Republican Party's Bully Capitalism

 Popular Economics Weekly

“Twice as many Americans believe their financial security is getting worse than better, according to an exclusive new poll conducted for the Guardian, and they are increasingly blaming the White House.” The Guardian

Graph: Last Tech Age

President Trump gave himself “A plus plus-plus-plus-plus-plus” grade on the U.S. economy in a recent interview with Politico cited by The Guardian. That Trump can perpetuate such an obvious lie that contradicts what most Americans feel is an example of bully capitalism at large, my term for what economists have termed is ‘late-stage’ capitalism that has been adopted by the Republican Party, a phase of capitalism marked by extreme wealth inequality and corporate dominance in nearly all aspects of life.

Historian Heather Cox Richardson in her Substack blog Letters From an American states that such corporate dominance is the result of at least $50 trillion in income and assets that has been transferred from the bottom 90% to the top 1% of Americans between 1975 and 2020.

It was done via a succession of Republican administration tax cuts and recessions that grew U.S. federal debt to its current record $39 trillion.

Americans now have the worst income inequality in the developed world as measured by various sources, especially the CIA’s World Factbook. In fact, our income inequality is at the level of developing countries like Mozambique.

The recent Guardian/Harris poll makes clear Trump’s big lie attempts to deny what has really happened since the 1970s that most Americans are seeing with their own eyes.

Democrats are almost twice as likely as Republicans to say their financial security is getting worse – 52% versus 27%. Add in 54 percent of Independents believe the same, who are usually the swing voters that determine elections, said the poll.

And 69 percent of Democrats and 58 percent of Independents believe we are already in a recession.

Why when the stock indexes are at record highs? One hint is that bully capitalism has hit women particularly hard. Nearly two-thirds of women (62%) believe the U.S. is in a recession, +12% from February, says the Harris poll, and women, the primary caretakers of children, are the first to see their suffering from the cuts in social welfare benefits such as SNAP and childcare programs by Republicans.

Trump and Republicans have boosted bully capitalism to a new high by showing their blatant lawlessness and cruelty, such as the ICE agents shooting citizens and non-citizens alike. The good news is that Americans can now see with their own eyes the blatant disregard for human suffering, and it has begun to sway the American public in recent elections.

The biggest lie of all perpetuated by Republicans is that “Government is the problem”, that bully capitalism made things better for everyone. No, the American government was formed to protect all Americans, not just the privileged few.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Will Corporations Become More Responsible?

Popular Economics Weekly

Tradingeconomics

It is a sea change in economic thinking when corporate CEOs that belong to the Business Roundtable sign a Statement of Purpose to consider more than maximizing their profits, when maximizing corporate profits at the expense of their employees, social responsibilities, environment, and the public-at-large has been their reigning mindset until now.

They have just announced a Statement on the Purpose of a Corporation, in which they “share a fundamental commitment to all of our Stakeholders”.

“The American dream is alive, but fraying,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable. “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

• · Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
• · Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
• · Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
• · Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
• · Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

It was in the 1970s that conservative economist Milton Friedman led the charge against Keynesian economics and government regulation that had rescued America from the Great Depression. The New Deal happened because Americans were willing to try anything to bring back jobs during the Great Depression, for fear that capitalism no longer worked.

A 2016 Forbes article described the Roundtable as comprised of 192 CEOs, and one of the most prominent lobbying groups in Washington, D.C. In 2015, the group spent $19.3 million on lobbying, making it the eighth biggest spender that year, according to the Center for Responsive Politics.

Corporate profits have been on a tear for years, reaching a record share of GDP and Gross National Income in 2018 with the corporate tax cuts. What did they do with those profits? Invested it mainly in buybacks to boost share price and CEO incomes.

FRED

The result was has been record income inequality, as many manufacturing and other high-paying jobs were exported overseas via the growth of multinational corporations in the name of globalization. The FRED graph above illustrates the growth of corporate profits (blue line) over wages and salaries (red line), particularly since the last two recessions (gray columns).

But now income inequality and corporate social responsibility is in the headlines with the upcoming presidential campaign. Senators Sanders and Warren have been the loudest in calling out corporate “corruption”, a code word for using their power to enrich Wall Street and their stockholders, rather than Main Street.

