Category Archives: Economics & Financial Affairs

Tipping Points: The Decline of the USA

Many conservative commentators have spoken of a forthcoming ‘tipping point.’ By that is meant a point, usually signified by some major event, beyond which it will be impossible for the United States to recover its founding principles and restore its fundamental structure as a Constitutional republic. I believe the idea of a tipping point originates with Thomas Sowell. It presupposes that the United States is on a century-long march from a Constitutional republic in which individual liberty is the highest ideal toward a Euro-style social welfare state in which equality of outcome is the main goal.

Sowell postulates that there will be – if it has not already occurred – a point beyond which the institutionalization of the mechanisms of the social welfare state will be so deeply ingrained that it will be literally impossible to reverse course. The fate of the country will be sealed; no conceivable course of action could then stop the nation’s slide into the basically tyrannical, unexceptional, collectivist, vacillating and increasingly poor nation that it will inevitably become. Some think that the passage of Obamacare was indeed the tipping point.

I will argue here that in fact there are three distinct tipping points – one political, one economic and one cultural. I will explain how we might identify these points and then assess which, if any, has actually occurred. In this way I will raise the possibility that the American people could lose some of the parts of ourselves that make us unique and special, but perhaps not lose the whole ball of wax. I will not claim that the political, economic and cultural features of American society are completely distinct and unrelated – that is certainly not the case. But I will hypothesize that it might be possible to change the fundamental nature of one aspect of American society without losing the heart and soul of another.

Political Tipping Point. A political tipping point would be the place beyond which it is impossible to restore America as the Constitutional republic envisioned and established by our Founding Fathers. That republic was based on these fundamental political principles: Constitutional rule of law; limited government with powers confined only to those enumerated by the Constitution; a federal system in which power is shared by the national government and the States; the people are sovereign and all branches of government derive their legitimacy from the consent of the people; the people’s rights are derived either from Nature and Nature’s God or from the Constitution (as amended); political leaders are ‘on loan from the people,’ not professional politicians and their most sacred duty is to ‘preserve, protect and defend the Constitution of the United States’; and finally, the main functions of government are to defend the nation from foreign and domestic enemies, maintain a sound currency, ensure that the States deal with each other fairly and consistently and to enforce legal contracts – it is expected to do little else.

It pains me to say so, but there is not a single clause in the above list that represents an accurate description of the political rules by which the United States is currently governed. Our political leaders, in all branches of government, routinely and flagrantly ignore the bounds impose upon them by the Constitution. Perhaps the most telling justification of that assertion may be found in the book, ‘Lies the Government Told You’ by Andrew Napolitano. He details the subversions perpetrated by our national leaders throughout US history going all the way back to John Adams’ signature on the Alien and Sedition Acts of 1798. He highlights how the transgressions have escalated – slowly in the 19th century, much more rapidly in the 20th. Moreover, it is clear that the American public is so accustomed to the misbehavior of its leaders that it has completely lost sight of how far we have strayed from our Founders’ ideals. The people are unaware that the current political system under which we live is far more accurately described as a social welfare state than as a Constitutional republic. Furthermore, there is almost no movement by the people or their leaders to recapture our founding principles. Even if they did, it might be impossible to succeed.

Therefore, from a political point of view, it would appear that we have passed the tipping point. When was it? In fact one can legitimately consider a score of candidates – moments and/or events at which the principle political nature of the American republic was irretrievably lost. Here are a few candidates:

·       Adams’ signature on the Alien and Sedition Acts of 1798

·       Marbury vs Madison in 1803

·       Lincoln’s suspension of Habeas Corpus in 1863

·       The introduction of the Federal Income Tax and/or the direct election of senators – both in the time of Woodrow Wilson

·       FDR’s New Deal

·       LBJ’s Great Society

·       Obamacare.

It is impossible to say which of the above (or any other event) marked the actual point at which the US ceased to be a Constitutional republic, much less to prove that having passed that point it is impossible to recover what was lost. However, I believe it is beyond any doubt that our current system would be recognized by our Founding Fathers to be as tyrannical as the one they revolted against.

