Thursday, December 9, 2010

Why The US Economy is Not Likely to Recover

Governments in the US have been kind to the wealthy. Throughout American history, but especially since Ronald  Reagan, the wealthy have enjoyed low tax rates. That, as we are seeing in the recent days with Obama, is not going to change in any foreseeable future.

The theory behind it sounds good. Let the rich keep as much money as possible because they will invest it,;and that will create more jobs and greater wealth for everyone. That way, we all win. Sometimes we do. But like any economic system, captialism is man made. Nothing man made has ever worked perfectly in all times and under all conditions.. If the system is forever maintained in its purest form, as if it were part of the divine order, it will break. Capitalism, like anything man made, has to be balanced with hman needs, with changing conditions. No system will work if allowed to run wild and out of control.

Fedualism and aristocracy broke; communism broke; American captialism is breaking.

The trouble is, you see, that capitalism can work - but only when it can find customers. And American capitalism, by giving free rein to greed and economic ideologues, has destroyed its own domestic market.

In the 1970s, the wealthiest one percent of the US population had about 1/8 of all the country's wealth. Today, that one percent has doubled its share. Wealth was certainly created in the intervening boom years; but not much of it worked its way down. On the contrary, the gap between rich and poor in the US today is the greatest it has ever been. In fact, most Americans living in that booming economy were actually getting poorer even in the good years as wages rose more slowly than inflation.

In the same period, the US has maintained some social programmes to help the struggling poor and the middler class. But they've taxed the poor and the middle class to supply those services, while cutting taxes for the rich in the mistaken  belief that letting the rich get even richer would somehow ease the poverty of the poor.

It didn't. And that's part of  the reason, much of the reason, the US is deep into recession. American capitalism, without adequate taxation or regulation, proved a great creator of wealth, but a terrible distributor of it. As a result, American capitalism has destroyed its own domestic market.

Don't worry about the wealthy. Capital is easy to move around. Ford can just as easily build and sell its cars in Asia. For others, the writing is pretty much on the wall. Most Americans will have to settle for lives much different from those of their parents, because American capitalism has bled the country dry. Canada will follow because, as in so many things, it is following the American example - just a year or so later.

The one thing that  capitalism needed from government (apart from bailouts) was military force to enable it to enter unwilling markets. But wealth is so concentrated now in the US that it can afford its own armies. Indeed, a major part of the American armed forces now is privately owned.

None of the above is left wing. I don't think in terms of right wing and left wing because I've never seen a bird with one wing that was able to fly. And the US has become a one-wing bird, furiously flapping its wing and spinning itself in circles.

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