The Steroid Policies of the American Economy

(I'm totally lazy today, so I'm just going to toss up an essay for a class I was taking last quarter.)

“Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure ... than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.” – Theodore Roosevelt, 26th President of the United States

"Oh sure, your guilty conscience might make you vote Democrat. But deep down you know you want a cold-hearted Republican who will lower taxes, brutalize criminals, and rule you like a king! That’s why you need me Springfield: to save you from yourselves!" – Bob Terwilliger, The Simpsons

It has become clear that the experiment of deregulation of the American economy has failed. The American middle class, mislead by empty promises of prosperity to all, have learned and now believe in the dreams and aspirations of a narrow population of already-affluent individuals, to the detriment of their own economic and democratic lives. In his book, The Squandering of America, Robert Kuttner lays the blame for this not only on the anti-social behavior of corporations, but also upon the complicity of the American government[1]. Like McChesney in Rich Media, Poor Democracy[2] and Galbraith in The Predator State[3], Kuttner asserts that the predatory behavior of corporations upon the middle class could not have occurred without the assistance of the American government. As a consequence, the “squandering of America” has occurred: the loss of promise and opportunity at the hands of private interest groups for the benefit of the American “elite”.

Kuttner highlights public policies that helped to create “the golden age of managed capitalism.” Social Security ensured that the aged and disabled were able to continue to live independently after a lifetime of contribution to the American economy or an unfortunate circumstance, respectively. The G.I. Bill, and other similar public education initiatives like Pell Grants, helped to keep tuition costs for public universities low and accessible to a wide range of Americans. Medicare and Medicaid provide health care for Americans in need, such as seniors or the disabled. The Wagner Act provided workers – a group which the vast majority of Americans should describe themselves as – with laws that would protect their right to organize peacefully and unionize. There were also acts regulating Wall Street activity: the Clayton Antitrust Act prevented the collusion of direct competitors; the Glass-Steagall Act prevented commercial banks from underwriting or marketing securities, thus making them more responsible to their investors; and the Securities Exchange Act prevented exploitation of the stock market through insider trading and the issuance of junk stock. The powers and duties of these public policies guaranteed the basic economic liberties enjoyed by Americans during the post-WWII era of prosperity enjoyed by the United States until the mid 1970’s.

The potential of the American economy to continue to thrive and prosper has since been undermined from a number of causes. Unchecked rises in the prices – not necessarily the costs – of health care and higher education have placed a large burden on the federal budget, which must now spend more on programs such as Medicare, Medicaid, and federal education initiatives. The imposition of tax cuts for the wealthy has cut into the liquidity of the American government, and its ability to float bonds to raise capital. The weakening of pro-union laws like the Wagner Act has impacted the power in the American labor market to demand fair wages and benefits. Further, the deregulation of the stock market and lending institutions has allowed speculative investment and other predatory corporate behavior, causing an unstable Wall Street market and undermining the strength of the investment sector. Where the American economy was “a sure thing” when it came to increasing productivity, wages, and spending, the “assault on the good society” has led to overspending into debt, inflation of the price of essential services, and the debilitation of the American working class to demand change.

The undermining of the “good society” has a number of detrimental effects on the American populace. First, the American middle class has effectively lost the ability to demand fair wages from employers; without strong union and labor laws, or a strong union or labor organization, employers – the corporations – are able to dictate terms of employment, or disseminate false information in order to encourage employees to give up their “sure thing” benefits, like pensions, for employer-friendly pension schemes, such as 401(k)’s. Second, fewer members of the American middle class can be assured of a “career” in a particular company; weaker labor laws, uncertain business futures, and an increasingly-educated labor force means that vocal workers may be fired and replaced by companies without risking productivity. Finally, the new American middle class – graduates of high school or higher education – face the ugly prospect of corporate bondage once they emerge into the labor pool; the rising cost of education and health care means that workers are dependent upon their jobs to provide wages for student loans and insurance for health care costs. Good wages and health care coverage are no longer benefits: they have become necessities. This turns an already-competitive work environment into a cutthroat wasteland; this turns voluntary employment for the benefits into involuntary servitude for the necessities. The destruction of the “good society” has turned the average American worker into a serf: living on land he does not own, working in order to subsist, and believing an ideology that he does not benefit from and cannot afford.

The steroid policies of the American economy are simple. First, short-term gains are to be prized more than long-term growth. Second, any attempt to police or regulate is to be shot down and decried. Third, there is to be no dissent among the players: the businesses, the lenders that they rely on, and the politicians that benefit from the hush policy. If business is a sport, then the economy is the playing field, the corporations and firms are the players, and the laws and policies of Congress are the rules. When the rules are such that the sport is no longer enjoyable, the rules change. In many ways, however, the American economy is not a sport: where most players would complain about other players breaking the rules, the players in the American economy practice a baffling sort of silence. There are too many smart people involved in the American economy to say that the recent collapse was unexpected or unanticipated. There are too many smart people involved to say that it was a simple mistake. It is far more accurate to criticize those entrusted with the health of the American economy with having failed in their task willfully and wantonly.

The American people can no longer accept their economy as a game for financiers and economists to play. Unlike a sport, when a player cheats, it has drastic effects upon the life of the American working class. Assets are raided; lives are destroyed. When a business is acquired by another, many American workers are forced out of jobs. When a business is dissolved, the same occurs. Thus, the American people must convert the game into a process: the economy must be regulated, and forced to work for the benefit of the people as a whole; social welfare, which is an integral part of an economy, must be regulated and managed to provide necessities to the people in need; and the violators of the rules of this process must be purged or punished for their transgressions. The rule-makers must crackdown on the steroid users, and reward the players that stick by the rules. Otherwise, the game will continue to be ruled by cheaters.

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[1] Kuttner, R. (2007). The Squandering of America: How the failure of our policies undermines our prosperity. New York: Alfred A. Knopf.

[2] McChesney, R.W. (2000). Rich Media Poor Democracy: communication politics in dubious times. New York: The New Press.

[3] Galbraith, J.K. (2008) The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. New York: Free Press.