Monday, March 5, 2012

Time For Another New Deal

Politics & Society

Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate.
Bertrand Russell,
“Freedom in Society,” Chapter 13 in Sceptical Essays (1928)

We are inclined to confuse freedom and democracy, which are regarded as moral principles, with the way in which these are practiced in America—with capitalism, federalism and the two-party system, which are not moral principles, but simply the accepted practices of the American people.
James William Fulbright,
Speech in the U.S. Senate, March 27, 1964

New Deal: A crowd of people wait at a Works Project Administration (WPA) clothing outlet in
San Antonio, Texas, in March 1939. During the Great Depression, the WPA was the largest of the
New Deal Agencies, and during the eight years it operated, between 1935 and 1943, it created
millions of public works jobs. Its initial budget in 1935 was $13.4 billion, or about 6.7 per cent
of GDP.  It was a divisive program, and by 1936 the term "liberal" referred to supporters of the
New Deal, and “
conservative” for its opponents.
Photo CreditRussell Lee, 1935
: U.S. Library of Congress Prints & Photographs Division

No one wants to admit that our economic system of capitalism is in trouble, least of all the wealthy who benefit greatly from its hyper- inequalities. In the past, to say so loudly was to court being branded a socialist, an anti-American, a troublemaker, etc. This of course is pure mischief or pure ignorance, and both tactics operate from similar motives, confusing an economic system with a political system. But, today such a diversionary tactic will not work, and a few have started questioning capitalism's current operating principles. More must do so. It must be said loudly, forcefully and with persuasive conviction that today's brand of capitalism is not benefiting a vast majority of persons.

It is precisely for the reasons that John Maynard Keynes enumerated here in The General Theory of Employment, Interest and Money, published in February 1936, during the Great Depression. If Capitalism were working well, I highly doubt that we would be witnessing the highest levels of sustained unemployment and underemployment, of poverty and of despair and hopelessness since the Great Depression. I expect that people will talk about our period of economic instability 50 years from now just as they did in the decades after the Great Depression. Perhaps, in truth, capitalism never was meant to be an equalizing force for opportunity in people's lives, and we are now witnessing its pure undistilled form after centuries of Darwinian-type evolution.

If that's the case, it's the end of opportunity, the middle-class, and the consumer society, and we'll move further along toward a kind of entrenched plutocracy, a government by the wealthy. But I don't believe that's the case, and there is enough solid evidence to support my assertion. Until recently, various forms of capitalism were working well for centuries, at various times humming along, brimming with hope and optimism. Now, it is hobbling on one lame foot.

It might have everything to do with today's most favoured form of capitalism, the neoclassical economic theory founded by Milton Friedman of the Chicago School. It is a fan of unimpeded markets, believing in the essential goodness of human nature. Such is in contrast to Keynes, who was out of fashion from the 1970s, but has since the Great Recession been given more respect. The reasons are not hard to understand.

Such is the way things are today. The point here is not to argue economic theory, for which I am not qualified, but to assess whether capitalism in its current form has resulted in the economic fiasco we are witnessing today. As Paul Krugman, a leading liberal economist, wrote in a recent opinion piece in The New York Times "Things Are Not O.K."
Full employment is still a distant dream — and that’s unacceptable. Policy makers should be doing everything they can to get us back to full employment as soon as possible.
Unfortunately, that’s not the way many people with influence on policy see it.
The reasons are clear: High unemployment favors the employer, the businesses and the wealthy. So, yes, things are not right. Not yet, Not by a long shot. And a dysfunctional U.S. Congress continues to ignore the problems, focusing on petty partisan politics. The result are morally indefensible, including policy makers who advocate austerity measures in the face of high unemployment, which only benefit the latest breed of vulture capitalists—a wonderful descriptive term—whose views and actions are both short-sighted and harmful. Like vultures they are ready to feed on the carcass of a dead company, picking up the best deal for little or nothing.

In short, they are greedy, ugly vultures with a high sense of entitlement. Always screeching for more, more, more. It's a sentiment that Andrew W. Mellon expressed, common among elites during all periods of uncertainty, who said in 1930 that the Depression would "purge the rottenness out of the system."

That's one foul-smelling melon. What to do with such persons who are not only elitist but annoying and morally immature in their demands and world views? There are a number of options, legislation being the most cited by liberals. Such might work, but we have seen how monied interests find the ability to circumvent new laws, finding loopholes, earning entitlements. We need creative thinking here on how human nature works, notably amongst like-minded and -monied peers. You know, "birds of a feather . . .

Being wealthy or amassing wealth or capital does not necessarily have to translate to being arrogant, self-serving and morally immature, though many of the world's wealthy hold such character traits, including Mitt Romney, the likely candidate for the Republican Party in the 2012 U.S. presidential elections. Yet, the Democrats and their candidate, the current president, fare no better, and offer no viable solutions.

It's Capitalism itself that is in trouble. One of its chief problems is its adherents' inability to understand the mathematical impossibility of continued sustained growth, as if growth was all that mattered. Too many capitalists and the members of congress who encourage such shoddy thinking have a poor understanding of science and of the laws of science, adding to our woes. Consider what somebody who is a self-described plutocrat and has benefited greatly from capitalism has written about capitalism's current weaknesses. Jeremy Grantham, the founder and chief strategist of the asset-management firm GMO, which manages about $100 billion in assets, wrote the following in his quarterly newsletter (February 2012):
It gets worse, for what capitalism has always had is money with which to try to buy influence. Today’s version of U.S. capitalism has died and gone to heaven on this issue. A company is now free to spend money to influence political outcomes and need tell no one, least of all its own shareholders, the technical owners. So, rich industries can exert so much political influence that they now have a dangerous degree of influence over Congress. And the issues they most influence are precisely the ones that matter most, the ones that are most important to society’s long-term well-being, indeed its very existence. Thus, taking huge benefits from Nature and damaging it in return is completely free and all attempts at government control are fought with costly lobbying and advertising. And one of the first victims in this campaign has been the truth.
Such is not surprising. His is a number of articles that lately have been discussing this, yet the politicians play partisan politics, uncaring of its implications. It's well worth reading more of Grantham's thoughts on this, since he's an insider's insider.

Although the news is negative, it does not equate to loss of hope. Change is possible, but it will not be easy to accomplish, and it will take many people getting involved to make it happen. As we have seen historically, there are a number of good and intelligent ways to bring about change, including parody, plays and moral principles, the last in short supply. And the people, the plutocrats seeing the light of change. Having wealth does not necessarily equate to having no compassion of the less fortunate. Warren Buffet has seen the light of humanity. So have Bill and Melinda Gates, fine examples of wealthy persons who are doing wonderful philanthropic work, notably in the developing world. Such might define Compassionate Capitalism.

As to economic policy, John Maynard Keynes has been credited with saving capitalism after the Great Depression. We have come full circle, and the economic theories of Keynes, once boldly discarded in the 1970s by Friedman and his disciples, need re-examination in light of the Great Recession by today's economic policy-makers. Just as public economic policies changed after the Great Depression (i.e., The New Deal, 1933-36), one hopes that similar public policies can change after the Great Recession.

Yes, I know many thinking conservatives criticize the New Deal, and it's not without merit, since such policies  contribute to Statism. Given the current move toward plutocracy, things can get worse, more ugly, more nasty more brutish. A New Deal might be the best compromise to give people jobs, and the dignity and bring about social peace that is necessary under democracy. Working people tend to build society. The opposite is also true.

It's time for Another New Deal. It might just be the saviour of capitalism.