Economic Tipping Point. In the realm of economics, again we see a huge change if we compare the current US economic system to what existed generations ago. The economic life of our country used to be characterized by: free markets; laissez-fair capitalism; the sanctity of private property; low taxation; the lion’s share of GDP accounted for by private enterprise; a climate in which businesses – large and small – succeeded or failed according to their ability to satisfy their customers; a strong dollar as the world’s leading currency and an ever increasing level of prosperity among the people. Now, while some hint of these characteristics remains, it is more true that: government intervention in the market has drastically increased and continues to increase exponentially; we have a mixed economy with government regulation often stymieing free enterprise; high taxation – especially on the ‘wealthy’; eminent domain has expanded beyond the vision of our Founders; government entitlement programs are choking the economy; businesses that are ‘too big to fail’ are ‘bailed out’ by the government; and we are plagued by a weak dollar, high unemployment and feeble economic growth.

Have we passed the tipping point? Has our formerly free market economy been so thoroughly corrupted by government control that our future is inevitably socialistic, and are we doomed to a diminished standard of living? I don’t know, but perhaps not. Matters were equivalently desperate in the 1970s, but Reagan’s economic program revitalized the economy and sparked a generation of sustained economic growth. Perhaps if we could rid ourselves of big government Republicans like George W Bush and even bigger government Democrats like Barack Obama, we could right the ship again. We certainly won’t find out whether it is possible until the Obama-Pelosi-Reid gang is chased from power and replaced by a limited-government, conservative leadership committed to free markets and economic growth – and I don’t mean more big government Republicans like McCain or Romney.

There is another point to be made. Sad to say, as with politics, a large percentage of the American public is not cognizant of the fundamental changes wrought in the American economy over the last 50-100 years. They take it as perfectly normal – and correct – that the federal government should play such an enormous role in the economy. They don’t know otherwise; and if they think about it at all, they don’t think it should be otherwise. As that percentage grows, the economic tipping point grows closer.

Cultural Tipping Point. Regarding American culture, yet again we see massive changes. Until approximately 1900, American culture was marked by: a WASP superstructure that valued morals grounded in religious faith – especially Christianity; a British legal system and classical British cultural traits like modesty, humility, perseverance and personal responsibility; veneration of the family; bourgeois values; patriotism; reliance on civic and religious societies; rugged individualism; and pride in our American heritage and appreciation for the achievements of Western Civilization. Today we see on the ascendancy a different culture, one that emphasizes: multiculturalism and the denigration of Western civilization; secular humanism; personal fulfillment over personal responsibility; sexual promiscuity; homosexuality and other abnormal arrangements in addition to (or even in lieu of) traditional family structure; denial of American exceptionalism; government as the ultimate resource for all societal problems and ‘social justice’ as the highest goal.

Nevertheless, I believe that we have not yet passed any cultural tipping point. I have two reasons for saying that. First, in the cultural sphere – unlike the political or economic, many are aware of the radical changes that have occurred and people have a sense of what is being lost. Politics and economics are very complicated, also impersonal, distant, at times unapproachable. But culture is personal, close, daily. It’s hard to conceal any changes. Grandparents tell their grandchildren about cultural differences much more readily than they discuss political or economic changes. Therefore, resistance is greater to adopting cultural changes than it is to accommodating political or economic change.

The second reason lies in the driver of the changes. Political and economic changes are driven primarily by government whereas cultural changes are driven by the media, the educational establishment and through the organizations of civil society (religious, civic, professional, etc.). Although the historic nature of the American experience encompasses a healthy distrust of government, I think that the people have been trained to instinctively rely on government more than on the opinion molding organs of society that have warped our culture. And so, there is less resistance to the advent of a political or economic tipping point than there is to a cultural one.

There is an anomaly hidden in this analysis. I have argued previously in this blog (see http://new.ronlipsman.com/2009/05/17/what-culture-is-it-that-the-politics-have-caught-up-with/

and

that the strategy progressives adopted in order to radically alter the country was to first capture the culture, whereupon the politics would follow. And that is exactly what happened. Therefore, how can we have a political tipping point precede a cultural one? I believe the answer is as follows: The progressives captured enough of the culture to enable them to successfully assault the classic political and economic structures of the US. With regard to the latter, the people are either unaware of the changes, or can live with them, or actually favor them. But a substantial part of the populace is uncomfortable with the new culture and resists the cultural onslaught – even if they do not resist its political and economic consequences.