Is this scaring Big Business enough to fulfill their commitment to serve Main Street, as it did during the Great Depression? The tide seems to be turning, as it is becoming increasingly evident that the record income inequality is causing corporations to rethink the role of capitalism in creating jobs that make America a better place to work and live.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Presidential Debates—Will Democracy Survive?

Popular Economics Weekly

Graph: Washington Post

Much of the media lament over the first Democratic Presidential debates was whether the Democratic Party had moved too far left on immigration and healthcare—whether it was about decriminalizing Central American immigrants crossing the border, or advocating some form of Medicare for all.

Could this allow the reelection of Donald Trump and bring about the decline, if not abolishment, of American democracy as we have known it post-WWII? Russian President-for-life Putin announced at the recent G20 economic summit that liberalism as we know it is now passé.

In an interview with the Financial times, Putin said the “liberal idea,” by which he meant the postwar dominance of democracy, human rights, multiculturalism and tolerance, had become “obsolete.”

Fear not, you lovers of Democracy, that isn’t true by a long shot. As much as oligarchs like Putin would like to find more worlds to pilfer, democracy cannot fail unless modern capitalism, the creation of post-WWII democracy, fails. And it won’t fail because it is the manna on which all nations now depend to sustain their citizens. There is no other economic system that will feed its citizens, as even China knows.

Modern capitalism was created out of the New Deal, with its government support of social programs and regulations that prevent capitalism’s worst excesses—such as unregulated capital markets and monopolistic profit-seeking,  causing the record income and wealth inequality that has brought on the discontent and enabled a President Trump.

It therefore behooves the Democratic presidential candidates, at least, to make the changes necessary to bring back some income parity and a greater social safety net, if for no other reason than it would reduce the souring suicide rates and gun violence that no other western democracy experiences.

How do we save a capitalism that doesn’t just cater to oligarchs like a Putin, or even China’s President Xi--who want capitalism that won’t allow dissent, and therefore the innovation necessary to nurture new ideas and inventions?

Senator Elizabeth Warren has thought out many new ways to make capitalism work for the many, and so democracy. The first step is to take back some of that wealth to strengthen the social fabric that was siphoned off to the wealthiest via lower taxes and deregulation causing many industries to become monopsonies—i.e., overly concentrated so they can control their markets, weaken social programs and employees’ bargaining power.

Warren would pay for her programs with a 3% wealth tax on fortunes over $1 billion, and 2 percent on fortunes between $50 million and $1 billion. According to University of California-Berkeley economists, it would raise about $2.75 billion over its first 10 years, all from taxpayers that the

Massachusetts senator argues have benefitted too much from a generation of tax-cutting that slashed top federal tax rates almost in half and corporate tax rates by 40 percent, accompanying a surge in inequality in both before-tax and after-tax income.

Other candidates like Senator Kamala Harris and Bernie advocate a return to the 70 percent income tax rate on the highest income earners, and an outright breakup of those corporations literally too big to fail; should we have another Great Recession.

How do these proposals benefit modern capitalism so that it benefits the many, rather than the few? Studies show that without public works programs, labor productivity declines, since not upgrading such as infrastructure slows transportation of goods and services. Reducing public health care and environmental protection sickens more people thus reducing work times. Reducing public educational programs and government R&D reduces overall literacy and scientific innovation, period.

There is good news on that front, as I have noted in past columns. Modern capitalism with its checks and balances has enabled the growth of prosperous middle classes at the heart of liberal democracies. No other economic system is able to produce the quantity of goods and services required for a healthy liberal democracy.

The club of rich democracies is not easy to join, per a recent piece in the Economist, but those who get in tend to stay there. Since the dawn of industrialisation, no advanced capitalist democracy has fallen out of the ranks of high-income countries or regressed permanently into authoritarianism.

This is not a coincidence, say Torben Iversen of Harvard University and David Soskice of the London School of Economics in their recent book, “Democracy and Prosperity”. Rather, they write, in advanced economies democracy and capitalism tend to reinforce each other, as I’ve been saying. It is a reassuring message, but one that will face severe tests in years to come.

In other words, taking government out of modern capitalism makes modern democracies weaker and more vulnerable to predictions from those who fear democracy, like Putin.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Saving Capitalism--Part II

Popular Economics Weekly

Nobel laureate Joseph Stiglitz’s plea to save capitalism is important for a number of reasons; foremost is the survival of liberal democracy itself. Modern liberal democracies that we have known since WWII cannot survive if we cannot ‘fix’ modern capitalism to serve the majority rather than minority of its citizens.

