|
Edited on Fri Mar-06-09 11:23 PM by crimsonblue
Subprime mortgages. Credit default swaps. Toxic assets. Frozen credit markets. These problems (and more) are the direct causes of the current economic crisis facing the United States, and much of the developed world. Underneath all of this, the true cause of the economic crisis we currently face is unfettered greed.
Prior to the Great Depression, corporations in America routinely manipulated the markets, lawmakers, and companies themselves in the pursuit of money. With Warren G. Harding's election in 1920, corporations found the perfect willing ally. In fact, Big Oil and other interests bought the presidency in a quid pro pro; in return for being elected, Harding placed powerful businessmen in high government positions in order to exploit the country for sheer profit (“The Tea Pot Dome Scandal” by Laton McCartney is an excellent book on this). The Depression, and the run on the banks that sparked it, were largely a result of willful manipulation and speculation run amok. False panics about the security of bank deposits caused a mass run by the general public to remove their savings from banks. Since banks normally do not keep the total value of all deposits readily on hand (deposits are used as capital to give out loans), thousands of banks became insolvent overnight.
As a result of the Great Depression, Americans elected Franklin Delano Roosevelt to the presidency, who ran on the platform on cleaning up Wall Street and instituting much needed financial regulations. Laws such as the Glass-Stengel Act prevented the mixture of commercial and investment banking, and kept banks from leveraging themselves into destruction. These policies, in combination with New Deal works such as the WPA and TVA, were truly socialistic in nature. FDR realized that the government could no longer be an enabler of rampant capitalism, and the government must control the markets in order to prevent fraud and excess greed. Born from these policies was the SEC, which is charged with investigating financial fraud, and the FDIC, which restored public confidence in the banking system. This system was met with fierce opposition by power capitalists, who frequently derided it as socialist and dangerous.
It is important to note that the socialist programs instituted (strong government regulation, fiscal government policy to provide jobs and improve the national infrastructure) was never truly communistic, because the government did not take direct control of companies; rather, the government began the role of receivership, meaning that the government became lender of last resort and also guaranteed deposits of Americans. I found it highly interesting that Wall Street fervently fought against the creation of the FDIC, because it has served for more than 70 years as a mechanism of stability in banking and encouraged investment.
One likely reason that power capitalists hated many of FDR's New Deal proposals is greed. They feared that by becoming actively involved in banking (as opposed to the government's traditional financial role with the Federal Reserve, which prints money and generally acts as a friend of business), the government would soon eradicate the banks and nationalize the entire banking sector (this was actually proposed in the late 1800s with the short-lived Bank of the United States).
It is undeniable that FDR's socialistic policies brought the United States out of the Great Depression. Unemployment plummeted more than 15% in the first four years of the New Deal, before pressure from capitalists forced FDR to drastically cut social programs-- which incidentally caused a noticeable slow down of recovery. The most heralded remnant of the New Deal was the creation of the Social Security Administration. In essence, social security acts as a government-run pension fund in which all Americans must participate. It is not coincidental that conservatives and libertarians have tried for decades to eradicate social security; they view it as an entitlement, and see no justification for the government to provide assistance to millions of Americans. In reality, Social Security is one of the most successful programs ever instituted in this country. Millions of Americans who would otherwise be penniless receive a monthly fixed income, allowing them to purchase groceries and pay their rent.
The social ideas enacted by FDR (including the requisition of much of the nation's gold supply, which served to prevent a horrifying hyper-inflation scenario from completely destroying the economy-- this scenario is largely to blame for the abject poverty prevalent in Germany prior to Hitler's rise to power) remained largely intact until the election of Ronald Reagan in 1980. Top marginal tax rates, which were once near 75%, were reduced to less than 47%. It is important to note that the economy of the United States thrived magnificently in the post-WW2 era, and a large, stable middle class arose. Through government involvement, millions of Americans were able to receive quality education and home ownerships rates exploded. Reagan's tax policies largely hurt the lower and middle classes. In order to remain quasi-budget neutral after slashing taxes, Reagan instituted high payroll taxes, which falls disproportionately on lower income individuals. I find it interesting that the income gap between rich and poor increased during the Reagan years. A large amount of wealth creation occurred during the Reagan presidency, but only those at the top benefited. This theory of trickle down economics became known by the name “voodoo economics”, because the belief that giving the rich more money will improve the lives of the poor is laughable at best.
The current economic crisis we face is a direct consequence of the past 25 years' government policy. Reagan prided himself with the eradication of many crucial FDR-era regulations, and his successors continued the great communicator's work. Under President George W. Bush, the largest tax cut in history occurred, transferring over $1.2 trillion dollars to the wealthiest 2% Americans. The lower and middle classes, however, have suffered dramatically under these laissez fare policies. American wages have stagnated and have been exceedingly outpaced by inflation. George Bush took office with a $250 billion surplus-- with an expected payoff of all the national debt by 2012-- and turned that into a $1 trillion budget deficit and >$10 trillion national debt.
The history of greed in our country is horrifying and angering. Instead of assisting Americans to obtain affordable health care, which is a natural right, the government instead spends over $525 billion a year on Defense spending-- which out paces the next closest country, China, by a factor of 5. Any mention of using the government as an instrument of social good-- be it providing affordable health care, aiding homeowners facing foreclosure, investing in alternative fuels, or providing funding to communities and states struggling in the face of daunting budget deficits-- is instantly met by the Right as “socialism” or “the destruction of capitalism”. Nobody must be paying attention, but Republican presidents have historically been the worst in terms of fiscal responsibility, and it was the deconstruction of necessary regulatory mechanism that caused the problems we currently face. Corporate America has proven it is a dismal steward of the economy, and, to a larger extent, the public trust. In order to solve the slew of crises we face, we must have strong socialistic government intervention. When private entities fail to act responsibly, those companies must be punished, and broken up if necessary. I think it is important to state that we will never have a communist country as envisioned by Marx, but in order for our country to move forward into the 21st century, we must embrace the notions of democratic socialism-- namely, that the government should take control of companies and industries which have shown to be incapable of acting ethically, and that the government must act to ensure that each American has the same equal footing (however, the government must ensure that only an opportunity “floor” is created, and not a ceiling, which can prevent advancement). It is a moral imperative that all Americans have affordable access to quality health care, have a quality education, and truly have the ability to rise out of poverty. We cannot allow ourselves to be a country that willingly gives hundreds of billions to Wall Street, while refusing to provide the assistance that Main Street needs.
|
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
