and nominates Hillary Clinton who is clearly a hawk.

The Democratic Party Establishment courts the oligarchy and takes their money in the form of political contributions, charitable contributions and paid speaking engagements at the same time that it ignores the plight of the working class.  The wealth and wage inequality continues to rise and the rich and powerful are treated differently from the working class.  Is it any wonder the working class is angry?

It is not just old white men that the Democratic Party Establishment has turned its back on.  Blacks, Hispanics and other minorities most of whom are working class have been hurt even more than the old white males.  As hard as it is to believe, Donald Trump did better with these groups than Mitt Romney did.  Hillary Clinton got 6 percentage points less of the Hispanic vote than President Obama did and 7 percentage points less than Bill Clinton did. I am convinced that part of this reduction in support is the result of the failure of the Democratic Party Establishment to stand up for and with these minorities.

The former white Democrats who flocked to Donald Trump in this election did so because they could no longer see any hope of the Democratic Party Establishment helping them economically.  While at the same time they saw a "strong" man who was standing up for them and giving voice to their racism, misogyny and economic fear and anxiety.

What can I do?  First and foremost, as a person of great white privilege, I must actively, publicly and boldly stand with my brothers and sisters who are the focus of Donald Trump's racism, misogyny and hatred, and I must actively, publicly and boldly protect the earth.  I must also work and organize to reclaim the Democratic Party.  It must be restored to the party that protects those least able to protect themselves, that fights for justice for all, that protects the earth and that demonstrates true love, compassion and empathy.  The Democratic Party has lost its way, and Donald Trump's victory is just the latest proof of that fact.

Thanks for reading and please comment,
The Unabashed Liberal