Actually, if this interpretation is accurate, then there is cause for hope that conservatives can mount a counter-revolution and take back the culture. Then perhaps we could even overcome the political and/or economic calamities that we have endured. But it will be extremely difficult. History is replete with fallen civilizations that were not able to recover their former exalted status: Persia, Greece, Rome, and more recently Spain, France, Great Britain and the Soviet Union. (It’s an interesting exercise to try to identify the fatal tipping point for these. My favorite is Britain, for which I think the Suez crisis of 1956 was the tipping point. The cavalier way that Eisenhower brushed aside the Brits marked the latter’s downfall as a world power.)

A legitimate question arises: Is the current situation sustainable? That is, having hopelessly corrupted our political system, teetering economically, but retaining our cultural identity to a large extent, can we survive in this hybrid fashion for a long period? Perhaps. The analogy is imprecise, but in some sense that is what the situation is for the Asian Tigers, and to some extent also China. Those countries do not enjoy the political freedoms that America did. Their economies are not as free as ours once was. But their cultural identities are strong and seem to be enough to keep the people unified and motivated. Can America endure as a big Singapore? I find it hard to believe so, but we shall see.

Let me conclude by reinforcing my hypothesis – namely, that we have passed a political tipping point, are very close to an economic tipping point, but are stoutly resisting a cultural tipping point. I will do so by briefly highlighting what I see as the signature consequence or output of each of these three components of American society – politics, economics and culture. They are, respectively, freedom, prosperity and patriotism/morals. Well America might still be the home of the brave, but we’re no longer unquestionably the land of the free. This year the Heritage Foundation downgraded our status from ‘free’ to ‘mostly free.’ For me, that is an unmistakable indication that a political tipping point has passed. As for economics, we are still a very rich society, with great opportunities for individuals to prosper. But if one consults Per Capita Income Data on the web site of the U.S. Census Bureau (see e.g., http://www.census.gov/hhes/www/income/histinc/p01AR.html), one sees (in constant 2007 dollars) a curve that is steadily rising over the years until the turn of this century. During the first decade of the 21st century, the curve is flat. It hasn’t turned down yet, signifying that we are on the cusp of a tipping point. Finally, I think that most Americans still believe in American exceptionalism, that America has been and should continue to be a force for good in the world, that our society – which represents a unique experiment in individual liberty – is blessed by Divine Providence and should remain a beacon of freedom to the world. Moreover, they are bitterly disappointed to learn that their President does not share that belief. If we the people loose that faith and tip culturally, then we are truly lost. I don’t think that is going to happen.
This piece also appeared in The Intellectual Conservative at:

Betrayed by My Own Country

For the second time in my life I am feeling betrayed by my own country. The unwarranted imposition of government-controlled health care constitutes the betrayal.

The first betrayal occurred nearly forty years ago. My wife and I had just purchased a new house in a nice (integrated) neighborhood within walking distance of the university in which I was on the Mathematics faculty. Actually, a prime attraction of the house was that it was located close to an outstanding public elementary school that my kindergarten-age eldest son would attend. But less than three months into the school year, a myopic federal judge ordered my son bussed to a far away, inferior school in a ghastly neighborhood—all in furtherance of racial integration, whereas my neighborhood and my son’s school were already completely integrated. I could not believe it. My liberties, my rights were being usurped. No county, state or federal legislator or executive did anything whatsoever to halt this gross miscarriage of justice.

This incident caused me to reevaluate all the political and social axioms that had governed my life. Suffice it to say that I emerged from the exercise converted from a misguided liberal into an ardent conservative. Nothing that has happened in the last four decades tells me that I made an incorrect decision.

I have felt many disappointments in that time as I watched our country slide ever closer to a Euro-socialist state. The people of the country do not appear to draw the right lessons from our: Ponzi-scheme entitlement programs; spiraling, out of control debt; government intrusion into virtually every aspect of our lives; crumbling free market system that is increasingly replaced by crony capitalism and socialist practices; debauched culture that undermines the morals, which our founders asserted were necessary for our Republic to survive; and our blatant and wanton violations of the Constitution.

But I have not felt personally betrayed as I did in the 1972-3 bussing incident—until now. I feel that the impending government takeover of health care is a personal threat to my liberty. When it is implemented, I will not have access to the doctors, hospitals and medicines that I might need in the latter part of my life. I will not be able to make the free choices that might enable me to live a longer and healthier life. Despite the clear and overwhelming opposition of the people, the radical in the White House and his socialist cronies in Congress are ramming their oppressive system down my throat. Betrayal! Whither my country?
 
