The Gadfly Bytes --
June 17, 2008
There are no sellers without buyers.
That’s the first law of practical economics. Everyone knows this to be
true, whether or not one has ever taken a course in Economics. Everyone
except, apparently, a few Ph.D economists who seem to forget this rule when
they are hired by the Heritage Foundation, the American Enterprise
Institute, etc., from which they migrate, back and forth, between offices in
Republican administrations and these right-wing think tanks.
For these worthies, the “first law” is replaced by the dogmas of
deregulation, “trickle-down” and market fundamentalism: impoverish the
masses, throw money at the rich who will then invest it, and then “the
invisible hand” of the unregulated free market will bring forth a cornucopia
of goods and services.
Never mind that there will be few if any buyers for these consumer goodies.
Henry Ford saw the fallacy of such a policy when he raised the wages of his
workers. His competitors in the auto industry were aghast. “Why did you do
that?,” they asked. Ford is said to have replied, “If I don’t pay them
more, who will buy my cars?”
It took awhile, but Henry Ford was eventually proved to be right. In 1935,
in the depths of the great depression, Congress passed the Wagner Act which
greatly enhanced the power of labor unions to bargain collectively on behalf
of their members. And after World War II, the G.I. Bill allowed millions of
returning war veterans to go to college and then to enter the work force as
trained professionals. The ranks of the middle class swelled, and as a
result of this gain in disposable income, so did the nation’s economy. In
an ongoing and sustainable
economic symbiosis, the investments of the capitalists “trickled down”
to increase the worker’s productivity, income and purchasing power, which in
turn “percolated up” to provide generous returns on these investments.
Like the fabled golden goose, this economic arrangement promised a perpetual
production of “golden eggs” of shared prosperity.
Then came Reaganomics, which allowed the ruling oligarchs with their
insatiable appetites for “more, still more,” to dismantle the unions, to cut
back workers’ salaries and benefits, to ship manufacturing and management
jobs overseas, to starve the tax base through loopholes, regressive tax
rates, and off-shore incorporations, and to strip the government of its
Constitutionally stipulated function of regulating commerce. (Article One,
Section Eight). As most citizens have consequently
toward poverty and serfdom, and the government has been taken "to the
bathtub” to be drowned, the upward “percolation” has been drying up. Rather
than protect and perpetuate the economic system that produced their wealth,
the privileged class is cooking and devouring the golden goose.
Bernie Sanders reports the resulting plight of the American middle
The economy is doing
great, except for 90% of the people in the economy. The reality is that
we have the hollowing out of the American economy. Median family income
declined by $2500 in the last seven years. 8 million people lost their
health insurance. 3 million people lost their pensions. This is a strong
economy? You’ve gotta be insane to believe that.
the richest one
percent of the population possesses more wealth than the bottom ninety
percent. (See also G. William Domhoff:
"Wealth, Income and Power").
This is how a
once-flourishing economy shrivels up and dies: the few who own and control
the nation’s wealth refuse to share that wealth with the many who produce
Ahead lies ruin for rich and poor alike.
For those with eyes to see, and a willingness to see, the consequences of
this unconstrained and unregulated greed are apparent and irrefutable: a
constriction of the economy which, unless met immediately with decisive and
painful countermeasures, must lead to economic collapse. We can expect no
such countermeasures from the Bush ("the fundamentals are sound")
administration. With the bursting of “the housing bubble,” consumer debt
has reached its limit: the national credit card is maxed out. Under Bush,
the cost of food has doubled, and of gas has tripled. (Neither food nor
fuel are counted in Bush’s phony Consumer Price Index, which consequently
understates the gravity of current inflation). As the average family spends
more on necessities such as food, medical care, home heating and
transportation to and from work, “luxuries” simply must drop out. No more
vacations. Fewer trips to the movies and to restaurants. Fewer purchases
of new cars (the old one will have to do for a few more years). Businesses
fail, workers are fired, stocks plunge, unemployment rises, the dollar
falls, the cost of imported goods (which means, due to outsourcing, most
consumer goods) rise. Still less disposable income to pay for higher priced
goods and services. More businesses fail, more workers are fired, etc.
Down, down, down, goes the spiral.
“No sellers without buyers.” It’s so obvious, so indisputable, even
tautological. How can anyone doubt this fundamental rule of practical
economics, much less promote policies that defy it? Answer: because
just as history is written by the victors, political/economic dogma is
written and taught by those with great wealth and power. And
anti-government, trickle-down, market fundamentalism are the dogmas of those who
own and control the nation’s wealth: dogmas that Friedrich Nietzsche called
“a master morality,” and that John Kenneth Galbraith characterized as a
"moral justification for selfishness.”
History provides numerous examples of such “justifications” by those
privileged with wealth and power. Out of the middle ages came the doctrine
of “the Divine right” of royalty to rule in luxury. This was supplanted by
the Protestant claim that personal wealth was the sign of Divine grace. In
the gilded age of the late nineteenth century, the Robber Barons embraced
the theory of “social Darwinism;” their wealth proved their superior
“fitness” to survive. And now we have the regressive dogmas of Reaganism,
of Bushism, and, let’s admit it, to some degree at least, of Clintonism:
“trickle down,” unconstrained capitalism, the wealth of the few as the key
to the wealth of all others. “The rising tide” that lifts all yachts, the
regressives assure us, lifts the dingys as well.
The fundamental error of “trickle down” economics is not that it is false,
but that it is a pernicious half-truth. As noted above, in a healthy
economy, investments do in fact yield results that “trickle down” to the
benefit of the workers and the public at large. But as Abraham Lincoln
correctly noted in his first inaugural address, “Labor is prior to, and
independent of, capital. Capital is only the fruit of labor, and could
never have existed if Labor had not first existed.” Thus “trickled-down”
benefits of investment presuppose the “percolated-up” wealth that is
produced by labor. An economic theory that touts “trickle-down” benefits of
investment to the neglect of the production of labor and the well-being of
the workers, is a theory that must fail in its application.
The doctrines of regressive economics – “trickle down,” market
minimalist government – are dogmas in the literal sense of that word: like
creationism and dialectical materialism (Marxism-Leninism), they are
believed and promulgated independently of evidence and practical
experience. If they are applied and fail, there is always an excuse at hand
that does not allow a suspicion that the dogma itself may be flawed. In
contrast, progressive economics is empirical, experimental and pragmatic:
constant in ends, and adaptable in means. As with numerous schemes in FDR’s
New Deal, the progressive policy is tried and, if it fails, it is discarded
and a new approach is attempted, and so on until policy is found that
“works.” (For an expansion of this point, see my
“Beautiful Theory vs. Baffling Reality.”).
The public must reject these false dogmas of regressive economics, and the
sooner the better; better for both the public in general and for the
oligarchs. The longer that these dogmas dictate public economic policy, the
greater will be the fall and the greater will be the retaliation of the
people against their oppressors.
No untried utopian schemes need to be invented to replace the current
kleptocracy. Only a restoration of a system that has proven itself in the
past: a regulated capitalism combined with a social democracy dedicated to
the welfare of all citizens and founded on the consent of an informed public
as manifested in honest, accurate and verifiable elections. And that latter
condition presupposes the existence of a free, independent and diverse
media, along with a public education system staffed with well-paid,
competent and dedicated teachers.
In short, what is required is a return to the liberalism – “the New Deal,”
“The Fair Deal,” “The New Frontier,” “The Great Society” – that Ronald
Reagan and the regressives have abolished in the past twenty-seven years.
The programs and policies of Reagan’s liberal predecessors were all
imperfect, as are all human endeavors, but unlike the regressive politics of
today, these earlier administrations had within themselves the means of
adaptation, correction and improvement.
We the people know the way out of the political and economic morass in which
we find ourselves. But if we are to escape, we must do so ourselves. We
can expect no help from the corporate media or from the politicians of both
political parties that have led us into the present crisis.
(Note: These ideas are presented and defended at greater length in
Economics for Regressives;” Chapter 9 of my book in progress,
Conscience of a
Copyright 2008 by Ernest Partridge