Contrary to popular belief, America began as a grand experiment in socialism. It baked socialism directly into its Constitution by mandating that Congress create the nation’s currency as needed “for the common welfare” in Article1: Section 8. This means that government, not the people, is responsible for providing common needs and any misery that can be mitigated with the currency is a political decision, not economics.
Capitalism is very attractive and a measured amount of it is very effective as a method to organize commerce and give incentive to innovation, which America has excelled at. However, capitalism cannot be expected to provide the collective conscience required of a society that benefits everyone or even provides basic needs as a guarantee of citizenship. America has functioned, especially in the last half-century, under the delusion that markets will dictate the best outcomes for everyone and capitalism has become a religion in that it no longer has to provide even reasonable evidence of its worth.
If America were to logically approach its economy instead of emotionally defending the religion of capitalism it would have long ago adopted policies that have proven themselves in other places. Guaranteed jobs/income and setting bottoms for living standards and benefits, using public money as a no-cost commodity available to governments to shape their societies, has been shown to be the best way to manage economies in many places. However, America’s bravado and insistence upon claiming “best” status in everything, largely post WWII, has kept it from even considering anything other than free market capitalism and denigrating any public spending as “socialism” as if it were a curse word.
As the majority of the world moved toward managed economies and some degree of socialism to guarantee minimum living standards post WWII, America took advantage of having the only industrial capacity not bombed into oblivion and went the other way with capitalism. It worked quite well and eventually even overcame the need for public spending of the New Deal that allowed it to overcome the great depression. However, as those more socialist countries regained their productive capacity the status of the US began eroding until it became a heavy importer of goods and its gold reserve dwindled away.
Breaking the relationship between production and wages with cheaper imports, taking away the worker’s power in the economy, was a turning point for America. All of the theories painting capitalism as self-regulating and self-limiting only work when production labor is the source of consumer spending, and fall apart in a race to the bottom when allowed to source its production outside of its sphere of influence in the economy it sells in. It wasn’t just the value-added imports that hurt America, as the wages to purchase goods could have been supplemented with public spending with little impact on inflation. This, of course, would have required higher taxation at the top of the economic food chain to prevent over-accumulation of wealth from the natural upward movement of money in a consumer economy with practically no bottom for production costs.
America recognized this once and did impose very progressive taxation on top earners in its most successful decades, not to produce revenue that it has no use for, but to direct investments into research and development that create economic gains that benefit society. It has since slipped into a reversal of that, giving the wealthy large tax breaks for money that simply flows to them, empowering them to purchase political influence to further firewall their wealth from the government by simply protecting the status quo. While the government doesn’t need, or even use, tax proceeds to fund itself, too much concentrated wealth will always pervert the political process and do harm to society in seeking rents after it has captured the available profits from more legitimate business.
The agents of capitalism have mostly been successful in attaining approval for this by positing the government as a competing “user” of the currency, not as the monopoly issuer without restraint from revenue. In forcing the government to act in this capacity any spending for the public purpose is viewed as a “cost” to the larger society, not income derived from currency creation into the private sector.
We, and the rest of the world by extension, changed economics completely in ’71 when we left the gold standard for a fiat currency. We can never run out of it or fail to pay any obligation denominated in the dollar, but few people can actually throw off their “household budget” thinking in relation to our national economy and continue to accept policies that don’t apply any longer. Convincing us to continue chasing gold in a fiat world and that everything the government does must be “paid for”, regardless of social benefit, was central to carrying out this decades-long con on America. Will America go quietly into the night, taking the ecosystem with us, just to preserve an illusion that we can’t “afford” to save ourselves? I fear that it will.