“There are many reasons for our plight, including corporate power and greed centered on immediate profits and little regard for the impacts business decisions have on low-income Americans and the environment,” said Stiglitz. “Corporations have translated their economic power into political power, lobbying for policies that give them free rein to despoil the environment; and the swamp President Donald Trump promised to drain has been overflowing.”

It cannot survive without greater government programs to improve lives, and better control of financial markets, advantages that countries like China, the world’s second largest economy, have in competing in world markets for resources, and winning trade competitions.

One answer is what is called Modern Monetary Theory, or MMT, that both progressives and conservatives are talking about. It’s really a reincarnation of the New Deal that enabled America to pay for the Great Depression and WWII with a large amount of government debt, without raising taxes at the time that would have impeded economic growth.

Conservatives have railed against versions of MMT since Roosevelt and his Labor Secretary Francis Perkins created the New Deal—giving millions of jobs to jobless Americans, creating the social safety net and much of the early infrastructure (dams bridges, energy grids) that need updating today.
But it’s now become obvious from their 2017 tax cuts that Republicans love debt as much as anybody when it suits their purpose.

Barrons.com

Conservative publication Barron’s Magazine portrays in this graph from 1985 to 2016 the actual U.S. net savings as a percentage of GDP. It highlights the wide fluctuations in the line graph—when there were 4 years of federal budget surpluses 1996-2000 (midgraph), to the low point in net savings during the Great Recession with the massive federal deficit. Foreign net savings are in red, domestic household and business net saving in blue and gray.

MMT is being touted as a possible way to pay for AOC’s Green New Deal, universal health care and other Democratic initiatives that will create jobs for all.

But debt has to be paid back in one form or another. In post-WWII economies, 1) it does get paid back if used in advancing growth that increases revenues, and 2) debt is extremely cheap today with the world awash in excess savings that investors are begging to place where it will give a decent return. Financing U.S. budgets with ‘other people’s money’ is not so risky when there’s no safer place to put it than in U.S. dollar investments.

WWII’s 120 percent of GDP debt was paid down to less than 40 percent in the post-war years with massive growth and productivity-enhancing investments like public highways, the Internet, modern healthcare improvements and government basic research.

We are in a much better position today with a fully-employed economy. But it does subject investors to the vagaries and vacillations of the Treasury bond market, which is the safest haven for investors afraid of an economic downturn that could crater stock prices.

Democracies are also in danger with authoritarian governments springing up in Eastern Europe using Russia and China’s authoritarian examples that control the courts and public media to maintain their power.

However modern capitalism with its checks and balances has enabled the growth of prosperous middle classes at the heart of liberal democracies. No other economic system is able to produce the quantity of goods and services required for a healthy liberal democracy.

Radosław Sikorski, Polish Minister of Foreign Affairs, speaking of recent anti-democratic trends in Eastern Europe at the Wrocław Global Forum, an annual summit organized by the Atlantic Council, the city of Wrocław, Poland, and other partners, noted a startling fact--there is a common assumption that dictatorships may be better at some economic tasks because they do not have to pay attention to public opinion. Yet communist governments in Central and Eastern Europe failed to live up to that supposed economic advantage.

Sikorski explained, “My thesis is this: contrary to received wisdom, dictatorships also have public opinion and dictatorships are usually more cowardly than democrats. That is why fundamental economic reform under dictatorships – in Chile for example – is the exception, not the rule. It is usually the democrats who have to tidy up the mess, including economic mess, left by dictatorships.”

The club of rich democracies is not easy to join, per a recent piece in the Economist, but those who get in tend to stay there. Since the dawn of industrialisation, no advanced capitalist democracy has fallen out of the ranks of high-income countries or regressed permanently into authoritarianism.

This is not a coincidence, say Torben Iversen of Harvard University and David Soskice of the London School of Economics, in their recent book, “Democracy and Prosperity”. Rather, they write, in advanced economies democracy and capitalism tend to reinforce each other, as I’ve been saying. It is a reassuring message, but one that will face severe tests in years to come.