This post also appeared in The Intellectual Conservative blog at

http://intellectualconservative.blogspot.com/2010/03/betrayed-by-my-own-country.html

 
 

A Flight of Fantasy II: A Manifesto for Conservatives When They Regain Power

Prospects for Republicans to regain political power—in both the Congress and the Presidency—continue to improve. But as we learned sadly under the administration of George W Bush, Republican power does not necessarily result in conservative governance. In a recent post in this blog, I speculated about what conservatives might do if they do indeed receive a mandate from the American people. Moreover, I pointed out that such a mandate would come in one of two forms: either clear but limited (as it was for Reagan in the 80’s and Gingrich in the 90’s) or overwhelming and comprehensive (as it has not been since Coolidge, and perhaps longer ago).

In the last post I outlined three priorities that should determine the agenda in the case of a limited mandate. Those priorities were:

  1. Role of Government. Shrink the New Deal/Great Society/Obamania-inspired gargantuan government that is choking freedom out of American life.
  2. Defeat Islamic Fundamentalism. Reduce, and hopefully remove the scourge of Islamic fundamentalism as a threat to the US, to the West, indeed to the World.
  3. Recapture the culture. Initiate a multi-faceted approach toward rescuing the culture of the US. The basic goal is to restore (a reasonable facsimile) of the traditional culture that permeated American life from the 18th to the 20th century. Start on the long path toward delegitimizing the pornographic, anti-family, anti-religious, egalitarian, multicultural, environmentally wacky, anti-achievement, socialistic cesspool that passes for culture in America today.

Ideas and suggestions for action on each priority were presented in that post. In addition, I also promised that in a forthcoming post, I would outline a program to govern the actions of conservatives if and when the American people come to their senses and install a truly conservative government—with a strong and sustained mandate. Perhaps surprisingly, the same three principles serve as a linchpin for that agenda. Except that, with a strong and sustained mandate, the agenda could be pursued in a much more vigorous manner. It is my purpose to describe, as succinctly as possible, that ‘grand program’ here.

Before I launch into the precise program, let us briefly recall the fundamental idea that fuels progressivism—an idea whose pursuit has led to disastrous changes in our country. I will also explain why, after a century of experimentation, the idea is bankrupt and we must return to the conservative principles that made our country a bastion of freedom and a model for the world.

The fundamental idea that drives progressivism is that the traditional American culture, highlighted by individual liberty, free markets, rugged individualism, limited government, sanctity of private property and a ‘don’t tread on me’ mentality, inevitably leads to inequity, unfairness, injustice and oppression. These horrible consequences of the traditional culture are a blatant violation of how human beings should live on our planet. They can only be corrected by replacing the traditional culture with one that emphasizes redistribution of wealth, multiculturalism, a powerful central government acting as the ultimate arbiter of social and economic disparities, group rights and a hypocritical reliance solely on negotiation rather than force to reconcile differences. I say hypocritical because the principle only applies to international affairs, but not to domestic policies.

I believe history has proven beyond a shadow of a doubt that striving for equality of outcome—aside from whether it is a proper goal for mankind—inevitably leads to tyranny. For proof, see the Soviet Union, East Germany, Cuba, China, Vietnam, Zimbabwe and even the European Union. The forcible taking from one to give to another—however justified it might appear in the abstract—deprives the former of liberty, property and, occasionally, of life. The coercive redistribution of wealth surely is one of the worst ideas that mankind has ever concocted—even if motivated by good intentions. Instead, the fundamental animating principle that should govern human behavior is equality of opportunity—that is, the same rules apply to everyone. After the games begin, some will outperform and out achieve others. If the society is just and the people morally sound, then those who excel will establish structures to aid those who do not. If, on the other hand, society (in the form of government) compels compulsory generosity, compulsory kindness or compulsory charity, then what it gets is not generosity, kindness or charity, but bitterness on the part of those deprived and resentment and irresponsibility from the benefiters. Charity and kindness can only result from an act performed with free will. Therefore, it is imperative that we reorient our country’s underlying philosophy from redistribution to equality of opportunity.

In the previous post I outlined for each of the above three priorities, concrete steps that conservatives could take, which the American people would support—even if they had granted conservatives only a limited mandate. If the mandate is broader, much more could be done. The two prime goals would be: first, a complete undermining of the liberal hegemony that has increasingly ruled the US over the last century; and second, a rekindling of the Constitutional republic that characterized US society in the eighteenth and nineteenth centuries.

