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:
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 four top multinational companies market value wise are: Saudi Aramco with $1,680 billion, Microsoft $1,359 billion, with Apple and Amazon on about the same - $1,285 & $1233 billion dollars. Aramco is tied tied to the State but the US companies know how keep their tax rates at a minimum.
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:
The all persuasive might of America’s megacorporations is such that Wal-Mart’s sales revenue is more than Finland’s GDP. The 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:
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 ‘neoliberalism’ in 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.
‘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.’
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)
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 (updated reference) 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: China 300%, Japan 230%, Greece 177%, Italy 135%, Singapore 126%, Spain 98%, France 98%, UK 80%, Canada 89%. (Figures updated July 2020.)
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?
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.
The motivating force behind the neoliberal approach is infamously stated in a 1979 response of Friedman to a question on
capitalism: