Stearmer

Weight Loss, Politics and Life in General

Controversial issue #1: The economy and the best way to manage it.

Socialism. The evil bad word that keeps getting dropped like and A-bomb on anyone who think that free-market capitalism is the be-all-end-all to all of our economic woes.

The argument typically gets framed something like  – “Our founding fathers….bla, bla, bla”. OR “The liberals are trying to turn us into Europe  – and that is just not American” OR “Socialism is Satan’s plan.” And the list could go on. On the socialist side the arguments typically get framed as a fairness argument and then they pull out all the sob stories of some poor smuck that lost everything to the evil corporate machine.

Yes, I am being intentionally inflammatory. Here is my issue with the discussion that happen on the economy and socialism and capitalism.

Socialism has two aspect. One is economic and the other is social. The first I see with a purpose – and the second that really is evil and completely counterproductive to freedom. Whether you can truly separate them out in practice I do not know, but the two sides need to be understood at least theoretically.

Capitalism also has two aspect. It is also economic and social. While it economic principles are wonderfully productive it also has significant social consequences. When we look at just one aspect and not the other (for both socialism and capitalism) we fail to see reality as it truly exists and then what makes it worse both sides then try to vilify the other side based solely on the consequences and not upon the merits

Very Very Very rarely will you see an argument that simply states the facts, historical and modern, on the nature of socialism and capitalism based on their history (good and bad), and then propose a decision based on the whole truth and nothing but the truth – as it were.

That is what I will attempt to do here.

The funny thing about people who claim to be capitalist is they tend to not be very familiar with the history and development of markets, regulation or the history of social responsibility. They like to talk about ideals – but never the reality of how markets actually work. There are several books that I would recommend on this topic including “Seeing Like a State”, Anything by Polani,, Otterson’s book on Adam Smith’s Market Place– and really people ought to be familiar with Marx.

I say that last one with caution, because the problem with socialism – is that argument in favor of it tend to forget that Marxism has been the basis for the murder of millions of people. Marx support revolutionary change theories are among the most dangerous we will deal with in this like So, you can stay away from his religious and political discourse. He was wrong there. But that does not mean we should dismiss everything. He was spot on in his critique of capitalism and the ills that develop out of it.

Here is a brief very overview. Markets have never developed out of nothing. They have been created and manipulated by those in power since the beginning. Often times that market developed out of most of humanity being able to participate or even know that they existed. When you live in a subsistence environment, living day to day, it is very hard to have anything left over for trade. As machines and specialization allow for the accumulation of capital, more and more people were able to trade for additional goods and services. These markets always developed with a mix of exploitation by those in power taking more in the capital exchange than those without power  – and then over time those without power gaining enough traction to demand retribution for their contribution to the overall economy that they were never compensated for – or demanding certain protections in the work space.

Over time you see that in the 1400’s (even before capitalism was a recognizable social process) the Speenhamland laws were enacted that obligated the elite to ensure that there was a minimum standard of living established for all the people on their land. Marx was right in that those in power will always seek more at the expense of those below. This is not always vicious – although it has been at times (think about anything Upton Sinclair wrote), but it is often very exploitative. Let’s think about it for an instance. Steve Jobs is the CEO of Apple. Did he invent anything at that company? Not since the 1970’s. It is questionable if he even had the initial idea for the iPod or iPhone. Apple has a new development division that looks at the competition in the market and trying to find unique idea or ways to better existing technology. So, Steve Jobs received a $100,000,000+ bonus each of the last several years based on the performance of the company. We do not know how much the actual developers made in bonuses – but based on industry standards I would expect $0-$10,000 being the most expected. Is that really fair? – I personally think not.

What to do about it is another thing.

Several years ago the NBA proposed leveling the playing field by instituting salary caps and other trading regulations. Initially people said it was going to prevent the best teams from recruiting the best talent – the exact same argument that is now used in corporate America. But guess what?! The NBA still thrives and is in business. So not exactly a disaster.

Yes it is socialistic in the economic sense– but that does not mean it is not right or fair.