Of course I am not proposing that we toss out the internet, abandon CAT scans and shun nuclear energy. Progress in technological matters and improvements in the quality of life should be embraced. But the underlying principles of our political and economic systems and, most importantly, of our culture, should be restored to the tried and true conservative paradigms that we benefitted from so greatly and for so long.

With that in mind, I will list, for each of the three priorities, some bold steps that I believe a strongly empowered conservative government should pursue. Each step merits a full essay. I and others will write those essays when the day of reckoning draws nearer. For now, let’s just settle on the broad strokes of the program—more of a conservative manifesto than a conservative playbook.

1. Shrink the government. Reagan failed to do it. So did Gingrich. This must be Job One of a new, powerful conservative government. Here’s how to do it:

·       A renewed emphasis on the Ninth and Tenth Amendments to the Constitution must be implemented. These amendments make clear that the people are sovereign and that, aside from the limited and defined powers granted to the Federal Government by the Constitution, all remaining powers are reserved to the States and to the people. The willful ignoring of these Amendments by the Federal Government—and the people’s acquiescence in that usurpation—are at the root of the unchecked growth in the power of the Federal Government.

·       The Federal Government’s budget must be restricted to a percentage of GDP more in line with historic figures. Before WWI, it was less than 10%; since WWII, it has ranged between 25 and 35%; and in the age of Obama it is over 40%.We should reduce it to no more than 20%.

·       Federal entitlement programs are out of control and by themselves threaten to bankrupt the country. They all should be severely curtailed and ultimately privatized. This is a huge challenge and unfortunately has to be done somewhat gradually as an overnight implementation would wreak chaos.

·       Every federal agency’s budget should be cut by at least 25%, and at least 25% of the agencies should be phased out. Several cabinet level departments should be axed. More draconian cuts would be a worthy goal.

·       All federal taxes (income, payroll, capital gains, estate, etc.) should be cut by at least 25% and preferably more.

·       The number of federal regulations should be cut by at least 50%.

·       The deficit and national debt must be addressed. If all the previous steps were taken, they would go a long way toward substantially reducing the deficit. In addition, there should be statutory or constitutional limits set on the permissible size of the deficit as a percentage of GDP—never more than 5% as it has been historically (except during the two world wars); now it exceeds 10% and is increasing. But even better would be a Constitutional mandate for a balanced budget (as is the case in virtually all the States), which could only be violated in times of national emergency and only upon a three quarters vote of Congress. These steps and a growing economy will enable us to start paying off the debt.

·       The Federal Government should sell off large portions of its tangible assets including buildings, land and equipment. The proceeds should go toward reducing the national debt.

·       Judicial power must be reined in. Appointments for life should be terminated. Justices should serve fixed terms (e.g., 10, perhaps 15 years), renewable by the consent of the Senate at most once.

·       The Federal Reserve should be reexamined. Its power and related controversial issues—such as whether a return to the gold standard is wise—should be open for serious discussion.

2. Defeat Islamic Fundamentalism. Above all, we must recognize and appropriately name the danger we face: A resurgent, worldwide and radical Muslim movement that intends to destroy the United States, Israel and Western Civilization. Like the previous totalitarian movements we defeated, Nazism and Communism, radical Islam is bent on world domination. Unlike the previous two, radical Islam is not led from a single nation state. But that does not make the threat to us any less dangerous. Thus far, we have been reluctant to name our enemy and we have refused to acknowledge that we are in an existential battle. The sooner we do so, the better able we will be to deal with and win that battle. Here, in brief, are some of the steps we must take:

·       Although there is not a single source, there are identifiable sites of greatest strength—for example, Iran, Saudi Arabia and Pakistan. We must impose severe sanctions on the first and punitive measures on the latter two to induce modified behavior. Military action must never be ruled out.

·       We must make clear that, should circumstances warrant, Teheran is a potential military target—but so are Medina and Mecca. That will focus their attention on the price they might pay for pursuing their mad quest.

·       The US must beef up its military. That means a larger force and the most advanced weapons—conventional, nuclear and those designed for asymmetric warfare. We must restore the capabilities of our intelligence services.

·       We should recognize that Israel is our most reliable ally in this struggle and cease our fixation on the so-called ‘Palestinian problem.’ Were Israel to disappear and Fatah/Hamas/Hizbollah to rule the Holy Land, it would not change by one iota the fundamental goal of the Islamic radicals to obliterate the West.

·       We must find a way to reenergize our NATO allies: they should cease their appeasement of our common Muslim enemies (which are increasingly found inside their borders); beef up their military capabilities; and seriously engage in this global struggle that threatens their existence even more than ours.

·       We should stop apologizing for ‘past American sins,’ reaffirm our role as the world’s chief bastion and model of freedom and go on the offensive against the enemy that endangers us. We need to engage the Jihadists in the court of world opinion as well as on the batttlefield.

3. Culture. As I have argued forcefully in the previous post and elsewhere, this is the greatest challenge facing conservatives—that is, recapturing the culture from the left that has almost completely usurped it over the last century. Here are the key philosophical principles that should guide us. (Some concrete action steps were described in the last post.)

·       A reverence for, allegiance to and study of the US Constitution must be a characteristic of all Americans, both young and old.

·       Similarly, the study of and pride in US history must be ubiquitous among the people.

·       Individual liberty must be restored as our highest goal. This does not mean an entitlement mentality that sees all of us with equal outcomes at the end of the day, but rather equal opportunity for all of us to achieve at the highest levels we can attain.

·       A belief in free markets, entrepreneurship, democratic capitalism and a rejection of the idea that the government can run our economy more effectively than the entrepreneurs, investors, shopkeepers and laborers who create and populate our job market.

·       Clean up the filth and degeneracy, propagated by the media, academia and the legal profession, which poses for culture in liberal America. This will not be an easy task. It requires higher moral standards among the people. Religion needs to play a role.

·       Restore pride in myriad aspects of the traditional culture that have been marginalized: Calvinist work ethic, humility, restraint, thrift, nuclear family.

·       Cease and desist all multicultural crap like: bilingual education, diversity programs, group rights, gay marriage and coddling of illegal immigrants.

·       Look to religious, civic, neighborhood and private philanthropic organizations to provide charity to the less fortunate—NOT the government.

Here’s the icing on the cake—two bold steps that would truly herald a refounding of America as a Constitutional republic. First, some of the above-mentioned steps might require a modification of the Constitution. The standard Amendment process is long and difficult. How about a Constitutional Convention? The Constitution provides for it. Just because we have not done it since 1787 does not mean that it is not a good idea. Second, it is not only Supreme Court justices who pledge to protect and defend the Constitution. Members of Congress and the President do the same. Perhaps it is time for them, like the members of the Court, to deem themselves responsible for deciding constitutionality of laws. I acknowledge this is a tricky matter, but I believe the founders foresaw that all the members of the government at the highest level would be equally responsible for safeguarding the Constitution.

Is America ready to embark on such a journey? I wish I could say that I was optimistic about the possibility. But the US has exhibited remarkable rejuvenative powers in response to numerous existential crises in the past. This one poses a greater problem in that the crisis has been festering for a century and its true nature is hidden from much of the population. Yet, unlike our President, I believe in American exceptionalism. It might ride to the rescue after all.

Obama: Please Shut Up Again!

There was a period about ten months ago when every time Obama opened his mouth, the stock market plunged another 100 points. At that time, the Anointed One rarely missed an opportunity to trash the insurance industry, the pharmaceutical industry, automobile companies and of course big banks. When he wasn’t verbally accosting these industries, he was promising sweeping new legislation and regulations that would supposedly rein them in and curtail their abusive practices.

Not surprisingly, the market reacted very negatively to these threats—both to the specific prospects inherent in Obama’s threats as well as to the uncertainty caused by their enunciation. Untold hundreds of millions of dollars of asset wealth were destroyed by the resultant decline in the Dow and other indices.

Since more than half of Americans are now shareholders, it is not unfair to lay the blame for a decline in the typical American taxpayer’s wealth at Obama’s feet. It is ironic that, last year, when too many Americans were still under the illusion that Obama’s stimulus program, deficit spending and cap and trade and health care monstrosities were going to help rescue the economy (they aren’t any longer), his loose tongue was already diminishing the wealth of the American people. It got so bad that even Bill Clinton had to tell him to button it.

Well, here we go again. This past week his Excellency reprised his repeated thrashing of the banking and insurance industries. With the same result on the stock market! Now, many expected that the recent market surge would yield to a correction. Leave it to our clueless President to initiate the correction and render it more severe than necessary. It’s time for Bill to tell him to shut up again.

This is what we get for electing an ignorant community organizer with no expertise in running a newsstand, much less a country. Republicans might be happy that his Presidency is going up in flames, but that brings scant comfort to those whose wealth he is shrinking. As for the Democrats, if I may quote Monty Pelerin in a blog in the Jan 23 issue of this magazine: The only happy Democrat today is Jimmy Carter. He probably senses the chance to pass his heavy mantle of ‘worst President in my lifetime’ on to ‘The One.’
This piece also appeared on the American Thinker blog site on Jan 24, 2010. (http://www.americanthinker.com/blog/2010/01/obamas_bank_bashing_killing_we.html)

Do the Democrats Really Believe in Democratic Capitalism?

By democratic capitalism I mean the socioeconomic system described vividly in Walter Russell Mead’s penetrating new book, God and Gold: Britain, America and the Making of the Modern World. It is the system pioneered in some of the Italian City States nearly five hundred years ago, picked up in the Low Countries thereafter, but adopted and developed with the greatest success by Great Britain and the United States over the last three hundred years. It has many attributes, but for the purposes of this article, let us define it as a society in which the economy is characterized by free markets, private ownership of property and means of production, and respect for the profit motive and the pricing mechanism, all operating under the rule of law guaranteed by a government that intervenes very little in the economic and social life of the people. The people are completely free to decide what to produce, what to charge, where to sell it, and to whom. Contracts are freely entered into and their legal sanctity is enforced by the government. Such an economy can exist only in a democratic society, that is, one in which the people are free to choose their political leaders and means of organization. The overarching structure could be a republic (like the US), a constitutional monarchy (like the UK), or a pure parliamentary democracy (like Estonia), but democracy is a sine qua non. 

 

History has demonstrated beyond any conceivable doubt that democratic capitalism leads to mass prosperity. Without the stultifying hand of government weighing them down, the people are free to develop new products, open new markets, produce copious consumer goods, trade with their neighbors and with partners around the globe, and lift the overall standard of living far beyond any ever achieved in a planned or centrally controlled economy. This assertion is unchallengeable. The sorry history of societies organized under feudalism, mercantilism, socialism, communism, fascism, absolute monarchy, religious fundamentalism, oligarchy or any system other than democratic capitalism makes the assertion self-evident.

 

But there is a catch. Because democratic capitalism is characterized by free and open competition, it results in winners and losers. In a general sense, people prosper. Some individuals and groups prosper immensely. Others falter, usually due to their own poor performance, but sometimes just because of bad luck. A classic example of the latter is the individual who invests heavily in a product or technology immediately prior to it being superseded by a newer and better technology or product invented by a competitor. This process of creative destruction that typifies capitalism can convert winners into losers in a brutal and sudden fashion. Well, that kind of phenomenon is often offensive to our sensibilities: ‘It’s not fair. It’s inequitable. Why should some prosper at the expense of others? Shouldn’t we shield the weak from the predatory practices of the strong?’

 

Such sentiments are not without merit. People should take no joy in seeing their fellow man fail—at least compassionate people should not. And aren’t we all striving to be compassionate these days? Compassionate or not, people often experience guilt feelings when they succeed, but friends and relations do not. Egalitarianism is not a philosophy that is easily compatible with democratic capitalism, but history shows that it runs deep in us.

 

It seems to me that there are two approaches for dealing with this ‘flaw’ in democratic capitalism. The first approach accepts the superiority of the system, but seeks ways to ameliorate its potential ill effects without disrupting the fundamentals of the system and thereby curtailing the great benefits it yields.

 

The second approach, while paying lip service to the benefits of democratic capitalism, postulates that either: (a) it is in fact not the ideal system and that a substantial modification of it would be better and fairer; or (b) regardless of whether an improvement is possible, the price that capitalism exacts is just too high and should not be paid. In this approach, in either case, a just-minded and powerful referee must supervise the game, intervening where necessary to ensure more equitable outcomes than would result under unregulated laissez-faire rules.

