Wednesday, October 13, 2010

Economics 101 or Why Capitalism Sucks

So, I received an email the other day from a friend of mine from high school. He sent the email to me and to the younger brother of another classmate of ours. Somehow, even though we all went to the same high school and graduated from the same magnet program (International Baccalaureate), Tue turned out moderate, Jared turned out a super conservative, and, well, I think that Sweden is a little too far right.

Tue was struggling around the upcoming election and had a question about the repeal of the Bush tax cuts and specifically whether or not it was cool to return to pre-Bush tax cut tax rates for high income earners while allowing the tax cuts to remain for those making less than $250,000. With all due respect to Jared, his response was something directly from the Rand Paul Bible. He believes that all taxes are wrong and that pure and unadulterated free market capitalism is the answer to all the ills of the world. Jared also suggested that businesses have fled this country because of our tax rates. I almost gagged on my own vomit.

Why thank you Adam Smith! Luckily for us, we have 500+ years now of various incarnations of capitalism that disprove that there little theory.

When I first read Tue's email and then Jared's response, I saw little flashes of red and almost burst a capillary. So, I waited a week before responded.

This was my response:

Dear Tue and Jared:

Actually, businesses left this country because it was easier for them to abrogate their responsibility to the working people that created the wealth that they want not only to maintain but to grow without regard to the social, community, political, or human cost.

I am not a communist, but I do believe in a collective responsibility both to each other and to the means of production. Bill Gates, for example, should reap the benefit of his brilliance. But, without hundreds of thousands of employees, he would not now be the second richest man in the world. His wealth is in direct relationship to the individuals, humans that assisted him in creating that wealth. How then should he have no responsibility, which, in civil society is expressed through wages and benefits to the individual and to the broader society as taxes, to balance his personal benefit against the means by which he acquired his wealth in the first place?

In a purely capitalist system, which has NEVER existed, capitalism will, eventually, create such a disparity in social well being that even if it does not, as Marx suggested, eat it self, it will be destroyed (the good along with the bad) by those that rightly detest the unfair, illogical, and downright idiotic division in wealth.

The idea that those that are wealthy have acquired their wealth through perseverance, self-sacrifice, and by pulling themselves up by their own bootstraps is as much a myth as Santa Claus, and like Santa Claus grown ups shouldn't believe it.

Show me a single major corporation in this country that did not acquire its massive wealth through generous subsidies from local, state and federal governments. Show me a corporate that is older than 70 years that did not acquire its wealth through massive oppression of workers that included state sponsored terrorism of workers. Show me a corporation that is over 150 years old that did not directly or indirectly benefit from slavery. Taxation is fair because the means of wealth creation are, in general, inherently unfair.

Further, if you'd like to discuss the social contract and political security, how then are people who relate to one another in a society based on capitalism and not small, localized barter communities supposed to pay for and sustain collective security while also dismantling despotism and watching out for the human tendency for exploitation? The honor system just doesn't work, and without a social structure to protect it neither does capitalism.

To answer your question, Tue, I believe that since the wealthy rely on the government to maintain their wealth that they should have to pay a proportionate amount of their income to sustain the systems that allow them to remain ridiculously wealthy. In the 70s, the marginal tax rate for the highest income bracket was somewhere around 70%, it is now around 36%...the income gap between the richest and the poorest has increased the largest it has been since before World War II which would lead me to believe that, perhaps, there is a correlation. Oh, and to be even more specific, the income gap began to widen drastically in the 1980s when the marginal tax rate for the most wealthy citizens was greatly reduced WHILE at the same time the Reagan administration began systematically dismantling the Great Society programs. No economist that believes in peer reviewed research and is credible will suggest that the two are unrelated.

We have seen what massive deregulation has done to industry. We saw it under Reagan (trickle down my ass), and we saw it under Bush (gotta love a complete reversal of the U.S. economy).

One of my favorite lines is...if you always do what you always did you will always get what you always got.

So, if you believe the Bush economic policies were good for America, if you believe our country is more economically healthy now than it was in the early to late 90s, then, by all means, vote for the Republicans.

Democrats are not much better but they are better. I pray to Heaven every day for a real change and a multi-party system but that may be too much to ask.



  1. wow, my attitude to taxation has always been very much like yours but no where near as well formulated or articulated!

    Thanks for that :)

    Oh and if Tue does not like the USA's top taxation rate of 385 he can always move to Australia where the top rate is 48%...

  2. Sigh...
    Thanks, B..

    You wrote that your friend Jared "...believes that all taxes are wrong and that pure and unadulterated free market capitalism is the answer to all the ills of the world. Jared also suggested that businesses have fled this country because of our tax rates."

    Uhm, correct me if I am wrong but Free Markets and Free Trade may not go hand-in-hand, but they are based upon similar government interference. Let the corporations do what they will.

    So...with Free Trade in place...yes, domestic companies have relocated jobs off-shore in order to collect more returns for cheaper wages. are RIGHT! Our tax rates encourage greedy CEOs to make use of Free Trade agreements. all means...reduce the tax on corporations, allow the Free Market to prevail...and... perhaps some of those jobs will return...or...

    Well, who cares...

    By the time that happens the United States will be categorized as Third World...but... The CEOs and conservative politicians wont have to sneak around and hire undocumented immigrants any more...there will be plenty of natural born citizens standing in line to clean their toilets! Gotta love that Trickle Down theory!

  3. All I can say is, SNAP!! God Bless you BLC!! As always, much love and utter respect.


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