And regardless of what happens to the income regulation I think that it is totally fair for the wealthiest Americans to pay for a system that helps make their wealth. Steve Jobs would be out of a job if there were not an America that could afford computers. So investing in education and even minimum wage helps him make all of his money. It is only just that those at the top, who reap the largest reward of a successful America, help pay for all of the benefits that they receive, both direct and indirect. And I honestly hope to be one of these people someday!

Again, a sense of history may be important. Up until the 1980′s the average executive pay was only 35 times higher than the average worker. By the end of the 1990′s that pay had increased to 120 times the average – and the highest side was over 700 times greater than then average employee. Something seems out of whack to me. At the same time the real wage (accounting for inflation) has dropped for the average American where it has gone up exponentially for the executive. Sure looks like someone is receiving a positive externality at the expense of the population. Just a suggestion.

Bottom line is that capitalism in its idealistic form has never actually existed and in my opinion the less regulated the markets have been the more trouble we have gotten into. Regulation has its own issues. And the capitalist can certainly point to many instances where the intervention has not been good (Smoot Hawley Tariff, Hoover’s flip flopping at the start of the great depression, the current housing crisis etc – let alone the potential social consequences of socialism at its extreme). But there are just as many examples where the intervention has been critical to success (Child Labor laws, minimum wages, OSHA standards, banking and investment regulations Monopoly break-ups etc). Understanding the whole history has lead even the most ardent free capitalist of the past Federal Reserve, Alan Greenspan, to conclude in a recent senate inquiry that free markets fail to self regulate and that it was a mistake to have followed the Reagan deregulation policies for the past 20+ years.

And before I move on there is one other major issue that needs to be addressed here. McCain vs Obama is really the age old question, in the USA anyway, of Anti Federalist (state’s rights) vs the Federalist (Strong federal government). This divide is almost as old as the country itself. In the 1800 election Jeffersonian ideals that were Anti Federalist were pitted against the John Adam’s federalist. Ever since that election more and more power has been given to the federal government with less and less control at the state level. Part of the Civil War was fought over this issue and many republicans today feel that Abraham Lincoln took the government too far away from States rights – or at least in the aftermath of his assassination that the Republican’s (of their day) took it too far to the federalist side. Glenn Beck is the most recent republican commentator that I have heard state this position.

It seems that so much of what we argue about today is not based in history. Historically this has been a constant battle. Republicans today (and even more so the Constitution Party) say that we need to get back to running the government the way the founding father’s would have wanted it, but I always wonder which founders they are talking about? It certainly was not all of them. Jefferson may be rolling in his grave but John Adam’s would be jumping for joy.

McCain is a state’s rights republican. States needing to take on more responsibility is a part of every piece of his plan for America. Sometimes I think this is a good thing. But there are issues (gay marriage being one of them) that really cut to the heart of the state’s rights issues. In making a decision about the next president we also have to consider the mindset of the person trying to solve the issue. If the issues we are most concerned with are State level issues, then McCain may be your man. But if they can only be solved at a national level – then you will want to consider Obama.

And actually there is one more issue to address as well. Supply Side (get people to create through tax incentives for instance – and they will buy) vs Demand Side (give people money and they will spend, government directly buying and building) economics. McCain is a supply side. Obama is a demand side. There are criticsms of both and since I am not an economist I am not really capably of giving a professional opinion, but what I can tell is that a combination of the two seems to move our economy the best. This is a really good article that will help explain it (http://blog.wolfram.com/2008/10/16/stock-market-returns-by-presidential-party/). Bottom line on this is that the supply side has had a good long run. Now we need to move back to demand side, which tends to be better for employment, spending on infrastructure, interest rates and encouraging new development is specific markets.

Personally, I am a demand-side-socialist (economic)-federalist more than not. So in this respect I have to side with Obama. I reserve the right to switch in the future. I think that a balance between the parties is good. Just right now the balance needs to swing in this direction.

In my opinion, if you do not agree let’s discuss.

Be Healthy – Enjoy Life!

Matt Stearmer

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