THE GLARING FAILURE OF REPUBLICAN “FREE MARKET” ECONOMICS!

By Jack Jodell, October 18, 2011

The  widespread and ongoing OCCUPY TOGETHER movements all over the world show a massive, almost universal, displeasure with capitalism as an economic model, particularly the  “free market” variety so beloved and espoused by today’s (and YESTERDAY’S) ultra-conservative Republicans,   Libertarians, and Tea Party extremists. From Wall Street to Milan, from London to Asia to the Middle East – there is justified anger and frustration with this so-called “best of all economic systems” due to its abject failure to provide jobs and opportunity to the vast majority of peoples, as it provides wealth and a comfortable, secure lifestyle to only a shrinking few.

Karl Marx, the German philosopher who founded the doctrine of communism,  had  it essentially right when he first analyzed capitalism back in the 1840s. He was an excellent diagnostician. His followers, however, among them Lenin, Stalin, and Mao, were poor pharmacists in that the remedy they prescribed was harsh, deadly, overly centralized, and too restrictive to provide much practical popular good.  The state (government) demanded all profit for itself and didn’t allow the individual citizen enough economic freedom to satisfy themselves. This harshness and restrictiveness ended badly for the first group of regimes that adopted  them, namely the Soviet Union and her various satellites. Of course, Marx died before capitalism itself had morphed into its more modern form of welfare capitalism, which had begun under Otto von Bismarck  in the 1880s and eventually matured with the implementation of Franklin Roosevelt’s New Deal in the 1930s. These provided for social safety nets for the population and were characterized by state regulation of capitalism, but not even that was enough to stem the system’s inherent self-centered greed.

Prior to Karl Marx were the beliefs of social philosopher Adam Smith, the darling of cirrent conservatives, who advocated unrestricted, free market “laissez faire” capitalism. He believed wrongly that the state had no right to interfere in any way with the workings of the marketplace and that an “invisible hand” would guide capitalists to always do whatever was in the best interests of the market itself to ensure that self-correction would enable all to prosper. The majority of people currently demonstrating on the streets know that such a hand does not exist, and that laissez faire capitalism has always proved disastrous for the majority and only desirable for the tiny few who are wealthy. In fact, in its current form of “crony capitalism” it has been proven to be a malignant force that has co-opted and perverted entire governments to make the very rich even richer and more secure and comfortable while dooming the rest of the population to increasing malaise and even squalor. Time and again, Smith has been shown to be a misguided idealist whose beliefs have repeatedly led to the rich getter richer and the poor getting poorer.

Enter John Maynard Keynes, the brilliant British economist whose ideas revolutionized social and economic thinking, and led to a very long and solid mid-to-late 20th century period of growth and prosperity for most of the capitalist world. He argued that the best way to combat long periods of high unemployment was to stimulate aggregate demand, NOT to institute austerity measures which would reduce that demand. He correctly forecast  government  regulation and intervention as being vital to the success and continuance of the capitalist system. He believed that when the amount of money being saved exceeds the amount being invested, JUST AS WE HAVE BEEN SEEING LATELY AMONG HUGE CORPORATIONS AND WALL STREET BANKERS, long-term unemployment will RISE. He recommended INCREASED GOVERNMENT SPENDING IN THE FORM OF PUBLIC WORKS PROGRAMS as a method to stimulate demand and lower unemployment rates. He also advocated a progressive tax system. He wrote in the middle of the Great Depression, “Let us be up and doing, using our idle resources to increase our wealth…with men and plans unemployed, it is ridiculous to say that we cannot afford these new developments.” Keynes thus came out in favor of LIMITED deficit spending: spending to the point where jobs could be created and maintained. His ideas, which were adopted by all western economics from the 1950s through the early 170s, spawned a tremendous and unprecedented prosperity. Workers AND business owners each saw their earnings grow. It was only the 1973 oil crisis, as well as the lifting of certain governmental regulatory controls which allowed “decadent and selfish” market speculators to once again enter the economic picture, which caused rampant inflation and increased unemployment to appear simultaneously. Consequently, a number of economists began to deviate from the accepted Keynesian model in the face of this “stagflation.”

As a result ofse late-1970s economic crises, conservative, classical economists like Milton Friedman came back into vogue. Along with him began the rise of conservative politicians like Ronald Reagan and George W. Bush, arguably the most mediocre and destructive Presidents of all time. These people rejected the Keynesian notion of government intervention outright, and declared government to be the problem rather than the solution. They pushed the country’s political and economic agenda increasingly further to the right of where it had been during the previous 25 years. “Trickle-down” and “free market” economics became the order of the day. Taxes were reduced on the very wealthy and corporations under the errant assumption that doing so would enable those with money to invest freely and without fear, the presumption being that huge numbers of new jobs would then be created and the whole nation would prosper. It didn’t quite work out that way, though. Antitrust suits became almost nonexistent as regulatory agencies were hurriedly stuffed with business-friendly rather than public-watchdog staffs. Short-sighted, greedy, ideological fools like trust-funder Grover Norquist came into prominence; a total outsider who would intimidate legislators to sign a pledge forbidding them to raise taxes no matter what. Government spending on the elderly and the needy was pushed downward in the belief that privitization was best and that entitlement programs were somehow hurting the private sector. Worst of all, there were tremendous cutbacks in mortgage banking and investment regulation, so reckless speculators began once again having a field day on Wall Street. Hedge fund managers made millions off the sale of junk bonds; labor unions were shackled and lost influence, membership, and even bargaining-power rights; American jobs were exported by the millions to cheaper, foreign slave-labor markets; American workers’ wages flattened out and began to recede; and the rich became (and are still becoming) vastly richer, while those in the 99% of the population below them grow increasingly poorer. Economic social darwinism has been instituted and is now strangling the land. Crony capitalism has replaced good government and is destroying the country in the process. Even the Supreme Court has adopted a disastrous, activist corporatist posture. THAT, ladies and gentlemen, is the natural end result of 30+ years of conservative Republican “trickle-down” economics, and THAT is why people are taking to the streets all across the globe! Capitalism has once more not delivered on its promise of abundance for all, and this latest “Great Recession” with its accompanying sustained high unemployment and austerity measures, represents the glaring failure of Republican “free market” economics. The obvious only solution is to return to some form of Keynesian sanity, to tax the rich much more heavily, and to begin a massive, government-funded series of programs to rebuild the nation’s infrastructure. OR, we can scrap the capitalist system altogether, but, practically speaking, this would only lead to a long period of bloodshed and civil strife. CLEARLY, THE UPPER 1% MUST YIELD GROUND AND WEALTH TO ACCOMODATE THE NEEDS OF THOSE BELOW THEM!  WILL THEY LISTEN TO THE DEMANDS OF THE 99%?   

In addition, conservative Democrats and Republicans alike MUST NOT ne returned to office in 2012!!!

About jackjodell53

I am an American Dissident trapped in a country where poor and middle class people are constantly being exploited and lied to by a very rigid and conservative plutocratic elite. I believe in government OF, FOR, and BY the people, not one controlled as it now is by corporations and special interests.
This entry was posted in "free market" economics, commentary, conservative Republicans, corporate greed, History, labor unions, libertarians, Politics, Progressives, taxes, Tea Party, wealth disparity and tagged , , , , , . Bookmark the permalink.

24 Responses to THE GLARING FAILURE OF REPUBLICAN “FREE MARKET” ECONOMICS!

  1. Darlene says:

    Beautifully researched, Jack. You have laid it out so clearly that even a muddle-headed Tea Party dolt should be able to understand that conservative economics are a proven failure and that Keynesian economics work. Too bad that even the ‘well educated’ are so enraptured by their warped ideology that they refuse to face facts.

  2. Jack Jodell says:

    Thank you, Darlene. They can only keep insisting the world is flat for just so long, though…we still know better!

  3. Joe Hagstrom says:

    I’ve been harping for years that we don’t need leadership as much as we need good followers. I’m proud to follow you Jack. You hit it out of the park every post. Well done sir!

  4. Jack, I’m going to offer a bit of constructive criticism to what is mostly a very good post. I hope you’ll accept it as such. If you do, it could help sharpen your sword.

