By Rudy Barnes, Jr.
America’s crony capitalism is managed by the super-rich (we’ll call them Wall Street). They control the means of production and set prices on most of the goods and services we consume. The old political mantra It’s the economy, stupid! remains valid. Wall Street not only controls our economy but also our politics. They bought Congress with campaign contributions.
A healthy democracy must balance the benefits of a privileged few with providing for the common good. Crony capitalism exploits consumers to benefit Wall Street, while progressive capitalism balances benefits for consumers. Altruism in U.S. politics was lost in 2016 when an alliance of white Christians and Wall Street disciples of Ayn Rand elected Trump as president.
There was a time when free enterprise was considered the golden goose of libertarian democracy. That was when business centers were on Main Street, not Wall Street, and healthy competition limited the exploitation of the middle class by mega-banks and corporations. But mega-mergers have since reduced competition and put consumers at the mercy of Wall Street.
The deregulation of Wall Street that began in the 1990s allowed unrestrained greed that led to the 2009 recession; and little has changed since then. In the next economic disaster (coming soon) we can expect a supplicant Congress to again rush to save their too-big-to-fail patrons on Wall Street, rather than replace their crony capitalism with progressive capitalism.
Many economists see an overvalued stock market, yet the market keeps rising. Sharp increases in stock prices (25% in 2018) seem more an index of inflation than the real value of corporate worth at a 2% inflation rate--which is also the Fed interest rate. These statistical disparities and the vast sums pocketed by Wall Street indicate a dysfunctional economy.
To make matters worse, Trump is pressuring the Fed to keep interest rates low while reducing taxes on the wealthy, while Democrats are promoting a radical Keynesian MMT policy that depends on low interest rates to make massive public expenditures. Both parties advocate short term political benefits at the expense of long term economic stability.
Wall Street’s mega-corporations are awash in cash thanks to an endless flow of 401(k) funds and cheap money from low interest rates. But the overvalued stock market is a bubble that will soon burst. The super rich will be the first to see a crash coming and will be able to protect their assets, leaving the middle-class to suffer the most, as they did in 2009.
There are warning signs of an economic crisis in 2020. They include a labor market reduced by technological innovations and a huge U.S. national debt that keeps growing. Similar dysfunctions of crony capitalism led to the Great Depression in 1929, when most Americans rejected crony capitalism for progressive measures that regulated Wall Street and provided needed social programs. But in the 1990s deregulation once again ushered in crony capitalism.
Crony capitalism fosters greed and sacrifices the economic well-being of many for the profits of a privileged few. It ignores the greatest commandment to love God and all of our neighbors as we love ourselves. It’s ironic that a large majority of white Christians joined forces with Wall Street to elect Trump as their president. Progressive capitalism can restore the moral legitimacy of America’s democracy with the spirit of altruism that once made America great.
As bad as it might seem, another economic depression could save American democracy from further demise. It will take a new political majority and a politics of reconciliation to replace crony capitalism with a more progressive form of capitalism. While a war could serve the same purpose, an economic crisis is surely preferable to the horrors of war to save our democracy.
Crony capitalism thrives on unrestrained ambition and greed. It may be the ideal of Ayn Rand’s objectivism and the prosperity gospel, but it conflicts with the altruistic morality taught by Jesus. Progressive capitalism balances the profit motive with providing for the common good. It can prevent the further exploitation of the middle class and the demise of democracy; but it will be a difficult challenge since most in Congress depend on Wall Street for their campaign funds.
Notes:
Joseph E. Stiglitze has asserted that progressive capitalism is not an oxymoron. We can save our broken economic system from itself. Stiglitz explains: “America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people. One can get rich either by adding to the nation’s economic pie or by grabbing a larger share of the pie by exploiting others — abusing, for instance, market power or informational advantages. We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking), and too many of our talented young people followed the siren call of getting rich quickly.
...We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality. If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans making their living by driving.
