Belaboring the Obvious

Sunday, June 11, 2006

Is Your Government Overdue For Its...

... 200-year check-up?

William Greider has a sensible and broadly appropriate article in The Nation, online now, and in the June 26th print issue.

Greider offers a few suggestions about how the politics and economics of the country may change in the near future as the country's voters and thinkers ponder the effects of an economy in decline due to policies which have been firmly in place since the Reagan administration.

Greider, within a paragraph or two, gets right to the nub of the problem of today's economy:

The strange paradox of our times is that despite America's fabulous wealth, most people's lives are shadowed by economic anxieties and real confinements, the wounds that market ideology has imposed. They fear that much worse is ahead for their children. Reform must re-establish this fundamental principle: The economy exists to support society and people, not the other way around.

To put that a bit more directly, the vast sea of workers in the country are not there to build and float bigger and bigger yachts for wealthy stockholders and overpaid CEOs.

Greider goes on to suggest some prescriptive remedies, and some of those suggestions are downright inspired:

Companies need to pay, meanwhile, for their antisocial behavior. They collect hundreds of billions in tax breaks and subsidies, yet abuse society in return--degrading the environment and communities, ignoring the national interest, offloading their obligations. Corporate taxation has declined since the 1960s from more than 20 percent of federal revenue [this figure may be subject to some contention--Naomi Klein, in No Logo, puts the percentage higher--about 34% in the `60s] to less than 10 percent. Despite their profitability, scores of major corporations pay zero taxes (some even collect refunds). One plausible remedy is to refashion the corporate income tax as an important new mechanism for enforcing corporate obligations to society. Imagine a reformed tax code that clears away all the corrupted loopholes and sets the basic corporate tax rate higher, at around 45 percent.

Corporations would then be able to reduce their tax liability--perhaps by 15 points or more--by demonstrating that their performance adheres to higher social standards. Does the company, for instance, increase wages for workers in step with its rising productivity, as economists assume, or does it pocket the money for the insiders and shareholders? A positive record could knock several points off the tax rate. Does the company have an egregious history of trashing environmental laws or fraudulent dealings in financial markets? It would be ineligible for reductions. If the company is increasing its American workforce, augmenting pensions and healthcare, encouraging democratic relations with employees, it could be rewarded at tax time. This leverage would penalize bad behavior at the bottom line and reinforce the tattered regulatory laws. The performance ratings would be public--a "market signal" that tells investors and consumers which companies are the white hats and which are the rogues.

But, Greider simply assumes the changes in voter awareness necessary to create a government capable and willing to adopt what would be today considered radical change are inevitable: "Now life and liberty can be restored. Government helps by creating the proper foundations. People will do the rest for themselves."

If only it were that simple. The problem, as it has been even before Reagan's first inaugural, is not that there are many people aware of the need for comprehensive change. Rather, the system, as it has evolved, is made to be rigged in favor of the powerful. Figuring out how to unrig it is a far greater problem than devising the fixes once those fixes are possible.

First, ever since the advent of political parties in the country (created as a means of delineating the differences between the wealth/aristocracy-inclined Federalists and the more agrarian/small merchant class-supporting Democratic Republicans), we've lived with this dichotomy which can be loosely defined as capital v. labor, and in a nation built upon law, capture of the government was essential to carry out the aims of one group or another.

By the early 1890s, the country was suffering under its latest depression, and living conditions were extraordinarily difficult, especially in rural areas. This gave considerable impetus to the so-called Prairie Populists, with William Jennings Bryan generally representing the interests of populism, though he remained a Democrat throughout his career. The roots of that depression, as with most depressions, could be traced to an inequal distribution of income. Corporate "trusts," particularly the railroads, had dominated the agrarian markets, setting market prices lower and charging increasingly unrealistic amounts for bringing agricultural products to market.

Governments, federal, state and local, had subsidized the railroads through bonds and gifts of rights-of-way, and enabled the railroads to operate at low cost, sometimes thinking that such was the path to economic progress, where, in fact, this subsidization of the railroads involved huge amounts of graft and political influence--and larger and larger profits for the trusts.

Bryan took up the cause of the common man, running for President in 1896, 1900 and 1908, and was beaten, rather conclusively, every time, by a Republican (which had, after Lincoln, increasingly become the party of big business). McKinley, with the assistance of one of the most corrupt politicians in the country, Mark Hanna, won in 1896 and 1900, while Taft defeated Bryan in 1908. All this occurred despite poor economic conditions and the truly obscene wealth accumulated by the Robber Barons.