What are those tests? The largest may be how to grow an economy that benefits more of the middle and lower-income classes with greater government-funded programs, such as happened with the New Deal. That obviously hasn’t been the case since 2009 and the recovery from the Great Recession. It is already being tried successfully in many Northern European countries that reward its citizens with a larger social safety net, shorter working hours, and more leisure time.

Professor Stiglitz, Torben Iversen, David Soskice and a growing number of economists show just how liberal democracies have survived multiple wars and global recessions; by modernizing capitalism to fit modern needs. Perhaps “capitalism is the worst economic system, except for all the others,” to paraphrase Winston Churchill’s famous aphorism.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Professor Stiglitz’s Plea to Save Capitalism

Popular Economics Weekly

MarketWatch

Nobel laureate economist Joseph Stiglitz has been saying he wants to make capitalism work for everyone again in various writings, just as it did post-WWII, including this CNN commentary on the recent Earth Day. Is there even a viable alternative?

“America's economy has not been working for a large portion of the country. Workers at the bottom of the income scale earn wages, adjusted for inflation, that are not much higher than what they were 60 years ago, while the income of a typical full‐time male worker hasn't budged much from 40 years ago. In addition, life expectancy is in decline. But the economy is not only failing American citizens. It's failing the planet, and that means it's failing future generations.”

So how do we make it work for more Americans in the face of almost united opposition by the Republican Party? Firstly, we have to recognize the actual problem—Republican attempts to disempower large segments of Americans—women and blue-collar workers, for starters that have suffered the most from rollbacks in healthcare and workers’ collective bargaining rights.

We know the cost of the 2017 Republican tax cut bill; more than $1.5 trillion of spending cuts in Medicare and Medicaid coverage over 10 years in an attempt to lessen the projected $1 trillion annual budget deficit it is already costing; not to mention the endless attempts to cripple or outright abolish Obamacare without an alternative, and ban abortions, if not contraception outright.

And “In a new study for the Brookings Institution’s Hamilton Project, we report survey results in which we find that one in five workers with a high school education or less are subject to a noncompete. A quarter of all workers are covered by a noncompete agreement with their current employer or a past one,” reports the NYTimes.

This means they are banned from working for a competing company in a similar line of work for a certain period, limiting their mobility and hunt for a better job.

This is why Americans’ life expectancy is on the decline, while rising in all other developed countries; which have universal health care, pay for the costs of state-run, higher education institutions, and in general protect their citizens with an extensive social safety net.

Why does America have more than ten times the per capital prison population than other developed countries, and stratospheric gun violence—now 40,000 per year killed with white males the largest segment of gun suicides—whereas other developed countries annual gun deaths number in the 100s?

We don’t need to be diverted by the many “crimes and misdemeanors” of POTUS and the White House. Republicans have been rolling back social benefits and increasing inequality since at least 1980 by commandeering the levers of power—Wall Street with the repeal of Glass Stegall and deregulation of whole industries, corporate America with now unlimited fund-raising due to their Supreme Court win in citizens vs. united, and gutting of the Voters Rights Act that weakened federal enforcement of voter discrimination against minorities in states with a history of discrimination.

The list goes on and on. So what can be done about it? Make government(s) again the solution, rather than the problem that Reagan liked to intone to his supporters, and that ran up the first record public debt. It wasn’t until President Clinton’s successful attempt to actually create a budget surplus in his last four years (1996-2000) that America first began to pay down that debt.

But the Bush/Cheney government frittered it away with multiple budget cuts and foreign wars, increasing it again rather than diverting the savings to domestic programs that would strengthen America, and led to the Great Recession.

The lesson is obvious. Government wasn’t ever the problem, since Republicans have been willing to spend taxpayers’ money to support their own programs and run up record debt without any intention to pay it back to the American taxpayer.

Instead, government has worked very well when it funded their wars, higher corporate profits, or gone into the pockets of their high-net worth supporters. We should never buy Republicans’ attempt to brand-name government as the problem, particularly when it has benefited them far more than the average American.

Will it save capitalism, as we know it?  Only if we don’t buy the Republicans’ mischaracterizations.  Modern capitalism is really the creation of modern liberal democracies, with its ability to nurture growth and innovation that accompany the democratic checks and balances to prevent its excesses.

So  in saving democracy, we can save a modern capitalism that works for the many.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What's Wrong With Capitalism?

Financial FAQs

Winston Churchill once said, “No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.”

