“Latter day discourse on the economic system as something separate merely because it can be analytically isolated bypass the inescapable fact that there is always persent a politico-economic system: government with economic ramifications, an economy with political ramifications.” Now, how to fix it begs the question that benefactors thereof will not counterpose said reckoning – where will it all end? what will be the historical outcome of the concentration of wealth and power in the United States? All the while acknowledging our parlous present circumstances and the variance created by globalization/automation, political/institutional dysfunction, and corruption/plutocracy being facts of social order.
Reducing government (establishing new forms of shareholder capitalism) may or may not be step in devising a new form of social contract compatible to 21st century social patterns/dynamics; but if it provides means to reduce power of money in politics then reducing volume of what’s worth buying needs curtailing post haste. Now, how do we do that?
Excellent post Adam. The fix coming up in part 4?
It is a pleasure to hear the strength of traditional conservatism speaking out against plutocracy and corruption.
What still rings of the current ideological divide, however, is the scepticism towards good government, whose role is to level the playing field, protect the poor and support communities while subjecting businesses to honest competition–especially in the sustainable conservative self-understanding of the past.
As long as conservatives continue to slander government instead of formulating a positive vision, including its necessary role in acting socially responsibly and levying sufficient taxes, they weaken it to fight against corruption. I suspect that that the anti-government frame is the keystone in the lobbyists efforts to end any centralized resistance to their influence.
Would the way out lie in renouncing the belief that government is the problem, and working out how government might be the solution? Beyond the spin of the corporations, there is certainly a centrist consensus on what the pillars of that function could look like.
Thank you for your deep and insightful articles. I really enjoy reading them.
“What’s Wrong and How to Fix It”
I would tend to diagnose the problem in a politico-economic frame of reference as well.
1. The nearly complete transference of tax burden from property (70% of all govt. revenues in 1930) to labor (income tax, sales tax, employment tax) has ensured a British-style banking industry which instead of enabling true economic growth, exists to extract maximum gains from asset inflation and has artificially inflated the value of capital while simultaneously artificially finishing the value of capital formation and labor. This in contrast to what might have been a set of policies encouraging Industrial Banking, where the focus would have been on creating new capital goods, rather than merely inflating the price of existing assets.
2. Tax deductions for mortgage interest, tax-free capital gains on up to $600K every two years and other such policies amplified the effects of core policies.
3. Monetary policies since 1995 gave exorbitant fuel to create a massive bubble.
These government policies created tremendous incentive to misallocate capital in every sphere of economic activity and more importantly set a squeezing out of artificial rent from the entire productive economy and younger households and transferring it to the finance, real estate and insurance sectors. The “playing field” has been made very uneven across the spectrum of industries.
Over the last three generations, these policies have caused the cost of housing to rise at a far greater rate than inflation. I beleive that this unprecedented generational transfer of wealth was a paramount cause of the growing wealth disparity in classic Ponzi fashion.
Relevel the playing field so everyone can win again.
A. Restructure tax code toward greater neutrality by phasing out asset bubble inducing features. A flat tax with few deductions, phasing out mortgage interest deduction gradually, instead of our current crony capitalist tax code.
B. Rebalance the burden of taxation so it is more evenly spread over both capital and capital formation. A very mild type of wealth tax might be considered.
C. Equalize the tax burden of employment taxes by shifting the allocation from its current “per employee” basis over to a straight percentage of sales in order to equalize the playing field.
D. Retract dual mandate and replace with a more conservative Federal Reserve policy akin to Taylor Rule. Keep the dollar strong to protect people on fixed income.
E. Consider a public-private initiative to create an industrial banking sector in America. One might consider giving tax advantage to debt used for creating new capital goods over merely inflating existing ones.
These core changes could yield a political environment where fiscal discipline is more palatable by both sides of the aisle.
That should have read “diminishing” rather than “finishing”.
How do we fix it? We don’t fix it. The power players are too entrenched; “fixing” it requires some of them, at least, to loosen their stranglehold on wealth and power, which they’ll never do.
1976 Campaign cost $70million in 1976 dollars. That’s about $300 million today. Normalize to the relative populations, and it doesn’t seem like they’re spending all that much more money today.
Not that the US isn’t an absurd plutocracy, but I think the gas expended on campaign finance is a distraction from the real issues.
Well, legally they do. International human rthgis law, national bills of rthgis or human rthgis acts, criminal law etc. all guarantee the right to property, with stiff penalties for violating it. Of course, morally or philosophically it’s a different matter. Locke is famous for his philosophiocal justification of the right to property (see here if you want: ), but I don’t think it’s waterproof. The best defense of property I can think of is it’s importance for the right to privacy (see the same link). If you think privacy is important, it’s hard to see how you can reject the right to property. Much depends also on the origins of property. We all know that part of out property even yours and mine originates from colonial exploitation and others types of injustices. Property in general can be justified, but once you start to look at specific property, you quickly unearth injustices that undue the right to a specific set of property.