This post examines the underpinnings of the current US political and economic systems. Truth-Out did a brilliant job of describing how capitalism began, evolved and currently defines the US condition and then we present an alternative model.
Increasingly, it is becoming clear that focusing on individual issues, no matter how seemingly important, is missing the mark. The challenge we face is not election reform, money in politics, a transition to renewables, or solving immigration. It is about getting very clear about the root causes for all of these individual, but connected issues. I am not sure if the correct term is capitalism, oligarchy, corporatocracy,plutocracy or a kind of merchantile feudalism, but whatever you call it,over the past four decades, a relatively small and concentrated group of elites has been increasing its control of our media, regulatory system, and political processes. And their control is tightening by the day.
Over the longer-term, I am going to attempt to lay out a very clear analysis of when and how this began and how we are getting ever closer to a form of corporate fascism from which we may never be able to extricate ourselves. I am becoming increasingly convinced however, that whatever chance we have to reverse our situation, it is not to be found in a candidate or a legislative solution.
Today, I am presenting an analysis of our current political-economic system derived from an excellent Truth-Out article that begins with analysis of how our founding fathers constructed the “democracy” (such as it was and is) and economic systems that we have operated under for almost 250 years. I have used extensive excerpts from this article and there is a link to the article at the bottom of this blog.This blog does not describe a very rosy picture, but at the end of the post is an inspiring video outlining an alternative economic model with one of its original manifestations being located in Cleveland in the Evergreen Collective, an organization we will be visiting in just two weeks.
From Truth-Out–The Current Situation
“In a landmark 2014 political science study, leading researchers determined that the US is not a democracy, but a nation in which the masses of Americans are effectively disenfranchised, as “economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence.”
The article begins with references to Adam Smith and his landmark work,The Wealth of Nations. .
From Truth-Out: “Smith warned that free competition can’t exist when any corporation dominates its industry, allowing them unbridled reign to set prices on the public for corporate profits, which never align with public interests. Smith’s prescience was correct: Corporate mergers today continue toward monopolization of industry, while elites continue shaping policies in their own image, reinforcing plutocracy, since wealth dominance yields political dominance.” Smith felt that government intervention was inconsistent with the operation of capitalism, that for capitalism to function, it must operate in a ‘free’ market with unfettered competition between business operations. While the GOP is attempting to unravel much of the regulations and controls put in place over decades to control the impulses of business,unfettered capitalism is not in play if business sectors collude and conspire to manipulate the ‘free’ market.
How Did We Get Here. More From Truth-Out: “Hamilton began planning the Federal Bank of the United States (FBUS) in 1779, 12 years before it opened. Its earliest blueprints reveal that he determined it to ‘link the interests of the state in an intimate connexion with those of the rich individuals belonging to it.’ As such, when the FBUS came to fruition, nearly 80 percent of its seed capital derived from private investors, and ‘two-thirds of the bank stock was held by British interests’ and other wealthy investors, soon paving the many roads toward risky speculation, the Panic of 1819 and eventually, the Great Recession.”,
So over 250 years ago, the finance industry was controlling the national economy and using international resources to invest in risky investments to the peril of the national economy. Sound familiar?
More from Truth-Out: “Hamilton consciously modeled his system on British mercantilism, reasoning that the US economy would only flourish by protecting our agricultural and industrial enterprises, and that this ‘protecting’ mustn’t be left to Smith’s ‘open and free market’ but must be surgically engineered by government. This was the early economic nationalism of President Trump’s “America First” ideology.”
“Smith advocated for government regulations to protect the public, not corporations, yet his warning has drowned in the roaring Republican demands for corporate deregulation, giving rise to a recent phenomenon: ‘regulatory capture.’ ”
Regulatory capture occurs when regulatory agencies employ members of the very businesses that government is supposed to regulate. The business gains internal control of the agency, then severs its chief purpose of restricting corporate tyranny over the public.
Truth-Out describes how some perfect examples of regulatory capture include “the relationship between big banks and government, wherein banking lobbyists literally write the policies that regulate them, for the benefit of the banks; as also in the recent, appalling Dodd-Frank regulation rollbacks. More are found among the Trump administration. Just examine some recent deregulatory efforts by Betsy DeVos of the Department of Education, Scott Pruitt of the Environmental Protection Agency and Steven Winberg of the Department of Energy.” Truth-Out indicates that regulatory capture is not an example of capitalism where survival of the fittest is the rule and the assumption is that with free competition, businesses will only survive by providing the best services and products. In the US today, we really are not seeing the workings of capitalism, but the workings of an oligarchy where the free market is discarded in favor of a carefully controlled political and economic system with controls that favor the corporatocracy at the expense of labor and the consumer. From Truth-Out: “Combined with evidence that corporations have dominant power over our political economy, this does not reveal capitalism, but corporatocracy and plutocracy.”
Truth-Out goes on to describe how our trade agreements that call for “free trade” which would be consistent with capitalism are far from “free.” “Free-trade agreements” aren’t ‘free’ at all. Quite the opposite. NAFTA is a generalizable example. It’s a legal agreement between nations for the protection of transnational and multinational corporations to operate in privileged conditions across foreign borders.”
Furthermore, from another report from Corpwatch.org:
NAFTA includes an array of new corporate investment rights and protections that are unprecedented in scope and power. NAFTA allows corporations to sue the national government of a NAFTA country in secret arbitration tribunals if they feel that a regulation or government decision affects their investment in conflict with these new NAFTA rights. If a corporation wins, the taxpayers of the “losing” NAFTA nation must foot the bill.
In other words, “free-trade agreements” protect corporations from capitalism.
Another way in which the current US economic and political system stray from pure capitalism is in relation to research and development (R&D) in a myriad of industries. R&D naturally requires an enormous investment of funds in order to develop products and technologies. But instead of corporations funding their own R&D, government does so with taxpayer dollars, often through branches of the Pentagon or Health and Human Services. Once R&D is complete, corporations cherry-pick that precious information at no cost.
The investment of public funds into research and development that advances corporate product development ought to result in the public, as investors, to receive some level of return on that investment. Yet while we provide the “capital base” for such innovation, but, unlike in capitalism, we “investors” receive no return-on-investment. Those gains are privatized by the corporations that cherry-pick the R&D in order to produce their products.
For this corruption of justice . “We the People” must, together, move toward an economic system that is designed by the many and for the many; the system fought for by the Lowell Mill Girls, in which “those who work in the mills ought to own them, not have the status of machines ruled by private despots who are entrenching monarchic principles on democratic soil as they drive downwards freedom and rights, civilization, health, morals and intellectuality in the new commercial feudalism.”
In the end, whatever you call the political and economic system globally operative today, what is clear is that it serves the interests of the 1% and is seeking to ensure that those interests are secured permanently through a methodical effort to control all governmental regulatory functions, the media, the political systems, the labor market and even our ability to think freely. While now we are able to pen words that challenge this system, the free flow of ideas in the mainstream media is no more with only a semblance of debate occurring within a very limited range of options.
The implications of this situation will be explored more deeply over the coming weeks, but a goodly reason for Roxanne and I going on the road, is to talk with people who continue to innovate, explore alternative models of organizing, communicating, and working collectively. Even within today’s constraints there are courageous social pioneers working collectively, exploring ways to invest public funds for public good, and organizing to seek justice. One of the most exciting places we plan to visit is in Cleveland Ohio and the Evergreen Collective, a model of economic enterprise developed by the Democracy Collaborative. The video below describes this model.
Click here to read the very thoughtful and illuminating Truth-Out report.
Paul & Roxanne
Categories: Economic Justice, Community & Economic Development
This is promising. Have you thought about how to start this is Santa Fe\Albuquerque?
Not sure what to make of this post. As far as I understand, it appears to be pointing out that the version of capitalism that we have does not follow the tenets that Smith laid out in “The Wealth of Nations”. Further, that Hamilton and other founding fathers followed the British form of capitalism with its support for rule primarily by aristocrats and industrious business owners.
Although having no claims to being a historian, I doubt that there has ever existed a pure model of capitalism, especially where government serves to protect the public and not the interests of the corporations themselves. Certainly, if they have existed, I suspect, not for long. There are of course governments that have not gone as far as ours in empowering corporations and the extremely wealthy owners to so clearly influence or establish policy. But all governments are subject to corruption because government officials (elected or not) are just human. All systems created by humans are limited by that human nature. Further all systems, human or natural, require that they incorporate continuous monitoring, repair and refurbishment if they are to continue to meet their intended purpose for their intended period of existence. In my opinion, our current system of governance does not appear to have sufficiently robust features to detect, prevent or limit drifting further from democratic rule, at least than we had forty years ago. This especially so with the development of social media and the proliferation of media outlets with clearly partisan positions.
With reference to the Lowell Mill Girls and the authors journey to seek out other economic collective models, as pointed out, there are successful examples of employee ownership of businesses. The most well known and successful of these is the Mondragon Corporation which was started in Spain during Franco’s rule, and now is a global entity. However this multibillion corporation has also drifted from its stated principles and many of its wage earners are no longer vested as owners in the corporation. Which brings us back to the nature of all human designed systems and the need for robust oversight and corrective actions to maintain the intended purpose and underlying principles. With regard to going out to check existing economic cooperatives please keep in mind that no system, no matter how successful, can be adopted without adaptation to fit the environment, the business and the culture that it is to be implemented in. Usually it is the underlying principles that one should identify and, if sound, serve as the foundation for all other aspects of the system to be built.
Good luck with the effort. I look forward to hearing the results of your investigations.
As usual, John, your comments are so well informed and spot on. If you are interested, I’d love it if you could write up about 1500 words on Mondragon, its founding, initial ideals, successes and growth, and then its straying from its ideals. Your point about human nature is so true and suggests that existence will be a constant evolution and devolution between higher ideals and humanism and greed and corruption. And the recognition that we don’t have the technology to monitor social media and for that matter the high speed business transactions that are now common. But I am going to go back to an older blog I did about how starting in the 70s the elite really began to coordinate and conspire to take over the media, the universities, and state and local government. I think there is a longer piece I want to do about the accumulation of power that has occurred over the past 40 years and where that leaves us in terms of being able to advance more progressive policies. I am very fearful we are approaching a place where we have gone so far to the right or more accurately to plutocracy, that we can’t restore a balance and can only slow a movement toward fascism.