Economic Systems: Mixed Beats Pure

Economics pretends to be a science, but more than most sciences it tends to be driven by ideology.

In ideologies the answers are given. Facts are fit into theoretical frameworks. Facts that don't fit in are denied or even falsified, and at best are explained away. Just as with religions.

In the United States and much of the globe there are two major economic ideologies to choose from: free market capitalism, and socialism. Both camps look back at the 20th century and pull facts (or pseudo facts) from the economic trajectories of various nations to justify their current policy prescriptions.

I believe they are both wrong, to the extent they demand pure systems. I believe the historical record shows that they are both wrong. I believe that in the United States and elsewhere we need to build up a popular culture, science of economics, and political system that understands that mixed systems (involving both free and regulated markets, and the control of capital at times by capitalists, and at times by government) can work better than pure systems.

Ideologists are people who insist on using the same tool set for every job, even when a better (often just bigger) tool set is available.

To keep this essay short, I will focus on one ideology, free-market capitalism. This ideology is being pushed heavily in the United States by capitalists, their media voices, their academic establishment, their religious establishment, and their politicians. However, let me make it clear that I am not in favor of a centrally-planned socialist system where the government owns everything (though its claim would be that it holds everything in common for the people). I am in favor of a mixed system. I am just coming at it from the free-market side.

If you think free markets are sacred, then of course whatever comes out of them is wonderful. The Great Depression was created by free markets, so it must have been wonderful.

I don't believe the Great Depression was wonderful.

So assuming I can demonstrate that mixed systems can be superior to pure free market capitalist systems, what would be the goal? I am willing to go with the classic: the greatest good for the greatest number. It should be clear that by choosing different goals you can skew the debate towards pure systems, or even within the range of mixed systems.

If you make either Socialism or Capitalism the goal, then you have self-proving economics. Some more reasonable goals might be: maximizing GDP (gross domestic product) over the long run; minimizing unemployment, crime and hunger; sustainability (environmental and human); profit maximization for business owners; stability; political consequences like democracy (or control of it by an elite); and so on. The ideal economic system would depend on the goals you choose.

I would say a knowledgeable human being would want a mixture of weighted goals, and the flexibility to change the goals themselves, if the experience of reality warrants that.

Some goals many Americans share are: minimizing bubble/bust cycles; maximizing GDP growth over time; distributing GDP adequately so that every American has a good chance of having a good economic life, or minimizing poverty. Minimizing poverty would include protection for children, seniors, and disabled persons.

Many free market ideologists would not like that list of goals, since it almost implies some elements of socialism need to be applied. Some free-marketers would argue that their system is so wonderful that it actually does maximize GDP growth without cycles of busts or creating masses of poor people and criminals.

I would argue that you can't achieve those goals without a Federal Reserve trying to keep a rein on the money supply; mandatory Social Security; mandatory unemployment insurance; and programs for children.

That said, economies are complicated, and they change. Our data-driven economy of today is as different from the factory-led U.S. economy of the late 1940s (when every other nation's factories were still in splinters from World War II bombing campaigns) was from the mainly agricultural economy of the U.S. in the first half of the 1800's.

Long ago the world learned that free markets don't work in certain situations; the ideologists want us to forget the lessons of history. Industrial monopolies (as during the 1800's after the Civil War) tend to concentrate wealth in a few hands, but stifle growth of the economy as a whole. They stifle competition, which is supposed to be the engine of free-market economies. The monopolies were created naturally through competition, but once created they had a word for competition: "Ruinous." In the process of enriching a few capitalists they drain the resources of smaller businesses and consumers, leading to economic stagnation and recessions.

But suppose that you want long-term GDP growth, and don't care if a few people starve or die young from lack of medical care. Would that not then favor a pure free enterprise system, with government relegated to military matter and punishing anyone who dared to steal a loaf of bread?

Yes, according the the free market ideologists. But they ignore history. In the U.S. we mainly had free-market capitalism until 1933. The results should be examined in detail. There was GDP progress, but it came mostly in booms and busts. By 1933 most of the centuries' earlier gains were gone, down the drain because because there was nothing in place to put breaks on the downward plunge that started in 1929.

