29 Oct 2018                     home

Ideology and Economic Well-Being

The elections are a week away. My intention here is to describe what I see as a basic ideological flaw regarding government and the economy by members of the Republican Party.

I agree with Republicans about the US Constitution as fundamental to our democratic republic. I agree with many Republicans about the basics of money and the need for a balance over time between spending and revenues. Money, we know, is not wealth or value, it is supposed to represent these things. Money is traded and goes around. Paper money is a government phenomenon. (Gold is a commodity, stored, and traded but not as a currency.)

We all know about inflation. President Trump equates Venezuela's inflation with the socialism of his Democrat rivals. We know that inflation comes with a government printing more money to pay for its spending and that more money in circulation reduces a currency's value, followed by rising prices. As follows:

It takes more money to buy goods from abroad. Government tax revenues fall. The government prints more money to pay its bills, worsening the inflation. Exporters might benefit as they can sell their stuff abroad cheaper. But common people find it harder to consume, including basic necessities.

Republicans warn us about too much government spending. They support spending aimed ultimately at a balance — as in a balanced budget. I too believe in balance: a balance that produces stability and allows our energies to create economic growth without enlarging the government's debt. (World War II forced our government to borrow temporarily with the idea that when peace returned the debt can be paid down, as was done from presidents Truman to Carter.)

We have Republicans who believe that balance they are seeking is best produced by markets free of government interference. This view congratulates people for achieving the American Dream. It's a view at least close to Social Darwinism. (President Obama accused Paul Ryan and Mitt Romney of being Social Darwinists.) The fundamental fault with this piece of Republican ideology is its failure to acknowledge the imbalance that develops when there is no corrective government intervention on behalf of what Jefferson called "we the people". Those with wealth have the ability to acquire more wealth better and faster than others. Historically this has created rule by wealthy oligarchs and aristocrats. With capitalism it has led to monopolistic power rather than Adam Smith's idea of competition as fundamental to a modern economy. These are advantages that have destroyed the dream called "equal opportunity," creating in its place what some might call dominance by "the elite."

I want to emphasize that unequal societies will not automatically correct growing wealth disparities without some kind of corrective government agency. We can hope that the degree of democracy we have can supply that agency offsetting the power and influence that goes with wealth.

The balance that Republicans believe in does not exist. What I want is merely a better balance. Republican con artists accuse Democrats of seeking an equal distribution of wealth. But this is a distortion. Democrats that I know are not seeking to do what the Bolsheviks did in Russia after 1917 (to deprive wealthy people of their property and property rights, to deny them access to educational institutions and to label them enemies of the state). I like variety. We have wealthy people contributing to the betterment of society and the world. I recognize the benefits we receive from businesses that are efficient and make available quality goods (I love my 2017 Chevy Spark) — and businesses that obey the law, respect the environment, and don't try to flim-flam the public with techniques that work with the gullible. I think of the contributions of Franklin Roosevelt and the advances in medicine created by John D Rockefeller. And today we have the good the works of Bill and Milinda Gates.

But we also have the need that Paul Volcker, speaks of. He was Fed chairman under Carter and Reagan and he has a memoir coming out on October 30 titled "Keeping at It: The Quest for Sound Money and Good Government." Volcker tells Andrew Ross Sorkin of the New York Times that everybody talks about monetary policy, "but the lesson of all this is we need better, stronger supervisory powers."

Regarding government spending, the Trump administration blames his increase of the federal government's debt not on his tax cuts but on too much spending. The tax cuts of President George W Bush and President Trump were supposed to stimulate the economy and put more money in the pockets of common people. These tax cuts were supposed to increase revenue to the point of erasing debt, but that strategy hasn't worked. So now we hear about the need to cut government spending.

Some of us complain that we can maintain a balance while investing more, for example, in infrastructure (investment meaning that eventually it is supposed to win for the nation money-wise and otherwise.) And there is talk of the benefits of investing more in education, research, and health.

There are indeed limits regarding government spending. Note that Denmark, Sweden, Norway have recently had conservative prime ministers, but conservative in a European context. And so it was that Margaret Thatcher left Britain's National Health Service (NHS) in place. (The NHS was launched in 1948 with the idea that everyone should have access to good health care regardless of wealth.) The British have been described as viewing the NHS as sacrosanct, so much that a tough conservative like Thatcher merely tinkered with it.

We in the United States, I submit, need leaders in our state and federal governments willing to tinker in creating balance and stability that benefits the general public — all of us. Republicans ridicule the higher taxation countries like Norway, Germany, Denmark, and Sweden, countries that have managed to invest more in public benefits without developing any crippling economic imbalance.

We should ask why, despite our advanced technology and wealth, we lead Japan, Iceland, and Norway in infant mortality, 5.8 deaths 1,000 births in 2017 compared to 2.0, 2.1, and 2.5 for these countries just mentioned. And we have these other countries leading us in life expectancy.

This past week the economist Paul Krugman has described these countries as not socialist (meaning government control of the means of production). I confess that I see the world more as Krugman does rather than our standard Republican ideologue.

I agree with the woman from Minnesota wrote: "Free education, healthcare, reasonable minimum wages, and environmental protection can co-exist with growth, economic freedom and competition. In reality, they are synergistic."

The economy declines, grows and moves forward technologically. Politico writes of "historically low unemployment, solid economic growth, sky-high enthusiasm among small businesses and shattered records for job openings." President Trump mendaciously gives himself credit and Republican, ideologues cheer his salesmanship, and many buy into it but not most economists. Many are thinking about their struggle to make ends meet, other insecurities and their inability to save to buy a home. We should be asking what we can do to improve on what we have, how we can minimize disasters and expand opportunity while serving economic and social stability.


October 30. This morning I see a new book described as follows:

Pulitzer Prize-winning economics journalist Steven Pearlstein argues that our thirty year experiment in unfettered markets has undermined core values required to make capitalism and democracy work.

On nearly the same subject, Robert J Samuelson has a column titled Capitalism besieged.

And at the NY Times, David Brooks has a column (Oct 29) telling us that "the chief struggle of the day is sociological and psychological, not ideological or economic."

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Copyright © 2018 by Frank E. Smitha. All rights reserved.