...The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest. It is as fatally flawed as the notion after the fall of the Iron Curtain that we were seeing “the end of history” and that we would all soon be liberal democracies with capitalist economies. Most important, our exploitive capitalism has shaped who we are as individuals and as a society. …this is what is to be expected in a society that lauds the pursuit of profits as leading, to quote Adam Smith, “as if by an invisible hand,” to the well-being of society, with no regard to whether those profits derive from exploitation or wealth creation.”
https://www.nytimes.com/2019/04/19/opinion/sunday/progressive-capitalism.html?searchResultPosition=1
George Will has castigated Republicans and Democrats alike for America’s borrowing from the future, calling it decadent. Will criticizes Bernie Sanders for not explaining the cost of his Medicare-for-all plan, and goes on to condemn Republicans for their fiscal irresponsibility. Will cites Daniel Patrick Moynihan (D-NY) for recognizing that our public debt is morally problematic: “The people who do the borrowing, which is to say elected officials, are not the ones who will do the repaying. The temptation is real to use debt not as a form of investment, but a means of consumption. Far from the denial of gratification, it can, and frequently does, reflect just the opposite.” https://www.washingtonpost.com/opinions/america-is-borrowing-from-the-future-its-decadent/2019/04/24/c898798a-65ef-11e9-a1b6-b29b90efa879_story.html?utm_term=.456fd512ab29&wpisrc=nl_headlines&wpmm=1.
On how stock valuations are the most obscene since the great depression and are giving people false hopes of economic stability when they are a likely cause of the next stock market crash, see https://docs.google.com/document/d/1CVnWhz_hhg-DqRC2OxzaAUCrhHPAPvMcGUVnKDEld7o/edit.
Robert J. Samuelson has pondered the anomalies of the stock market: “If you think you understand what’s going on with the global economy, you’re probably not paying attention. On the one hand, the stock market is powering ahead. ...On the other hand, the “real” economy of jobs and production is slumping in the United States, Europe and China. How can both be true? Maybe they can’t.” Samuelson concludes that ...Either the market is mad or it’s gushing with good news.” See https://www.washingtonpost.com/opinions/if-you-think-you-understand-the-economy-youre-not-paying-attention/2019/04/03/0445e77e-5628-11e9-814f-e2f46684196e_story.html?utm_term=.6764ea545b14&wpisrc=nl_popns&wpmm=1.
On how regulators, Republicans and big banks fought for a big increase in lucrative but risky corporate loans, and how those collateralized loan obligations are similar to the risky real estate loans and derivatives that corrupted the stock market and precipitated the 2008-2009 financial crisis, see https://www.washingtonpost.com/business/economy/how-regulators-republicans-and-big-banks-fought-for-a-big-increase-in-lucrative-but-risky-corporate-loans/2019/04/06/08c8cd58-4b1e-11e9-b79a-961983b7e0cd_story.html?utm_term=.defb2ebe38a0&wpisrc=nl_headlines&wpmm=1.
Fareed Zakaria has noted that Trump is part of a worldwide populist assault on central banks. See https://www.washingtonpost.com/opinions/trump-is-part-of-a-worldwide-populist-assault-on-central-banks/2019/04/18/6ebbdd78-620f-11e9-9ff2-abc984dc9eec_story.html?utm_term=.50d17363cb66&wpisrc=nl_opinions&wpmm=1.
Robert J. Samuelson describes the importance of an independent Fed and on its quasi-independence after asking: Think the Fed is truly independent? Wrong. Think it’s a lackey? Wrong again. See https://www.washingtonpost.com/opinions/can-the-fed-stay-independent/2019/04/21/edd4e54e-63b5-11e9-bfad-36a7eb36cb60_story.html?utm_term=.d0ba4b7b4520&wpisrc=nl_headlines&wpmm=1
Lawrence H. Summers has described how the left’s advocacy of modern monetary theory (MMT), a modern Keynesian supply-side economic theory, wrongly assumes that government can finance all its costs and deficits by creating new money, when in fact government pays interest on any new money. See https://www.washingtonpost.com/opinions/the-lefts-embrace-of-modern-monetary-theory-is-a-recipe-for-disaster/2019/03/04/6ad88eec-3ea4-11e9-9361-301ffb5bd5e6_story.html?utm_term=.8fefc31e4900&wpisrc=nl_opinions&wpmm=1.
