Paralleling the growing US debt of the last 40 years has been the furthering of inequalities, not just in America but throughout the world; largely brought about by the channelling of money into the hands of successful entrepreneurs, company executives, high profile individuals and business tycoons.

 

Corporate America would like to slash ‘healthcare’ and ‘social security’ programs while maintaining global supremacy through a defence program that supports its commercial interests. The 'War on the Poor and Working Families' is clearly explained in this 2 minute YouTube clip from political economist Professor Robert Reich.

 

This 'slashing' attack on social security’ programs involves many well propagated myths but the truth is that these programs are well funded and are an essential part of any progressive society as explained by Nancy Altman, cofounder of ‘Social Security Works’, and a person with thirty-five years background in the area of Social Security and private pensions:

 

Social Security is wage insurance, which we earn through working and paying premiums or insurance contributions, under the American Federal Insurance Contributions Act, Social Security insures workers and their families against the loss of wages in the event of permanent and serious disability or death, in addition to old age.’

 

There are many ways in which the entrepreneur can gain a competitive advantage through money manipulation and most involve borrowing money and squeezing wage earning labour. Take a company with economic potential; inflate the company’s worth by retrenching workers; get a bank loan based on the revaluation (claimed as a deduction on company income); give investors a healthy dividend; sell the company to a megacorporation; keep 20% yourself and pay a token tax under the banner of Capital Gains.


 

The multinational company currently with the world’s highest market value is Apple Inc. who in November 2014 was the first Company to be valued at greater than $700 billion dollars; $296 billion in front of the world’s second biggest company Exxon Mobil. Understandingly, for those acquainted with megacorporation finances, Apple Inc. pays less than 1% tax.

 

Tax havens like Switzerland and Luxembourg are being used by more and more businesses forcing the burden of lost revenues onto taxpaying wage earners. In 1952 US corporate income tax provided 33% of total Federal tax receipts and now tax on corporate income is less than 9% of income tax. The Business section of Huffington Post noted that:

 

‘These companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, according to a review of nearly 28,000 pages of confidential documents conducted by the International Consortium of Investigative Journalists and a team of more than 80 journalists from 26 countries.’


 

The all persuasive might of America’s megacorporations is such that Wal-Mart’s sales revenue is more than Finland’s GDPThe recently installed Greek Finance minister Yanis Varoufakis, refers to ‘Wal-Mart’ as being the quintessential model for a new ideology of cheap commodities  with its simple formula of importingThird World products, exporting jobs and preventing trade union involvement in wages and conditions. 

 

Since the Global Financial Crisis of 2008 Governments have attempted to stimulate and grow their economies through money creation mechanisms which have widened financial inequalities since the ‘created money’ is not directly available to lower economic groups. Governments would do better with policies and infrastructures that create employment, or simply by giving the ‘created money’ back to the unemployed and low income earners who will then recycle the money back into the economy. As Nancy Altman notes:

 

‘What should not happen though, is cutting the benefits of those who lawfully have earned them. Indeed, Social Security benefits should be expanded.’


 

John Stuart Mill believed that the end result of unlimited economic growth would lead to the destruction of the environment and a reduced quality of life. He concluded that a ‘steady state economy’ would be preferable to unending economic growth. Environmental scientist David Suzuki agrees with Mill:

 

 


 

The ‘father of modern economics’, Adam Smith (1723-1790), developed the theory that self interest in a free market place would lead to economic well-being for the individual and economic growth for all. Smith's ‘The Wealth of Nations’, published the same year as the Declaration of Independence (1776), set the direction of economic thought that still exists today.  

 

Adam Smith’s concepts were further developed by David Ricardo (1772-1823) who was the first advocate of ‘monetarism’; the theory of controlling the money supply as the chief method of stabilizing the economy. Ricardo also introduced the concept of ‘comparative advantage’ in which a country recognises and builds on its innate strengths.

 

John Maynard Keynes (1886-1946) added the notion that boom/bust cycles and employment rates could be moderated by government intervention. Keynes developed fiscal policies that regulated growth through government spending and tax rates.

