Capitalism is a wonderful thing — taken in moderation
By ALAN J. ORTBALS
Often times presidential campaigns have themes: Return to Normalcy, the New Deal, a Fair Deal, the New Frontier, etc. But these slogans normally belong to one party or the other. This year is different. Just about everyone — and we have nearly enough candidates for a pickup baseball game — are espousing populism, trumpeting the welfare of the common man and raging against the ruling elite.
I guess their polls are showing them that the common folks have caught on. Joe and Mary Blow realize that their incomes have stagnated; that CEOs make 331 times more than the average worker; and the top 3 percent are sitting on twice as much wealth as the other 97 percent. Regardless of the polls, I doubt that most of these candidates have any intention of doing anything to close the gap.
After all, these same economic conditions were there four years ago when candidate Mitt Romney railed against the 47 percent of the population as sponges who were just waiting around for handouts. In fact, we’ve been on essentially this same course for the last 35 years since the Reagan Revolution resurrected the corpse of trickle-down economics, dead since the Hoover years.
Pure capitalism is like a poker game. Eventually all the money ends up on one side of the table. In a poker game, the losers go home mad, hoping for better luck next time. In economics, everything comes to a grinding halt because if you can’t buy, I can’t sell.
We practiced pure capitalism for the first hundred years or so of the republic. As a business owner you could make whatever you wanted; sell to whomever would buy it; and run your business any way you felt like it. There were no taxes on your income and the only regulation on your operations was, Buyer Beware. Most people today don’t realize how abhorrent conditions were for the masses in the Laissez Faire days of 19th century America.
In those days, industrial accidents killed 35,000 workers each year and maimed a half million others. The families of the fallen received no recompense. If the bread winner died, the family was generally destitute even if the wife and kids all went to work. If maimed, too bad. Death on the job was so commonplace that the general public only became concerned when scores of workers were killed — such as when 146 people were locked in the Triangle Shirtwaist factory and burned to death. In one year alone 195 steel and iron workers were killed in the mills of Pittsburgh, Pa.
Voters eventually became outraged and politicians finally began to listen. The Progressive Movement was the result. Policy followed that began to shift some of that money around the poker table and improve working conditions, but it was slow. Things like the Sherman Anti-Trust Act, the Child Labor Act and the 16th Amendment, creating the income tax, were enacted over a period of nearly a quarter century.
They weren’t enough. There was no minimum wage and labor unions did not provide a significant counter-balance. A lot of people still farmed for a living. The more they grew, the lower prices went. And the song “16 Tons” was a fairly accurate description of the strife of the coal miner.
Even during the boom of the Roaring Twenties, many people were poor, and many were trying to make ends meet by playing the stock market, much like the way people in the 2000s borrowed against their homes to pay off their credit cards. The rich got richer and the rest just tried their best to hold on.
Everyone knows about the stock market crash of 1929 but the roots of the Great Depression lie in the wealth gap. You can’t sell cars to people who can’t afford bread. Eventually that house of cards came tumbling down. So, when you hear that the wealth gap today is the greatest since 1928, alarm bells should go off. This is serious.
Capitalism is a wonderful thing — taken in moderation. Once again the money in the poker game is collecting on one side of the table and we need to be enacting policies to keep more people in the game. This isn’t wealth envy or class warfare, this is good economics. What we need is a new progressive movement to correct our course.
Legend has it that when Marie Antoinette was told that the masses had no bread she said, “Let them eat cake.” That didn’t work out too well for her.
Alan J. Ortbals is president and publisher of the Illinois Business Journal. He may be reached at firstname.lastname@example.org or (618) 659-1997.