In my book I wrote that "The moral justification of capitalism in America rests upon one very simple assumption: If you work hard you will get ahead." Are we killing the moral justification of capitalism for America's middle class? I think so. Here's how.
While the banks have gone back to their old irresponsible habits (see previous post) Elizabeth Warren, chair of the Congressional Oversight Panel for the bailout has an interesting take on what's been happening to the heart and soul of America. Specifically, she's worried about what's happened to America's middle-class. Warren writes:
Part of the reason for this is that middle-class Americans are now spending more money on health care, taxes, and on their homes than they did thirty years ago. Wages? They've dropped for both married couples and single men. Americans might be working more hours (i.e. those who have jobs) but the reality is middle-class America is in trouble in the areas of job security, job quality, and salaries (though the top 1% are doing just fine).
Here's the incredible point. These developments aren't tied to some mythical invisible hand in the marketplace. Nor is it tied to irresponsible consumers who brought debt loads upon themselves. Put more simply, none of Middle America's descent into debt, uncertainty, and pink slips is an accident.
As I pointed out in my book what's happening today is tied to favorable legislation that inflates profits and then protects inherited and ill-gotten wealth. Want proof? Take a look at (1) the logic behind the 2005 Bankrupty Reform bill, (2) the real beneficiaries of "Dead Peasant" Insurance, (3) how the politics behind the Estate Tax had nothing to do with saving the "family farm" and (4) why corporations really locate in off-shore havens. These developments have literally transferred trillions of dollars from Middle America to the top 1%. And this was before the bank bailout.
Middle-class America's descent is also tied to a state that's bought into the idea that financial institutions create wealth, even when they're busy sucking it out of the American middle class via bailouts and government enforced bankruptcies and foreclosures. And all for what? So the financial titans of America can continue gambling on interest rates and foreign currencies, as they are currently doing? Give me a break. This is wealth extraction, not wealth creation.
While I'd like to say that the real losers in this capitalist market charade are middle-class Americans, local community banks, small businesses and future entrepreneurs, I can't. To be sure, they're losing out. But the real loser here is the American ideal.
More specifically, while Elizabeth Warren is correct to point out what's happening to America's middle-class it's more important to understand what's happening to America: We are slowly killing the moral justification of capitalism.
Simply put, the idea that you can work hard and get ahead is getting smothered by well-connected financial titans who believe they are entitled to government-escorted profits in an economy they wrecked ... It's being smothered by a political class that believes in free market fairytopias, where market players do the right thing (and must be left alone) because they're virtuous in the pursuit of profit ... Finally, it's going to get smothered by a middle-class that will one day balk at the idea of having to pick up the pieces in the form of higher taxes, more uncertainty, and a faded American Dream (an early sentiment captured in the photo below).
America became America because we figured out that financial reward shouldn't go only to those of social standing (aristocracies), protected networks (elites), or to those with royal bloodlines (monarchy). America became America because we learned how to create opportunities and reward for those who worked hard. Rather than believing in free market fairies we need to relearn how this happened.
- Mark
While the banks have gone back to their old irresponsible habits (see previous post) Elizabeth Warren, chair of the Congressional Oversight Panel for the bailout has an interesting take on what's been happening to the heart and soul of America. Specifically, she's worried about what's happened to America's middle-class. Warren writes:
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
Part of the reason for this is that middle-class Americans are now spending more money on health care, taxes, and on their homes than they did thirty years ago. Wages? They've dropped for both married couples and single men. Americans might be working more hours (i.e. those who have jobs) but the reality is middle-class America is in trouble in the areas of job security, job quality, and salaries (though the top 1% are doing just fine).
Here's the incredible point. These developments aren't tied to some mythical invisible hand in the marketplace. Nor is it tied to irresponsible consumers who brought debt loads upon themselves. Put more simply, none of Middle America's descent into debt, uncertainty, and pink slips is an accident.
As I pointed out in my book what's happening today is tied to favorable legislation that inflates profits and then protects inherited and ill-gotten wealth. Want proof? Take a look at (1) the logic behind the 2005 Bankrupty Reform bill, (2) the real beneficiaries of "Dead Peasant" Insurance, (3) how the politics behind the Estate Tax had nothing to do with saving the "family farm" and (4) why corporations really locate in off-shore havens. These developments have literally transferred trillions of dollars from Middle America to the top 1%. And this was before the bank bailout.
Middle-class America's descent is also tied to a state that's bought into the idea that financial institutions create wealth, even when they're busy sucking it out of the American middle class via bailouts and government enforced bankruptcies and foreclosures. And all for what? So the financial titans of America can continue gambling on interest rates and foreign currencies, as they are currently doing? Give me a break. This is wealth extraction, not wealth creation.
While I'd like to say that the real losers in this capitalist market charade are middle-class Americans, local community banks, small businesses and future entrepreneurs, I can't. To be sure, they're losing out. But the real loser here is the American ideal.
More specifically, while Elizabeth Warren is correct to point out what's happening to America's middle-class it's more important to understand what's happening to America: We are slowly killing the moral justification of capitalism.
Simply put, the idea that you can work hard and get ahead is getting smothered by well-connected financial titans who believe they are entitled to government-escorted profits in an economy they wrecked ... It's being smothered by a political class that believes in free market fairytopias, where market players do the right thing (and must be left alone) because they're virtuous in the pursuit of profit ... Finally, it's going to get smothered by a middle-class that will one day balk at the idea of having to pick up the pieces in the form of higher taxes, more uncertainty, and a faded American Dream (an early sentiment captured in the photo below).
America became America because we figured out that financial reward shouldn't go only to those of social standing (aristocracies), protected networks (elites), or to those with royal bloodlines (monarchy). America became America because we learned how to create opportunities and reward for those who worked hard. Rather than believing in free market fairies we need to relearn how this happened.
- Mark
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