Ted McLaughlin : The ‘Free Market’ Myth and the Suicide of Capitalism

Political cartoon by Carol Simpson / Cartoon Work.

The ‘free market’ myth and the

suicide of the capitalist system

In a capitalist society such as ours the wealth will be redistributed to the richest people unless there are some regulations to prevent that.

By Ted McLaughlin / The Rag Blog / August 23, 2011

We hear a lot today about free trade and free enterprise. Those are today’s code words for unregulated capitalism — the idea that capitalism can work for the benefit of everyone in a society as long as it is not hindered by government regulations. The proponents of this idea say that the more money the capitalists make, the more jobs they will create and the better off everyone in the society will be.

You may recognize this as the Republican “trickle-down” theory.

These modern Republicans may be surprised to learn that their boogeyman, Karl Marx was in favor of “free trade.” Look at this quote from Marx:

The free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.

Marx was in favor of free trade, or unregulated capitalism, because he knew that such a system was sowing the seeds of its own destruction. An unregulated capitalism would inevitably result in the death of capitalism (by concentrating too much of the total wealth in the hands of a few people which would kill demand).

The rich and the corporations (today’s capitalists) have let their greed for accumulating ever larger pools of money blind them to reality (if they ever understood it in the first place). And that reality is that capitalists do not create jobs. Demand for products and services is what creates jobs. Capitalists simply exploit that demand to make money (and they have to put people to work in order to exploit that demand). But when the demand disappears, so do the jobs.

Now you may be asking yourself at this point: If an unregulated capitalism is suicidal then how has our system survived this long? The answer is regulation. When our system has started to get too out of whack, we have instituted measures to regulate or control the excesses of capitalism — measures designed to redistribute some of the income and wealth away from the rich and to the others in our society.

I know that the term “redistribution of wealth” has been demonized in this country, but that is ridiculous because wealth is always being redistributed in all societies. In a capitalist society such as ours, the wealth will be redistributed to the richest people unless there are some regulations to prevent that. These regulations will spread the distribution of wealth and income throughout the society. This is healthy, because a more equal distribution of income creates demand as people use that wealth and income to buy goods and services (and this allows capitalists to make money and workers to find jobs).

We have used various means to redistribute the income more fairly in this country. We created a progressive income tax (where the more money a person makes the higher tax rate they pay), we created and protected unions (which provided workers with decent wages and better benefits), we created an array of social service programs (to protect children, the elderly, the poor, and those with disadvantages), and we imposed regulations on the business practices of Wall Street and the corporations. These things helped to keep our capitalist system from getting out of control and choking to death on its own success.

But the Republicans have never accepted that capitalism needs regulating. They still believe that “trickle-down” (or Voodoo) economics will work (in spite of its repeated failures). With the election of Ronald Reagan in 1980, they began to tear down the safeguards that had been installed in our society. They started to eliminate business regulations, strip unions of their power, dismantle social programs, and lower tax rates for the rich. This process was accelerated in the administration of George W. Bush.

The result was predictable. Far too much of the nation’s wealth and income became concentrated in the hands of only a few people (about 1% of the population controls 40% of the wealth and income currently). While the income of the rich grew astronomically, the income of

workers was stagnant (and their buying power dropped substantially). This resulted in a drop in demand, which resulted in lay-offs, which killed demand even further, causing more layoffs — and this spiraled the country down into a serious recession.

And what do the Republicans think the solution to this jobless recession is? They want to cut social programs, cut taxes for the rich, eliminate unions, and eliminate regulations on businesses. In other words they want to do more of the same things that caused this economic mess in the first place. They seem to be incapable of learning from either experience or history.

They claim they are being fiscally responsible. They aren’t. What they are really doing is giving our capitalist system enough rope to hang itself — an economic suicide that could unfortunately also kill our economy (and maybe even our democracy).

[Ted McLaughlin also posts at jobsanger. Read more articles by Ted McLaughlin on The Rag Blog.]

The Rag Blog

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5 Responses to Ted McLaughlin : The ‘Free Market’ Myth and the Suicide of Capitalism

  1. Unknown says:

    Gary Shteyngart’s book, _Super Sad True Love Story_, is on the same page with this posting except that he postulates a complicity of Democrats in the post-Reagan deregulation such that the Bi-Partisan party has been in charge of it — to which I say “right on.”

  2. I would have to agree with that. The Democrats must shoulder their share of the blame for their complicity.

  3. Paul Beckett says:

    I’m really happy to have read this article. I’d be even happier to have written it.

    Paul Beckett

  4. I posted a similar thought chain about this time yesterday morning on notmytribe, about the rebirth of those “flip this house” real estate scams like the ones which snapped the fragile economy 4 years ago. Before reading this article.

    Also linked into it in a comment. Then came to read the article.
    It might seem to be restating the obvious, continuously, but that’s the only way to convince a certain demographic group to listen.

    “No, no! Mustn’t play with sharp objects! How many times must Mommy tell you?”

    It only seems harsh and mostly useless until you step back for a moment and take a deep breath, and realize that in the almost 70 years since the first deployment of Atomic Weapons we at least have kept the Stupid Ones from nuking everybody. And realize that it’s been less brutal at least coming from our general direction than if we had gone full-on guerrilla against them.

    Walk down the street with a baseball bat getting peoples’ hearts right, would be amusing for a short while but then your arm would get tired, it wouldn’t actually work and is morally reprehensible on several levels.
    Still, it does have a certain attraction, close your eyes and daydream …
    “Sir, you need your heart right… BAMMMM!”

  5. Anonymous says:

    It's willful "misunderstanding." As Upton Sinclair said:

    "It is difficult to get a man to understand something when his paycheck depends on him not understanding it."

    Scratch the surface of any issue we face to day and you'll find billionaires behind it driving the issue.

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