What about capitalism? Has it survived because it is the most imperfect economic system, except for all the others?

Hedge fund billionaire Ray Dalio has been sounding the alarm of late that the western, free market, American model of capitalism is no longer working for most Americans.

In a recent Linked In commentary he said, “I think that most capitalists don’t know how to divide the economic pie well and most socialists don’t know how to grow it well, yet we are now at a juncture in which either a) people of different ideological inclinations will work together to skillfully re-engineer the system so that the pie is both divided and grown well or b) we will have great conflict and some form of revolution that will hurt most everyone and will shrink the pie.”

Dalio was talking about the 1930s collapse of markets and Great Depression—when Roosevelt’s New Deal came to the rescue, employed millions of the unemployed and helped US win WWII. It was the last time income inequality had increased to the level it is today as shown in this well-known graph, and the last time “people of different ideological inclinations” worked together.

In the words of Marriner Eccles, Roosevelt’s Federal Reserve Chairman during the Great Depression, “As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth ... to provide men with buying power. ... Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. ... The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”

We have the same situation today; partly as a result of the just-ended Great Recession, which was comparable to the Great Depression because of the $trillions in American households’ lost wealth yet to be recovered.

The Great Recession was a market failure caused by the housing bubble, but also by government policies that kept employees’ wages from rising with the increases in productivity—hence the return to record income inequality. For instance, collective bargaining labor laws were weakened in the 1980s. Today there are 26 so called ‘right-to-work’ states that restrict workers rights and union collective bargaining in some way.

This was accompanied by deregulation of whole industries in the name of globalization that loosened oversight and regulations controlling corporate behavior, unleashing the worst form of capitalism—cutthroat capitalism where the profit motive overrode all social obligations to take care of those less fortunate, which made it more difficult for ordinary Americans to climb the success ladder.

Dalio’s graph portrays who benefited from the 2001 and 2007 Great Recession. It wasn’t the employees, as employees’ share of US corporate sales plummeted from almost 76 percent of corporate revenues to 68 percent in 2017. Employees lost the most, in other words, and have yet to climb back above the 70 percent that prevailed from the 1970s to 2000.

And hence comes Ray Dalio’s dire threat: “The previously described income/wealth/opportunity gap and its manifestations pose existential threats to the US because these conditions weaken the US economically, threaten to bring about painful and counterproductive domestic conflict, and undermine the United States’ strength relative to that of its global competitors.”

So we need to find ways to escape repeating the history of the 1930’s and World War II that followed. Put another way, how do we rebalance the power structure that skewed incomes and wealth upward, and put the US at the bottom rankings of developed countries in services provided to its citizens—like educational opportunities, health outcomes, and chance for upward mobility?

Dalio’s answer is to identify leaders who believe greater equality of opportunity is the way to save capitalism, and who will in turn form public-private partnerships that include businesses, philanthropists (such as Dalio) and government to coordinate the planning of such partnerships via recommendations of a “bipartisan commission to bring together skilled people from different communities to come up with a plan to reengineer the system to simultaneously divide and increase the economic pie better.”

But who are those leaders? Philanthropists such as Bill Gates, Warren Buffett, and Dalio are already participating. And there are enlightened corporate leaders that don’t belong to ALEC, the right wing American Legislative Exchange Council lobby responsible for crafting the right-to-work laws that currently suppress both voter rights and worker salaries in many of the red states.

Harvard Socialist, Rober Putnam, author of Bowling Alone, the Collapse and Revival of American Community, doubts that American communities fragmented in the 1970s as a result of another ‘revolution’, the ICT revolution (in information and communications technologies), can be easily reconstituted. He says good luck in bringing together those ‘different communities’ that Dalio talks about: “I think that community is a casualty of an elite minority’s capture of both markets and the state…The genie of meritocracy cannot be put back in the bottle.”

And Nobel economist Paul Krugman once joked it may take another extremely dire event, maybe an alien invasion, before Americans will unite again in a common cause as they did with the New Deal and WWII.

Where will we find the political leaders? He doesn’t mention large ideas like the Green New Deal, which some of our younger leaders—and even Presidential candidates—are proposing. The bottom line is it will take very big ideas to tackle such  “existential threats”.  Let’s not forget global warming that the US Pentagon had said is already endangering our national security.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen