Guest Column by James Heltunen
Social angst has been slowly spreading throughout the world. Massive demonstrations in Greece, Spain and Portugal have made the headlines time and time again. The Occupy Wall Street and Tea Party movements have Americans on alert. Something is fundamentally wrong with the economy, but no one can fully explain it. The problem is not capitalism. The problem is a mixed economy.
Contrary to popular belief, we do not live in a capitalist country. We have a mixed economy. This means we have free market industries with heavy government intervention or regulation. This concept was first popularized in the United States by John Menard Keynes. His main theory was increased government spending during times of recessions and depressions would speed up economic recovery. This may be true, but the unseen effects of increased government power over the free market are wrecking our economy.
During the Great Depression, Franklin D. Roosevelt was the first American president to embrace Keynesian economics. The New Deal of “relief, recovery, reform” was the first example of major government intervention in the free market. The government increased deficit spending on multiple government sanctioned programs. These programs became known as alphabet soup programs because there were so many acronyms.
FDR calmed the fear during the Great Depression but the depression dragged on. Increased government intervention did little to create relief or recovery. It did accomplish its goal of reforming our economy, but in a negative way. FDR helped create the mirage that capitalism is destructive and against the ideals of American citizens.
Today, politicians influence the economy through our tax code and federal budget. Corporations and lobbyist groups use this increased political power to influence legislation in their economic interest. This is facilitated by “legal bribes,” known as campaign contributions, to elected representatives. Special interests provide politicians with campaign money if they support legislation (i.e. tax breaks, budget earmarks) that betters their economic standing.
As proof, massive corporations have continued to grow larger and larger. They have become multi-national entities with increased control over the production of resources. They fail economically but their government connections provide them with taxpayer bailouts. They have been deemed to have the same rights as human beings. They are too big to fail. They are the new oligarchy.
The economic crash of 2008 is often attributed to deregulated capitalism. For example, many believe that the repeal of the Glass-Steagall Act helped facilitate the banking collapse. This is a half-truth. The economic crash and the Great Recession are due to increased government intervention in our economy. Banks did want to repeal the Glass-Steagall Act in order to help diversify their investments. There is no problem with greater investment diversity.
The problem lies with the fact that certain big investment firms knew that they could make increased risk investments without the risk. The big banks/investment firms negated the high risk through strong “political friendships.” These groups knew that if their investments backfired, they would be able to secure taxpayer bailouts. This is a small price to pay for protection against the free market.
The government’s influence in economic affairs is the root of all problems. We must separate the government from economics. We must start with a new tax code that cannot be changed or manipulated by politicians or special interests. As American citizens we need to look into new forms for taxing our citizens and businesses. We must also make it illegal for the government to provide businesses with taxpayer dollars or bailouts. This only encourages irresponsible behavior or incompetence. The “too big to fail” philosophy supports a truly un-American ruling class.
Laissez-faire capitalism created the greatest and freest nation to ever inhabit the earth. The flaws of capitalism are the flaws of reality.