Voters continued to vote for the party of business--against their interests--until Wilson won in 1912. Then, disappointed with the return of inflation after WWI (though rampant war spending was a cause of that inflation), voters again returned the business party to power. In quick succession, the administrations of Harding, Coolidge and Hoover gave business everything it wanted, and, as a consequence, oversaw government scandal, increasing government indifference to the plight of the poor and the evolution of the stock market bubble and banking deregulation which were the root causes of the 1929 crash and the beginning of the Great Depression. As the wealthy got richer, the country as a whole got poorer.

The same has happened since the Reagan Revolution, and in some oddly recurrent ways (this is understandable, to a degree, because the Secretary of the Treasury under Harding, Coolidge and Hoover was Andrew Mellon, who effectively codified the trickle-down theory--Reagan's people just dressed it up with the ironically-named Laffer Curve). Throughout the past twenty-five years, government's focus--even through the Clinton years--was on satisfying the demands of the market and the capitalists. And, despite the evidence of declining standards of living for the bottom 60-70% of the electorate, voters continue to install politicians who put those forces of capital first, and the interests of the people second.

Certainly, the primary reason for this is the same one that dominated politics at the turn of the last century--money. The wealthy have it, and can buy access to politicians with campaign contributions, and the poor do not. Any politician who claims that they aren't influenced by contributions (and all say they aren't) are either lying to the public or lying to themselves. Until that problem is solved, the situation will continue as it is, despite Greider's certainty that the political situation is ripe for change.

The secondary reason is a dominant belief in the country today that things are better than they actually are. The same attitude was firmly in place in the Roaring Twenties, and, both then and now, that attitude was encouraged by the promotion of debt.

What is markedly different now from then is that there is a large, devious and mendacious network of think tanks, institutes, public relations firms and media outlets devoted to manipulating public opinion in favor of the interests of large capital and to convincing the average man that the interests of the wealthy are the same as his own. Television and radio today bring their message to more of the electorate than was ever possible by newspapers and fledging radio in the `20s. One need only see the degree of popular support among the poorer elements in society for repeal of the inheritance tax to understand just how pervasive their message has been, and how little reality intrudes on the mind of the average voter today. The Horatio Alger myth (everyone can be a millionaire) is as strong today as it was over a hundred years ago, but the free market has actually acted, all the while promoting the myth, to inhibit the Alger effect--the United States now has less economic upward mobility than most other industrialized European countries, and the decline in upward mobility has accelerated in recent decades.

Greider is correct in his assertion that the time for such changes is upon us, but the forces mentioned above are not going to give up the government they've bought without a fight, and a wholesale restructuring of the economy cannot occur without the intervention of government.

The last time such a wholesale restructuring occurred was upon FDR's election. Even though the country was in the depths of one of, if not the most, destructive depressions in the country's history, the wealthy industrial magnates of the time weren't prepared to accept the will of the people and almost immediately began preparations to overthrow the government and install themselves as a governing committee. Were it not for the fact that they had picked the wrong military leader to lead that revolt, they might have succeeded.

More to the point, the Great Depression forced many people to see that a government acting as a proxy for the interests of big business had brought them to an unpleasant end. Roosevelt offered alternatives, and that's why he was elected, repeatedly.

Is catastrophe the necessary catalyst for change? I hope not, but our own history is instructive in that regard. People do believe things that are demonstrably untrue, and that is even more true today, if only because so many people receive daily reinforcement of their misbegotten opinions from the right-wing megaphone. In the summer of 1929, people thought that the market would go on climbing, that credit was inexhaustible and that, as Calvin Coolidge once opined, "the business of America is business."

No one thought about the larger implications of that statement until they were unemployed and broke and seemingly without a future. Then they thought about it, and not without a measure of bitterness.

George Bush's actions as President, in concert with a Republican Congress, have accelerated problems which have been in play since Reagan's policies became received wisdom, and any of a host of triggers could bring about change. Oil shocks, a credit crisis, an attempted religious revolution within government. Whether any of those produce the sort of change envisioned by Bill Greider remains to be seen. When economic disaster befell Germany in the `20s, fascism was the change of choice.

Whatever happens in the near future, we still need to be mindful--as a guidepost and a rallying point--that the economy, and the government, serve society and the people, not the other way around. Any government which tries to convince us otherwise is in need of an oil change and a tune-up.


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