Heather Boushey objects to MMT saying the left should resist the siren song of “modern monetary theory” since it doesn’t deal “...with one of the central economic challenges of our time: The richest Americans are obstructing, subverting and distorting the way our economy works to their own benefit.” See https://www.washingtonpost.com/outlook/the-left-should-resist-the-siren-song-of-modern-monetary-theory/2019/04/19/37e92190-5b9b-11e9-b8e3-b03311fbbbfe_story.html?utm_term=.9464a2fbe4e7&wpisrc=nl_headlines&wpmm=1.
Greg Jaffe has described the shaky foundations of crony capitalism from the perspective of capitalists in capitalism in crisis: U.S. billionaires worry about the survival of the system that made them rich. See https://www.washingtonpost.com/politics/capitalism-in-crisis-us-billionaires-worry-about-the-survival-of-the-system-that-made-them-rich/2019/04/20/3e06ef90-5ed8-11e9-bfad-36a7eb36cb60_story.html?utm_term=.84d7430816bb&wpisrc=nl_headlines&wpmm=1.
On how our ballooning budget deficit reflects an unhealthy democracy, see https://www.washingtonpost.com/opinions/our-ballooning-budget-deficit-reflects-an-unhealthy-democracy/2019/03/08/c4add366-4037-11e9-922c-64d6b7840b82_story.html?utm_term=.5ee15aef8bb9&wpisrc=nl_headlines&wpmm=1.
On how 70% of Wall Street thinks Trump will be re-elected in 2020 (and supports him in his efforts), see https://www.cnbc.com/2019/04/05/70percent-of-wall-street-thinks-trump-will-be-reelected-in-2020.html
Related commentary:
On the greatest commandment and love over law:
(1/11/15): The Greatest Commandment: A Common Word of Faith
(1/18/15): Love over Law: A Principle at the Heart of Legitimacy
(1/23/16): Who Is My Neighbor?
(1/30/16): The Politics of Loving Our Neighbors as Ourselves
(3/31/18): Altruism: The Missing Ingredient in American Christianity and Democracy
(10/13/18): Musings on a Common Word of Faith and Politics for Christians and Muslims
(2/23/19): Musings on Loving Your Enemy, Including the Enemy Within
On Christianity and capitalism:
(3/8/15): Wealth, Politics, Religion and Economic Justice
(8/9/15): Balancing Individual Rights with Collective Responsibilities
(10/18/15): God, Money and Politics
(1/30/16): The Politics of Loving Our Neighbors as Ourselves
(6/4/16): Christianity and Capitalism: Strange Bedfellows in Politics
(10/1/16): The Federal Reserve, Wall Street and Congress on Monetary Policy
(2/11/17): The Mega-Merger of Wall Street, Politics and Religion
(3/11/17): Accountability and the Stewardship of Democracy
(9/9/17): The Evolution of the American Civil Religion and Habits of the Heart http://www.religionlegitimacyandpolitics.com/2017/09/the-evolution-of-american-civil.html.
(9/16/17): The American Civil Religion and the Danger of Riches
(12/16/17): Can Democracy Survive the Trump Era?
(1/20/18): Musings of a Maverick Methodist on Morality and Religion in Politics
(1/27/18): Musings on Conflicting Concepts of Christian Morality in Politics
(3/8/15): Wealth, Politics, Religion and Economic Justice
(8/9/15): Balancing Individual Rights with Collective Responsibilities
(10/18/15): God, Money and Politics
(6/4/16): Christianity and Capitalism: Strange Bedfellows in Politics
(10/1/16): The Federal Reserve, Wall Street and Congress on Monetary Policy
(2/11/17): The Mega-Merger of Wall Street, Politics and Religion
(3/11/17): Accountability and the Stewardship of Democracy
(9/9/17): The Evolution of the American Civil Religion and Habits of the Heart http://www.religionlegitimacyandpolitics.com/2017/09/the-evolution-of-american-civil.html.
(9/16/17): The American Civil Religion and the Danger of Riches
(2/17/18): Musings of a Maverick on Money, Wall Street, Greed and Politics
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