    “Adam Smith . . . believed an ‘invisible hand’ would guide capitalists to always do whatever was in the best interests of the market itself to ensure that self-correction would enable all to prosper.”
    Smith described a mechanism through which buyers and sellers come together to establish value (prices) and by doing that, determine allocation of resources. Buyers and sellers’ intent isn’t to do what’s best for the market. Sellers seek the highest price they can get, while buyers seek the lowest price they have to pay. They’re looking out for their own interests, not the market.

    I think self-correction refers to allocation of resources. If someone devotes time, money and effort to bringing out a line of buggy whips this year, the market, through lack of demand, will invisibly guide him to do some market research before coming out with another product there’s little or no demand for.

    “Smith has been shown to be a misguided idealist whose beliefs have repeatedly led to the rich getter richer and the poor getting poorer.”

    I think you’re confusing Smith, who accurately described a mechanism, with modern-day snake-oil salesmen like Friedman, who advocated for the mechanism as a miraculous thing that automatically satisfies all wants and meets all needs if only government will leave it to do it’s thing. I don’t think Smith did that. The following is from Wikipedia, in an article about laissez faire:

    “Adam Smith first used the metaphor of an ‘invisible hand’ in his book The Theory of Moral Sentiments to describe the unintentional effects of economic self organization from economic self interest.[10] Some have characterized this metaphor as one for laissez-faire,[11] but Smith never actually used the term himself.[8]”

    On Keynes: “He believed that when the amount of money being saved exceeds the amount being invested, . . . long-term unemployment will RISE.”

    To save money without investing it, you have to do something like store it in a safe or stuff it in a mattress. Since very few people go that route, money saved is univerally considered invested. Even if you only put money in a passbook savings account, you’re investing it. The bank can leverage that money to lend even more.

    There was no single reason for increasing longterm unemployment in Keynes’ day, nor is there only one today. The U.S. has a serious structural problem because of the rapid advance of multiple technologies that increase efficiency and productivity while reducing the need for employees. With the introduction of automated telephone switching back in the 1960’s and 1970’s, the career field of telephone operator nearly became extinct. I’d guess that alone did away with more than a million jobs nationwide. Millions more jobs have been axed by modern farm machinery, computers, cell phones, robotics and the like. Then, there’s the effects of outsourcing and offshoring.

    On your larger points and conclusions, I couldn’t agree more. The goose that laid the golden egg is badly damaged thanks to selfish, cynical predators and the clods who follow them. Americans deserve better than that.

    • Jack Jodell says:

      S.W.,
      Thank you very much for your enlightening information. In a way, Smith is like Marx only in that his theories were put into practice disastrously and imperfectly by his followers (Friedman).

  5. Infidel753 says:

    The economics of Smith and Friedman sound very plausible when presented in the abstract. It’s understandable that millions of people still believe that’s how reality works.
    But the essence of the rational scientific approach to reality is that hypotheses need to be tested against the real world by experimentation and observation. If a hypothesis turns out not to be an accurate description of what actually happens, then it must be abandoned, no matter how good it sounds in the abstract.
    Geocentric cosmology once seemed very plausible, but when the observations of Galileo and others showed that the universe actually didn’t work that way, it had to be abandoned (though certain ideologues, who didn’t much care about the evidence, bitterly resisted doing so).
    We’ve been cutting taxes fairly steadily for 50 years, especially the last 20, and de-regulation of the financial sector has similarly been tested in action. The results are in — slower growth, shrinking job creation, rising inequality, and rising deficits. The hypothesis failed. That’s not how the real world works. Only the ideologues and people swayed by their propaganda will still cling to it.

    • Jack Jodell says:

      Thanks for the astute observation, Infidel 753.
      Unfortunately, at this point in time, the ideologues swayed by this errant scheme tend to hold a good deal of power, and they are called conservative Republicans and Tea Party extremists. THEY are the ones screwing up our recovery, and they must be thrown out of office to end this insanity.

    • So true and beautifully stated. Ideologues, amplified by the right-wing noise machine, will go on hard-selling their failed approach, and get plenty of traction with the public. That is made possible by the fact too few understand and accept the scientific method and intellectual discipline you described so well. To top it off, many think they know quite a bit about economics, when in fact much of what they “know” is actually political nonsense pumped out incessantly by the right-wing noise machine and conservative politicians.

  6. rjwalker918r says:

    >>He believed wrongly that the state had no right to interfere in any way with the workings of the marketplace and that an “invisible hand” would guide capitalists to always do whatever was in the best interests of the market itself to ensure that self-correction would enable all to prosper.

    That is how conservatives understand his thought, but I think that is an incorrect understanding.

    My understanding is that he said that the pursuit of economic self-interest _sometimes_ also serves the society at large, not always. He supported government policies to encourage the development of new industries

    He taught us that a nation develops wealth through domestic manufacturing, not through exporting production and jobs and importing the end products.

    http://rjw-progressive.blogspot.com/2011/06/economic-wrong-turn.html

    • Jack Jodell says:

      Thank you for stopping by, rjwalker918r.
      Thanks for that excellent link, too. It seems to confirm my assertion that Friedman and much of the resultant right wing economic policy of the past 30 years were wrong and have gravely damaged our economy. For the Republicans, Libertarians, and Tea Party extremists to continue to promote this nonsense is very dangerous and could destroy this country altogether. That is why these people have got to be thrown out completely in the next election!

  7. Bucko Bear says:

    Wish I’d said it dep’t :
    “Money is like manure. If you spread it around, things grow; leave it in one pile, it just stinks.”
    Can’t remember the originator, sorry.

  8. JCarls says:

    To the clarifications about Smith that others have added, somewhere in his writings, Smith goes on record as not trusting businessmen to be left to their own devices — a reference to the tendency of those with plenty of both self-interest and money to destroy the systems in which they exist.

  9. Stimpson says:

    I came in (late, again) on an excellent discussion. I blame the current mess on the Friedman-influenced policy-makers, and the way an Ayn Rand disciple used the SEC to turn financial markets into a casino. I highly recommend Griftopia, and especially its chapter on Greenspan (The Biggest Asshole in the Universe) for more on the latter problem

    • Jack Jodell says:

      Thank you, Stimpson. Events have shown clearly how disastrous being either a Rand OR Friedman disciple can be!

    • I see exactly what Stimpson is driving at….and you examples, Jack, are prime. Economics was never a subject I found any anchor to. I took it because it was necessary. I read Oso’s briefs with a sometimes confused digestion. However; I have had no trouble assessing and defining the ‘disaster capitalism’ that has marched on through our economy for the last 30 something years… since reading Klein. More great stuff… I’ll spread this through the nets. ta.

      • jackjodell53 says:

        Thanks, Gwen.
        The problem with economics is that it is in the abstract, while all of us live in reality and have to deal with the aftereffects of the abstract theories which people like Friedman and Rand have disastrously misapplied. That is where people suffer needlessly, and that is what I have spent my adult life opposing. ECONOMIC POWER TO THE PEOPLE, and if the state must aid that process, so be it!

  10. JollyRoger says:

    I have said before, and I say now, that the collapse of the USSR was the worst thing that ever happened to THIS country. As long as the USSR existed, with the infrastructure to broadcast a very different view of things, the greedy here knew that to get too greedy could literally be fatal. But once the check on right-wing greed imploded, suddenly there was no one, anywhere, offering up an alternative to the greedmeisters.

    It is directly as a result of this that we find ourselves where we now are. They need some kind of fear-insipring check on their behavior, and I despair of it ever coming from within.

    • Jack Jodell says:

      Jolly Roger, that is an outstandingly original perspective which is very worthy of great deliberation and widespread acceptance. I tip my hat to you for this great insight!

  11. Hello Jack,
    I have heard many of the so called, “Christian Conservative Republicans” condemning the “Occupy Movement” as being against God. I would say that THEIR form of “Christian Love” comes with its own form of a “Sexually Transmitted Disease” of non-critical thinking ignorance and apathy.

    I just did a posting of Harold Camping’s recent prediction that the end of the world would happen this past Friday, October 21, 2011. But wait!?!?! Here we are again this Saturday.

    • jackjodell53 says:

      Hello, Engineer of Knowledge.
      Yes, those fundamentalists have it all wrong. They are indeed ignorant, but also irrationally fearful and distrustful of all which doesn’t fit their narrow little box of beliefs.

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