From AlterNet:
If the “free-market” theories of Ayn Rand and Milton Friedman were correct, the United States of the last three decades should have experienced a golden age in which the lavish rewards flowing to the titans of industry would have transformed the society into a vibrant force for beneficial progress.
After all, it has been faith in “free-market economics” as a kind of secular religion that has driven U.S. government policies – from the emergence of Ronald Reagan through the neo-liberalism of Bill Clinton into the brave new world of House Republican budget chairman Paul Ryan.
By slashing income tax rates to historically low levels – and only slightly boosting them under President Clinton before dropping them again under George W. Bush – the U.S. government essentially incentivized greed or what Ayn Rand liked to call “the virtue of selfishness.”
Further, by encouraging global “free trade” and removing regulations like the New Deal’s Glass-Steagall separation of commercial and investment banks, the government also got out of the way of “progress,” even if that “progress” has had crushing results for many middle-class Americans.
True, not all the extreme concepts of author/philosopher Ayn Rand and economist Milton Friedman have been implemented – there are still programs like Social Security and Medicare to get rid of – but their “magic of the market” should be glowing by now.
We should be able to assess whether laissez-faire capitalism is superior to the mixed public-private economy that dominated much of the 20th Century.
The old notion was that a relatively affluent middle class would contribute to the creation of profitable businesses because average people could afford to buy consumer goods, own their own homes and take an annual vacation with the kids. That “middle-class system,” however, required intervention by the government as the representative of the everyman.
Beyond building a strong infrastructure for growth – highways, airports, schools, research programs, a safe banking system, a common defense, etc. – the government imposed a progressive tax structure that helped pay for these priorities and also discouraged the accumulation of massive wealth.
After all, the threat to a healthy democracy from concentrated wealth had been known to American leaders for generations.
A century ago, it was Republican President Theodore Roosevelt who advocated for a progressive income tax and an estate tax. In the 1930s, it was Democratic President Franklin Roosevelt, who dealt with the economic and societal carnage that under-regulated financial markets inflicted on the nation during the Great Depression.
With those hard lessons learned, the federal government acted on behalf of the common citizen to limit Wall Street’s freewheeling ways and to impose high tax rates on excessive wealth.
So, during Dwight Eisenhower’s presidency of the 1950s, the marginal tax rate on the top tranche of earnings for the richest Americans was about 90 percent. When Ronald Reagan took office in 1981, the top rate was still around 70 percent.
Discouraging Greed
Greed was not simply frowned upon; it was discouraged.
Put differently, government policy was to maintain some degree of egalitarianism within the U.S. political-economic system. And to a remarkable degree, the strategy worked.
The American middle class became the envy of the world, with otherwise average folk earning enough money to support their families comfortably and enjoy some pleasures of life that historically had been reserved only for the rich.
Without doubt, there were serious flaws in the U.S. system, especially due to the legacies of racism and sexism. And it was when the federal government responded to powerful social movements that demanded those injustices be addressed in the 1960s and 1970s, that an opening was created for right-wing politicians to exploit resentments among white men, particularly in the South.
By posing as populists hostile to “government social engineering,” the Right succeeded in duping large numbers of middle-class Americans into seeing their own interests – and their “freedom” – as in line with corporate titans who also decried federal regulations, including those meant to protect average citizens, like requiring seat belts in cars and discouraging cigarette smoking.
Amid the sluggish economy of the 1970s, the door swung open wider for the transformation of American society that had been favored by the likes of Ayn Rand and Milton Friedman, putting the supermen of industry over the everyman of democracy.
Friedman tested out his “free-market” theories in the socio-economic laboratories of brutal military dictatorships in Latin America, most famously collaborating with Chile’s Gen. Augusto Pinochet who crushed political opponents with torture and assassinations.
Ayn Rand became the darling of the American Right with her books, such as Atlas Shrugged, promoting the elitist notion that brilliant individuals represented the engine of society and that government efforts to lessen social inequality or help the average citizen were unjust and unwise.
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I wonder sometimes if it would be better for the Radical Right to take over for a few years to thoroughly screw things up. In that way, their voice would be silent for another 60-70 years like it was after the Great Depression, until people forgot the damage that they actually can do.
Seriously??
You’re an economist now?!
My buddy hectorspector and I are having a good laugh at your expense right now.
I remember when Reagan was President. I seem to recall that Tip O’Neill ran Congress at the time. In fact, if my memory serves me correctly, prior to Newt Gingrich, the Democrats were in control of Congress for at least 60 years.
The whiffed jab at Paul Ryan really is a prize winner though, considering that he was appointed Budget Chairman when …. less than six months ago?! He hasn’t even completed a budget yet!
We somehow missed that 60 year era of laissez-faire federal government….. When the federal government was shrinking in size and scope….
Mercy, you are a piece of work. You really ought to stick to skate park advocacy unless you’re willing to put in the effort to read and grasp THE WEALTH OF NATIONS.
269, I’ve read Adam Smith, and interestingly, he had some balanced and nuanced views about property and its role in society, unlike the radical right of today. He absolutely believed government had a regulatory role to play, mainly b/c property beyond what one requires for one’s own personal needs is a creation of civilized society. Outside of civilized society, there is no conception of owning more than one can haul around oneself. Go read some Ben franklin.
Packrat, I’d responsd to your point if I knew what it was. Instead, I’ll offer you a little bit of Ben Franklin:
I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I traveled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.
Benjamin Franklin, On the Price of Corn and Management of the Poor, November 1766
All the property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it.
Benjamin Franklin, letter to Robert Morris, December 25, 1783
It’s a good thing that James Madison had such a large roll in drafting the Constitution.
James Madison was serving food? What a gracious host.
This is a long video but it’s worth the watch:
http://www.ted.com/talks/hans_rosling_on_global_population_growth.html
It probably goes without saying, but it’s not surprising that someone who thinks that FDR got the country out of the Great Depression would also believe that Madison had a nominal role in drafting the Constitution.
It’s not like someone thinks FDR got the country out of the Depression. It’s that most historians say he did. But how about getting back to the present? The philosophy of Ayn Rand is a failure.
I know the point of the post was not actually to critique Rand’s literary work or its application to the world around us but…
Ayn Rand’s concepts only function in a perfect universe where greed drives productivity and innovation instead of existing simply for the sake of amassing wealth. Some of Rand’s most intense negative commentary was focused on those who simply strove to amass wealth and power without necessarily engaging in the distributive portion of such activity- namely building companies that employ the middle class. Atlas Shrugged directly attacks the notions of businesses stifling competition and competitors either through market tactics or via government policy. Oppressive business practices can be as dangerous as collective socialism and in fact represent opposite sides of the same coin.
The concept of a free and open market as depicted by Rand can operate and prove highly beneficial to society only as long as it is not manipulated and tampered with by those seeking power, money and influence for their own sake. It requires honest participation. The free market and world described by Rand has not failed to live up to our standards. We fail to live up to the standards required by such extreme perfection and morality.
Of course-as noted in the post- this was all written during a period where it was almost inconceivable that China and India would become the factories of the world and that any nation, including the United States could become so specialized as a service and economic control center. The middle class has not disappeared, it simply relocated to Shanghai.