The New Deal did not work out all that well at first, either. It was war (selling to nations already at war until Pearl Harbor, then vast levels of deficit spending on our own war machine until we emerged as the leading world superpower) that got us out of the Depression. After that, however, some of the New Deal, let's call them what they are, Socialist, programs did dampen the boom and bust cycle. There were cycles, but on the whole I would argue that having a mixed system worked better than either pure free-market capitalism or pure socialism would have.

The question should not be whether we should have a capitalist or a socialist economic system. The question should be: which elements of each, working together, create the overall strongest economy?

But for voters, judging politicians, that would demand something that has often proven beyond their ken. It requires understanding complexity. It requires something more than regurgitating campaign ads. It requires independent thinking.

The same for economists. When an American economist reveals himself (or herself) as a pure free-market exponent, know you are dealing with a priest, not a scientist.

Late Stage Imperialism, Class, and America's Future

"Like a poor beggar, raileth on the rich.
Well, whiles I am a beggar, I will rail
And there is no sin but to be rich;"
—William Shakespeare, King John, Act II

I was an infant in the late 1950's, and in the early 60's I was sure the world was about to end. I lived in Florida during the Cuban Missile Crisis. If that were not bad enough, I was still a pre-teen when I heard predictions that even if there were no nuclear war, there would be an ecological crisis that would surely destroy civilization.

Half a century later the nuclear weapons are still at the ready. The world's population has climbed, species have disappeared, and global warming has been added to the potential ingredients for catastrophe.

In the seventies I hoped for a political revolution in the U.S. with the working class coming out on top, but not led by a dictator. When I graduated from college the world was deep in recession. Jobs were hard to come by, so I took ones that no one else in their right mind wanted. I sure as hell would rather have starved as a bum than move back in with my parents. But even at minimum wage, even at part time, I could get by on my own, often living in a group house with a bunch of roommates.

For a few years it has been obvious that the U.S. economy is in trouble, and with a kind of trouble that no political party wants to admit to. The trouble is in history itself, and history cannot be changed, nor can politicians or most citizens face it honestly. The trouble is complex, but not so complex that it cannot be outlined in this essay. The solutions offered by the main political parties (and the wings within these parties) are not going to work, because they refuse to admit to the essential features of the problems facing us. I include here the Democratic Party, Republican Party, Green Party, and Libertarian Party.

Let's just suppose you want to know what is going on, even though you won't be able to do anything about it, because 300 million of your fellow American citizens are wandering around a circus of mirrors, wondering why good times are getting scarcer no matter how hard they pray to Jesus, Keynes, Ayn Rand or Rachel Carson.

Most Americans today think Brits are a cutely accented people with a very sweet Queen leading them in High Tea. But from roughly 1500 until shortly after World War II the Brits ran the largest, most brutal, most barbaric empire in global history. Which brings us to Franklin Delano Roosevelt, or FDR.

Imbued with schooling in the Latin classics, even before the American Revolution some members of our ruling class longed to be the center of a new, global empire. FDR today is beloved by Democrats and hated by Republicans for New Deal economic policies and bureaucracies that never die, but that was and is a side show. FDR's true importance was that he fulfilled the imperialist dreams of the founding fathers.

FDR was quite clever. He had learned much from his uncle, former President Teddy Roosevelt, and from the architect of modern American and global racism, President Woodrow Wilson. FDR served as Wilson's Assistant Secretary of the Navy (1913 to 1920), which traditionally was the front-line post for U.S. imperialist plotting. From uncle Teddy he learned how to prepare to take advantage of a situation, and from uncle Woodrow he learned how to wait until other imperialist powers were exhausted fighting each other before committing American troops.

Hence, Britain, Germany, and Russia bombed each other's factories pretty well before Japan finally recognized a war that already existed (American soldiers were fighting Japanese soldiers in China before Pearl Harbor) and forced FDR's hand. FDR had already been building a vast armada to invade China and Japan, but much of it was sunk at the Battle of Pearl Harbor. With ten times the industrial capacity of Japan and with Communist Russia having already stopped the German advance, it was mainly a matter of time and willingness to spill blood to capture Germany, China and Japan before the Red Army could.

Russia did pretty well during World War II, but the British Empire collapsed. So did the Dutch Empire (did you even know the Netherlands had a empire, also know for its cruelty to natives?) and the French Empire. But in all the world only one nation had not lost a single factory to bombs. It was the United States of America. Thank you FDR.

In 1946 everyone wanted American food and other aid, and so no one could afford to set protective tariff barriers against U.S. goods. U.S. factories and corporations went wild. We took over French and British colonial puppet governments by offering them higher bribes than their old oppressors could. We lost China and Eastern Europe to communism, but by 1950 the effective American Empire was larger than the British Empire had ever been.

Working class Americans benefited. Corporations could be generous to newly-recognized unions because profits were flooding in from all over the world. Still remembering the Depression, workers and business people alike worked hard to push Prosperity to greater heights. Almost everyone (except for some oppressed minority groups) could own a suburban home, a car or two, a television, telephone, stereo, lawnmower, and the usual furnishings. College education became the rule, not the exception.

The Unions attributed prosperity to their forcing the Bosses to pay higher wages; they did not want to look at imperialism. The Business guys (this was pre-feminism) attributed prosperity to the Free Markets and their own cleverness. They did not want to look at imperialism. The Democratic Party and Republican Parties did not want to look at imperialism's effects on the American economy, they just wanted credit for prosperity. Within the U.S. everyone could agree that U.S. global dominance was a kind, protective sort of dominance. Our dictators were good men who were protecting their people from the horrors of Communism. We sent aid packages to show our benevolence. Anything said to the contrary was Communist propaganda.

The only people who talked about imperialism were the American Communists. Until around 1960 they were almost all in the Communist Party U.S.A., a pro-Stalin organization, and few people listened to them. In the 1960's a bunch of smaller communist, anarchist, and socialist groups thrived for a while, but they mostly collapsed after the end of the Vietnam War, and with them any analysis of imperialism.

Meanwhile, due to improvements in medicine and agricultural science, the human population of the world mounted rapidly. It was great for business. Each newly added human was a consumer and potential worker.

New trends emerged between 1970 and 2010 that gradually changed the global balance of power. The U.S., although defeated in Vietnam, maintained much of its economic empire and military clout, but was unable and uninterested in overtly conquering the entire world even after the collapse of the U.S.S.R. and its allied regimes. But the most important trend was re-industrialization both inside and outside the Empire, and a coincidental relative de-industrialization of the U.S. It was simple: producing profits became easier outside the U.S. than within as each decade passed.

Global industrialism, including mechanization of agriculture, has led to the degradation of the environment almost everywhere, but most notably in China. With China now trying hard to clean up its own environment, and labor costs rising, the rapid expansion of the Chinese economy is already slowing down. Other nations will absorb most new factories that are built to serve the global economy.

Neither the Democratic Party nor the Republican Party is willing to tax our non-American subjects to pay for the costs of imperialism. The U.S. federal budget is now in perpetual deficit, yet domestic government services are rapidly disintegrating. Almost all union workers now are government employees. Even the agricultural sector is under constant attack by drought, roundup-ready weeds, global warming, and symptoms like honeybee colony collapse.

The problem is not just that the Democrats and Republicans are deadlocked in Congress, resulting in a do-nothing government. The problem is that even if one party had its way, its solutions would not work. None of the solutions on the table are designed to work to revive a late-stage imperialist economy. Just like nothing the British did could revive their economy as their empire collapsed between 1945 and 1960. The world went on, and eventually the British adjusted, but they were no longer the world's richest rich people with the world's best paid workers.

The first real decision to be made is whether to maintain the empire, downsize it, or abandon it. From a purely economic viewpoint, each option has its merits. Maintaining the empire would work if we admitted we run an empire and imposed substantial taxes on our foreign subjects. Downsizing would work if we could shuck the most expensive and indefensible subjects, but even with a smaller military we would still need impose taxes. If nations rebelled against the taxes, we would probably have to abandon them.

Abandoning the entire empire would likely work out best in the long run, but it also abandons the easy fix of taxing our subjects. Today we still have very significant industrial, agricultural, and educational capacity in the 50 states (I am assuming Puerto Rican independence is an economic no-brainer). As bad as our natural environment is, it is in better shape than that of many other nations. Yet in international competition we have few advantages because of the stupidity of our business class and legacy costs of imperialism (the national debt).

We would still need to either decide on a national course. How can every person capable of work be given a productive role in a post-imperialist scenario? I don't think the welfare-state model, in which more of the pie is doled out to the indolent, can lead to anything but further decline. The goal of full and productive (as opposed to make-work) employment could be achieved within a democratic and largely free-market framework if the government would show a bit of backbone when necessary. Local, State, and federal government should be free to set up businesses as needed to address needs underserved by existing businesses. After an incubation period the ownership of such businesses should be transferred to the employees of the businesses.

It is absolutely essential, however, that the U.S. reduce its population. There cannot be prosperity for all on a limited supply of natural resources when the population keeps climbing, or even at the current level. This policy would doubtless include economic guidance. I would advocate free public education only for 2 children per family, and no tax deductions beyond the 2nd child either. If only a few people have more than 2 children, enough women will have no or only one children, and the population should trend to long-term sustainable levels.

Of course, I know this won't happen. The working class of the U.S. is as infected with fantasies as the capitalist class and the middle class. The leaders of the working class, middle class, and capitalist class are clueless. They were deceived by the easy fruits of imperialism. Those fruits are disappearing. Instead of waking up and learning how to plant an orchard, Americans demand that the fruit just keep appearing on the table. And politicians give them what they demand: pipe dreams.

Tax the American Empire

[Note: much of this article first appeared as Post-Imperial Mendocino County at MendoDay.com]

The American economy, the economic crisis of 2008, and ongoing sluggish growth, cannot be understood without first admitting that we are in a post-imperialist era.

We cannot move the economy forward again without getting out of the double-bind we are in: paying for the trappings of imperialism, without its economic benefits.

The federal government's budget is still deeply in deficit mode, yet has not provided enough stimulus to get us up to even moderate growth. So we are not really out of the crisis that swept over us starting in 2008. Food stamps and long-term unemployment benefits have staved off starvation for most citizens, but hardly amount to a long-term solution.

The idea that the United States of America ever went through an imperialist period will surprise many of its citizens. Imperialism often implies an emperor, but in our case it mainly means being able to extract wealth from foreign nations through the exercise of military and economic power.

There was no clear beginning to U.S. imperialism. Grabbing native American Indian lands was a major way of extracting wealth from outsiders even before 1776. Most historians would say modern U.S. imperialism started with the Spanish-American War in which the U.S. grabbed Puerto Rico, the Philippines, and Cuba (we later sort of gave Cuba to its local elite, although the process was not really completed until Fidel Castro came to power). Or you could go back to the Mexican-American War, in which we grabbed the northern half of Mexico.

To understand how we might revive the economy and government, we should focus on U.S. imperialism after World War II. How did we get to that happy situation? From 1929 until just before World War II the United States economy was pretty sleepy . By the late 1940s and into the 1950s the U.S. economy was bustling. Why did World War II make such a difference?

The United States has had some pretty clever leaders. Even in the 1700's many of them wished for our nation to be a Great Power like the British Empire or France. Presidents like James Polk (who grabbed California), William McKinley (Spanish-American War) and Theodore Roosevelt came to symbolize U.S. global ambitions.

It was World War I, by accident or strategy, that became the template for future U.S. success. Under President Woodrow Wilson the U.S. stayed out of the war, selling all the goods our farms and factories could produce to both sides. Then, when Russia had collapsed and Italy, Germany, France and England were exhausted, the President, under pressure from U.S. bankers, found a pretext to declare war.

It was great, World War I. Not that many American soldiers died (just 117,000), but we tipped the balance for Great Britain and France. Germany was defeated. We did not grab any territory to speak of, but we became the world's bankers while leading the world in industry.

The rematch known as World War II went even better. President Franklin Roosevelt rearmed the United States while putting the British Empire even more heavily in our debt. We let the Communists defeat the Nazis and, again, came in towards the end to claim victory and its spoils. English, French, Italian, German, Japanese and Russian factories had been largely destroyed by aerial bombardment. In contrast the U.S. had built many more factories.

As the French and British empires collapsed after the war it was U.S. factories that supplied the goods for most of the world. In the U.S., in the 1950's, most Americans who wanted one could get a job that paid well. An interstate highway system was built, suburbs were built, colleges expanded and filled. The whole imperialist deal was so profitable that even though the U.S. maintained what was by far the world's most expensive military establishment, paying for it detracted little from the economy.

The Sixties were even better, with John F. Kennedy (a Democrat) engineering the biggest tax cuts for the rich in American history. Even those Americans whose race, geographical location, or just plain laziness and incompetence had prevented them from sharing in The American Dream were soon helped by President Lyndon Johnson's Great Society social programs.

The prosperity might have gone on for centuries, but America's capitalists betrayed it. Rival gangs of capitalists pursued opportunities that turned imperialism on its head. It was profitable to keep costs for consumers high in the U.S. It became more profitable to produce the goods sold in the U.S. in other sectors of the world, certain of the "third world" nations like Mexico and Korea, then later China and Brazil. Meanwhile another gang clung to the profits of the military-industrial complex, and even added profits by whipping up a Homeland Security spending bonanza.

As a result American military, homeland security, and domestic budgets had to be skimmed from a thinning layer of middle-class taxpayers. The capitalists received tax cuts, notably special treatment for dividends and capital gains, as well as no taxes on financial transactions. Factory workers, most of them, dropped back into the proletariat, losing their middle-class incomes. Low-paid service work came to make up most of the American economy.

In classic imperialism, as say run by the British Empire from about 1700 to about 1950, the economic idea is to extract wealth from the enslaved nations. The extracted wealth is brought home, and while the rich get most of it, enough is trickled down to the middle class and proletariat to keep them happy and patriotic, or at least not rebellious. It is important to keep the cost of the military used to dominate other nations low enough so there is a net, major profit for the homeland. The Brits were very good at that. They even drafted soldiers from their subject nations and used them quite effectively. The British Empire fell because England exhausted itself fighting Germany, not because the empire itself was not profitable. At the end of World War II, for practical purposes, the Brits had mortgaged their empire to American bankers. We foreclosed.

Starting in the 1990's, and accelerating this last decade, the U.S.A. has done the opposite. You can see from our Trade Deficits that wealth has been draining from the nation for two decades. At the same time we are being bled internally by the military and homeland security industries.

Look at Afghanistan. Where's the loot? We give money to the corrupt government of Afghanistan. We give them weapons. They sell the weapons to the Taliban, who then use them to shoot at U.S. troops. We get nothing out of it. Not oil, not a market for U.S. goods, not slaves or concubines or the usual imperialist loot.

There are only two solutions. One is to tax every nation in the world that we can. That is the classic imperialist solution: give unto Obama the things that are Obama's. The plan probably would not go down very well in most countries. But they would have no choice. Look what we did to Iraq, and most nations don't have the defenses Iraq did.

Taxes should be modest and imposed gradually, so as not to shock the world economy. A 1% sales or income tax on developed allies and a 0.25% to 0.5% tax on less-developed dependents would probably work for a starter. While the rate is low, by taxing some 6 billion people, quite a bit of money would flow into the United States. It would pay for our work as the world's police, and also pay for our education, welfare, bread, and circuses.

The only other solution is to Cut the Military and Homeland Securities budget. Cut it to the size needed to defend us from Mexico and Canada. Something along the size of the New York Police Force budget.
Unfortunately we are maneuvering in is a sea of continued massive stupidity by American capitalists and both the Republican Party and the Democratic Party. Don't expect those bozos to start taxing England, Korea and Pakistan, or to reduce the military budget in a meaningful way, in your lifetimes.

Expect America to continue to decline. As the empire unravels, our homeland will unravel. To keep military muscle, we will loose economic muscle. If we keep on this course, at some point, our colossus will fall.

Unfair China

Hating the Chinese has become as American as apple pie. It unites Democrats, Republicans, independents, and even more than one Green Party member I have talked too.

But, we are asked to pretend, we are not prejudiced against Chinese people. It is the Chinese (communist) government's economic policies that are driving us, the best, sweetest, and least prejudiced people on earth, we Americans, to do battle with the Chinese.

All we demand is fairness. We just want some stability. We don't want to work hard for our pay. We are not used to it. So the Yuan (or Renminbi, if you use the more modern term for Chinese money) has to float. And it has to float upward against the American dollar. It has to make American goods cheaper in China, and Chinese goods more expensive in the U.S. Like an iPod, iPad or Mac could possibly be more expensive.

A quick recap the history of relations between the United States of America and China is in order. China was the wealthiest and most civilized nation in the world in when English settlers first started grabbing land in what is now the U.S.A. in 1607. On the other hand, the Chinese ruling class were mostly complacent and uninterested in modernization. Viewing (correctly) Europeans as predator-pirates, the Chinese allowed only limited intercourse during the 17th and 18th centuries. Americans started trading with China while we were still part of the British empire, but the trading was trivial to the Chinese.

In the early 1800's the imperial nations began seeing China as a great prize to be devoured, but its government was still strong enough to repel the predators. U.S. trade with China increased, and U.S. merchants participated in the illegal opium trade. That is where the Delano side of President Franklin Delano Roosevelt got their fortune (the Forbes fortune, too.) The Chinese government clamped down on opium, which was destroying Chinese culture and its economy. Parliament, the device by which a small number of British voters bullied half the world, resulted in the launching of the Opium Wars by Britain, which China lost. Britain got Hong Kong and America and other nations got the right to "free trade" with China.

The Chinese next resisted being gobbled up by America and friends with the Boxer Rebellion. The U.S., Japan, Britain, France, Russia and Germany ganged up on China and essentially got control of the Chinese government. Eventually the Chinese people rebelled, overthrew the monarchy, and formed a Republic. But America and friends preferred a weak China, and so backed a number of warlords, most notably Chiang Kai-shek.

Starting in the 1920's Japan, which had been more successful at resisting U.S., British and Russian bullying, decided that the only way Japan and all Asia would not get gobbled up would be by Japan taking the leadership of Asia. The Chinese warlords sponsored by the Euro-American imperialists did not like that idea. The Japanese, unfortunately, resorted to force to install modern, enlightened (capitalist), pro-Japanese regimes in China. This eventually led to open, declared war between the U.S. and Japan. Chiang Kai-shek's warlords also fought Japan, as did a new Chinese government set up in north-west China by the Communist Party.

America won the war, but not before Japan had encouraged most east Asian nations to declare independence. The Philippines declared independence from the U.S., Vietnam from France, Indonesia from the Netherlands, and Burma and India from Britain.

As the Japanese withdrew from the mainland, a civil war erupted between the Communist Party and the U.S. financed warlord Chiang Kai-shek. The Chinese won the civil war, but by then the Chinese economy was totally wrecked. In a mere 100 years China had gone from still being one of the wealthiest nations in the world to being one of the poorest. Chiang, helped by America, moved China's silver and gold, as well as what was portable of its industries, to the island of Taiwan, where he set up a dictatorship protected by the U.S. navy.

It took the Chinese decades to rebuild their nation. The U.S. refused to trade and pretended Chiang still ruled China. Although Nixon made peace in the 1970's, only in the 1990's did the Chinese start to have sustantial trade with the U.S. The U.S. gave the Chinese no breaks. We treated trade as a form of economic warfare, extracting as much from the Chinese in return for whatever modern technology we were willing to export to them.

So what do the Chinese owe the U.S. What is the standard of fairness that should apply to this situation?

Here's what I think: Americans have not been being screwed by the Chinese. We have been being screwed by Americans, by our own capitalists and their political subsidiaries. They want to direct our anger at the Chinese when it should be directed at ourselves and our economic lords.

So now the exchange rate of the yuan does not float against the dollar, and we buy more from China than they buy from us. First of all, as former Secretary of State Cordell Hull used to pontificate, global free trade can't be balanced on a bilateral (2-nation basis). Goods flow in all directions. China does not have a trade surplus with every nation. Because the U.S. economy is now so consumer oriented, we suck the blood of the entire world. China is just the assembly point, where quick hard-working hands turn raw goods and parts from the global economy into crap that you buy at Walmart because you don't have the good sense to save and invest your money.

If the yuan floated, then China would have a small lower trade surplus with the U.S. They would not take in so many billions of U.S. dollars. They would not buy so many U.S. government bonds to get rid of those dollars. The interest rates on bonds would go up, and the federal government would be stuck paying a lot more interest. So the national deficit would get worse, unless government spending were cut back further. In any case, that won't be good for the U.S. economy.

The way to balance things out with China is for the U.S. to compete on a fair basis, rather than whining and asking for special treatment. We could also increase import duties, which would lower demand for Chinese goods and help the U.S. Treasury. We could teach our children math and engineering and business practices instead of English, Art, and Film Studies.

Oh, things are pretty fair already. We could compete. But our American capital has been concentrated in the hands of a very few people because we no longer have meaningful taxes on inheritances and capital gains. This wealthy elite has become very lazy. They do the easy thing, aided by a bunch of well-paid technocrats, advisors, and lawyers. They invest in China or developing nations when they could invest in the U.S.

I just don't get how we can blame the Chinese for Steve Jobs and crew's failure to invest in the U.S. We don't even have to destroy America the Beautiful to create new factories. There is plenty of empty factory space in Detroit and other American cities.

Let's renovate those empty factories, and stop blaming the Chinese for our problems. I think the success of the Chinese is a great thing for humanity. They are a very civilized people, so far. If they become the number 1 economy in the world again, it will probably make the world a better place.

Where Have All the Capitalists Gone?

Gone to socialists, every one.

In our media saturated society anyone might think we are going through a major revival of free market capitalism. It is the Tea Party and Republican Party verbal remedy for all that ails American society.

Socialism and even just ordinary good government are anathema. You would think the government owns Walmart or General Electric, or the entire S&P 500, given the way the political candidates carry on. Even government regulations, like not selling poisoned food, are decried as socialistic.

The entire business community of America, and the workers who follow their leadership, claims to be against socialism. The capitalist spirit remains unbroken and ready to rumble despite decades of New Deal stimulus, Great Society redistributions and even ObamaCare.

Then there is reality. You remember reality. It is what videos are sometimes made from. It is what you have to drive through to get to work in the morning, if you have a job.

There is a litmus test. There is a way to see whether people with money, which is too say capitalists large and capitalists small, stand by their rhetoric.

Real capitalists put capital to work in business. On a large scale this is easy to quantify: most of America's capital at work in business can be measured in the stock market. Every public stock has a value called its market capitalization, and you can add all that capital up to see what the free market capitalists are doing business with.

Phony capitalists put their capital in government bonds. There really is nothing in our society more socialistic that a Treasury bill or bond. To buy a bond is to turn ones back on capitalism and free markets. To buy a bond is to believe that the federal government's ability to tax is sounder economics than a bet on a business making profits.

In case you have not been following the stock and bond markets, let me catch you up to date.

The stock market has been largely abandoned by investors. That happened in late 2008. There are still a few brave capitalists out there, and even some individual investors, but the market has been kept afloat, to the extent that it is afloat, by stock buy backs. That is, the companies are, by and large, quite profitable, and they use much of the cash they generate to buy their own stock, allowing the socialists to get out of their investment in capitalism.

The bond market, on the other hand, is stuffed to the gills with the money accumulated by socialist investors, mainly from selling stocks. These former capitalists love the taxing power of the government, which guarantees the safety of their "investment." They are happy to lend money to a money-losing government rather than risk it on money-making public companies.

It is time for capitalists to put a stop to this hypocritical behavior.

It is time for all Republican candidates to take a new pledge:

"I pledge all of my capital is invested in the stock market or private investments, and I have no capital invested in the socialist government bond market, and never will."

In fact, all Republicans should make that pledge and take action that aligns their investments with their capitalist rhetoric.

When will they ever learn?

Disclaimer: William P. Meyers has a retirement fund that is 100% in stocks and owns no government bonds.

Where are the Jobs?

Yesterday a friend called up, highly distressed. Her last short term job had been as a census worker in 2010, and her jobless benefits ran out this May. She is about to become homeless, although that probably means she will start couch surfing, not living in the street. I know she has not been diligent looking for work. Like some of my acquaintances, she enjoys a prolonged, taxpayer-funded vacation from the stress of work. Nevertheless, she has done some looking, and if jobs were more plentiful here is California, she would probably being going to work on Monday instead of facing an eviction notice.

Multiply that by about 14 million, and you have a nation filled with capable people who are not employed. The lucky ones are getting unemployment compensation. State benefits typically last six months; the Federal government extends that to a full two years during times of high unemployment.

There is no one cause of unemployment, but there are a few key factors at play. There are two big holes in the economy right now. One is construction, with its attendant employment of realtors and of workers that produce products that normally go into building like wood, cement, glass, and metal.

The other is government, particularly state and local governments. Ever since the economy turned up from the depths of the recession, private employers have been hiring, if not as quickly as we would like. June brought another wave of layoff notices for public employees like teachers, bureaucrats, and police. The net has been very few jobs.

In 2008 the Republicans and Democrats united briefly to save Wall Street, the banking system, and the big American automobile manufacturers. That done, they fell to quarrelling. The Republicans quarrel among themselves, Tea Party people against the old school. Almost no one listens to Barack Obama, whose lack of leadership qualities were disguised by his rhetorical abilities until he actually became President.

But high unemployment is not Barack Obama's fault. It is not anybody's fault. It evolved over time, and our politics have not yet evolved to the point where we can deal with the new reality.

Let's start by putting on our thinking caps. Why not use the money that is paid out in unemployment to pay people to do real work? In the most appalling cases, public school teachers are laid off, so they can sit on their butts for two years while the few remaining teachers take on ever more students. Can you spell S-T-U-P-I-D? But the same is true in the private sector. Some people get worked to death during a depression and almost wish they had been lucky enough to be aid off.

The problem is that our economic rules and regulations, and even business culture, are "fighting the last war." That is, they were designed to fix problems that might be the same on the surface, but that have different causes than in the past. So the fixes don't work any more, at least not as well as they should. We are feeding leaded gasoline to cars designed for unleaded, then acting surprised when the engines die.

Most of the programs we now have to deal with recessions and unemployment were initiated during the Great Depression (with bipartisan support, I might add. Go look at the Congressional Record if you don't believe me). Some pre-date that, like the Federal Reserve System. The Great Depression itself had no one cause; it was the perfect storm of changes in the global economy and American culture and politics. Hoover did not have the tools in place to deal with it, and even the New Deal did not work well. If Hitler had not started World War II (causing everyone to start ordering arms and grain from the U.S.), the Depression might have lasted even longer than it did.

Some people thought that war spending was the ticket, after that experience. The problem is that while the U.S. benefited economically from the war, the economies of Great Britain, Germany, France, Italy, Russia, China and Japan were essentially destroyed. The U.S. make out best when other nations fight. Other nations make out best when they remain neutral and the U.S. fights the evil villain of the decade. The only defense spending that really helps the U.S. economy is when it is just a fig leaf for civilian spending, like the Federal Defense Highway System. Built to move tanks around the nation quickly and make road contractors rich, that defense effort is now what we call Interstate Highways.

Some people think China is to blame (two decades ago they said the same about Japan). As late as 1750 China had the world's largest economy, then it was ripped to shreds by the Great Powers (including the U.S.) and had a third world economy by 1950 when the Communists took over. I don't see how we can honestly blame China for unemployment in the U.S. In fact, if not for China buying U.S. products, we would have even more unemployment. China would buy more products if we produced them. We don't produce more products because over 10% of our workforce are loafing when they'd be willing to work if they were offered a job and their unemployment checks were cut off.

Unemployment insurance was designed to provide temporary relief to workers, allowing them to find new jobs and stay productive. During recessions it also answers as a counter-cyclical measure, keeping demand up until the business cycle gets going again. It is not a jobs program. We had no real jobs programs during the Great Recession. Some extra money was spent on infrastructure, but infrastructure work is highly mechanized and the money goes for cement and diesel fuel for bulldozers and cranes. Only a fraction is used to hire workers.

Aside from government stupidity, which is ageless and unlikely to change, the root cause of joblessness is inefficient allocation of capital, which is a function of capitalist stupidity. Let me be clear: American capitalists are rapidly becoming world class idiots, and I don't just mean Donald Trump. Not all of them are dysfunctional, there is a spectrum, but a significant proportion of our capitalist class are seriously screwing things up for all of us.

There have always been some stupid capitalists, in particular heirs to capital have a way of regressing towards not being much smarter than the average joe. Over time that sort of ordinary ineptitude sorts itself out, as their heirs of the Carnegies and Fords lose their dough to the up and coming Bill Gates and Mark Zuckerbergs.

Nevertheless, the American capitalist class as a whole has seriously ossified during the last 30 years. They want sure things; they are risk averse. Hiring people for existing businesses is a risk. Starting a new business is very risky. Sure there are people who still do that, like venture capital firms, but they are the exception.

Government could do something about joblessness, but won't. It isn't that the Republicans are standing in the way of the Democrats. Ever since George McGovern failed to get elected President the Democrats have been quite capable of standing in their own way.

The good news is that we are still at the beginning of an economic up cycle. As the economy improves, our capitalists will feel safer, and want to use their money to make more money, rather than just hoarding it. To do that, they will have to hire more store clerks, maybe even begin making housing loans again, and paying workers to repair homes so people can move back into them.

If the capitalists were really smart, they would fire their $10 million + a year corporate CEOs and hire equally competent, probably more competent men at a fraction of the cost. The fact that they can't be bothered to do that shows just how bad they have become at allocating capital.