 

To implement the first approach, the people develop civic associations, religious associations and other non-governmental organizations designed to aid the less fortunate in society for whom the competition has not gone well. Their focus is on those who played by the rules; but didn’t play very well, or on whom the ball took a funny bounce. Because of the overall prosperity of the nation, the percentage of the population in need of assistance is small. Therefore, the goal of designing and implementing palliatives to help the deserving without compromising the overall system becomes attainable. Such an approach characterized the US for more than two hundred years—until the onset of the Progressive Era in the early twentieth century.

 

At which point we slipped into the second approach—starting a long slide down a slippery slope ever since, arriving finally at a new destination, the ‘Modern Welfare State.’ In which we pay homage to the superiority of democratic capitalism but in practice we countenance the activities of an increasingly interventionist government on the playing field in an aggressive fashion.

 

The nature of our federal government; it’s enormous influence in the everyday lives of the people; the fact that the vast majority of the people approve of this role for the government—all of this would have been unfathomable to and anathema for the American people, certainly at the time of the founders, but even up to the end of the nineteenth century.

 

That the federal government would have some role in the people’s commerce and transportation is stipulated in the Constitution. But that it would have a primary role in the people’s health care, education, retirement, housing, and religious, social and business affairs would be astounding to our forbearers. There is absolutely no such role ascribed to the federal government in the Constitution or other founding documents. However, once we assigned it a paramount role in the machinery that drives our capitalistic economy, it is not surprising that we also accorded it a major role in many other aspects of our lives. We have been rewarded with: judicial rulings like Kelo v. New London, Univ. of Cal. Regents v. Bakke and Roe v. Wade that have no legal basis in Constitutional law; congressional actions like Sarbanes-Oxley or McCain-Feingold, which are incompatible with the role assigned to Congress by the Constitution; and an Executive with the ability to initiate warfare, which is in direct violation of the Constitution. All of these transgressions are tamely accepted by the American people. In its desire to ameliorate the sometimes harsh side of democratic capitalism, the people have ceded to the government—in the economic realm and elsewhere—a role never intended for it. We are so far down the road of the second approach that hardly anyone notices the vast distance we have traveled.

 

The last sentence summarizes one of my two fundamental assertions in this article. Namely, I do not believe that the American people are even pondering the question of which approach to take any longer. A centuryis a long time. Three (or more) generations have already lived under the rubric of the Modern Welfare State. Few are thinking about the drastic change it represents. Very few are contemplating the philosophical issue it poses. If we are, as our founders intended us to be, a nation whose socioeconomic system is grounded in democratic capitalism, how can that be reconciled with the fact that we have installed the Modern Welfare State, which violates the basic precepts of democratic capitalism?

 

Now for the second point: What about our political leaders? It is inconceivable to me that someone who stands for the highest political office in the land could be blithely ignorant of the fundamental changes in the nature of American society that I have described. It would be inexcusable for a presidential candidate not to have a deep understanding of the nearly 400 year history of American society, not to have thought philosophically about our Constitution and its role in our society, not to have pondered the nature of our current socioeconomic system and related it to the deep historical thread woven by the American people over its history. My second point is that based on the evidence I see, I have strong suspicion that the leaders of the Democratic Party, and in particular the three current major candidates for that Party’s Presidential nomination, fail these tests.

 

Ms. Clinton insists ‘it takes a village to raise a child,’ thereby paying ultimate homage to collectivism, violating the millennia old notion that the family is the basic unit of society, and clearly setting a role for a parental government far beyond what we have experienced to date. Mr. Edwards speaks nonsensically of two Americas, urging us toward class warfare and completely missing the well known point that in our capitalistic system the mobility between the poor and the rich is, and has always been, very robust. Either he is a demagogue or he is totally misguided. And finally, Mr. Obama, with his mindless mantra of ‘change’ without any indication of who will be changing what for whose benefit has no more gravitas than a toothpaste commercial. If one examines what little record he has, it would appear that the change he has in mind would take us much further down the slippery slope.

 

To conclude, what I see among the leadership of the Democratic Party is at best ignorance of the socioeconomic axioms that have guided our nation and at worst a rejection of them, accompanied by the political intention to further entrench the Modern Welfare State as the paradigm for the American socioeconomic system. It has been thus for a longtime. If I asked you to identify the last Democratic Presidential candidate who really believed in democratic capitalism, you might make a case for Kennedy, perhaps Truman. I’m not so sure. The correct answer might be Grover Cleveland.