 

Milton Friedman (1912-2006) gained favour in the 1970’s as the global economy came out of the post war boom. Friedman’s thoughts were developed along the lines of Ricardo’s monetarism and later developed into ‘neoliberalismin which economic factors are shifted from the public sector to the private sector by privatizing state-run businesses, flattening tax rates, limiting subsidies and supporting deregulation. 


 

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A Brief History of Capitalist Theory
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(May 15th 2014 - April 23rd, 2015)
A Brief History of Capitalist Theory

‘It is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the Art of Living, and much more likelihood of its being improved, when minds ceased to be engrossed by the art of getting on.’

John Stuart Mill (1806-1873) – The Principles of Political Economy, (1848)

‘It is the Tower of Babel over again. Men who attempt to develop a science of the production and distribution of wealth without first deciding what they mean by wealth cannot understand each other or even understand themselves.’

Henry George (1839-97) - The Science of Political Economy, (1879)

 

‘The West, caught in Bankruptocracy’s poisonous web, unable to rise to the challenges of the post-2008 world, will keep stagnating, losing its grip on reality, failing to match its outcomes to its capacities or to create new ‘realities’. As for the emerging economies, bristling with people ready to transcend constraints, to spawn new ‘realities’, to expand existing horizons, they will be caught in a trap of low overall demand for their wares.’

Yanis Varoufakis, Greece Finance Minister (2015)



 

 

 

David
Ricardo 
Adam
Smith 
John
Keynes 

In the 21st Century, commercial advantage has in large part replaced warfare as a criterion for global dominion, with a country’s advantage being dependent on natural and human resources administered by stable, innovative governments investing in infrastructures and technological efficiencies, whilst manipulating monetary supply and trade agreements.

 

The United States of America is the world’s number one ‘superpower’, not so much for its military spending (which is a massive 40% of the world’s total), but because of its Gross Domestic Product (GDP). At $1.7 trillion dollars, the GDP of the USA is about the  same as the combined GDP’s of the next three largest economies: China, Japan and Germany. 

 

And yet the anomalies of economic growth have the world’s ‘superpower’ broke and going further into the mire as shown by its 2013 Federal Budget that allocated $0.8 trillion dollars in excess of its GDP in three major areas: healthcare programs ($940 bill.), social security ($882 bill.) and defence ($718 bill.); thus producing a ‘debt to GDP ratio’ of 102% - a long way above the recognised safety limit of 50%.

 

The indicator used to define sound economic growth is the ratio of a countries ‘debt to GDP’. At a certain point the debt burden becomes so large that the government must raise taxes and cut spending to service the interest on debt and this in turn leads to slower growth, less jobs and more debt. Note the debt ratios of other major economies: Greece 177%, Italy 132%, Portugal 130%, Ireland 123%, Singapore 105%, Spain 98%, France 95%, UK 90%, Canada 89% along with more recent figures for China 217% and Japan 400%.


The graph below shows the American debt to GDP ratio since the formation of its government in 1789. Most notably there has been an increase during wars and recessions and the current projection would indicate similar tough times of war and recession ahead.

Since the Industrial Revolution economic growth has provided the Western world with an ever increasing material sufficiency such that developed economies of the 21st Century are now saturated with cheap 'daily necessities' while its citizens are ‘nurtured’ by a complex of government regulated service industries and humanitarian ‘safety nets’. Meanwhile the remaining 70% of the world’s population are in various stages of mirroring Western style development.

 

Economic growth relies on a continuing increase in production and consumption; this being a reasonable road for developing countries where consumption is aligned with population growth; as it was in the post World War 2 period of Western world development. But is the continuation of economic growth in developed countries compatible with personal happiness, planetary wellbeing and global peace?

The Folly of Economic Growth in the 21st Century

Friedman’s approach serendipitously meshed with a blueprint for lobbying US Governments presented to the Chamber of Commerce in 1971 by corporate lawyer Lewis Powell and dubbed the ‘Powell Manifesto’. Since then the rich have been getting richer while the rest of us bumble on filling in forms to justify our existence.

Somehow, we have come to think the whole purpose of the economy is to grow, yet growth is not a goal or purpose. The pursuit of endless growth is suicidal.
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"Well first of all, tell me: Is there some society you know that doesn’t run on greed?...there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system."

The motivating force behind the neoliberal approach is infamously stated in a 1979 response of Friedman to a question on capitalism: