The prevailing GOP doctrine on economic issues can be described quite simply: take money and power away from workers and the government and provide more “freedom” to business. Why? Because workers and the government are too inept to know where and how to invest their money, of course. Businessmen know how the world works. They will invest wisely; the productive capacity of the nation will soar; and everyone will prosper.
That’s the theory. Under some circumstances, there may even be some merit to it. Under today’s conditions, however, here is the result:
- The tax and regulatory “freedom” granted to business, when combined with technological change and globalization, has resulted in a hollowing out of America’s middle class, and an ongoing shortfall in demand.
- With few people except themselves in a position to buy anything, the wealthy invest in dollar store chains and government securities. They do not create new businesses with their cash mountains; instead, they squeeze rents out of the ones they already have by using their political and economic power, and they drive up the price of existing assets by competing for them.
- The public sector is starved of investment. Infrastructure suffers, even when it is essential to economic growth. The logical response to a move towards a knowledge-based economy is to put money in education, but the wealthy view all kinds of public expenditures as inherently wasteful, and refuse.
- Any attempt to bring the welfare state up to date through increased taxation of the wealthy is attacked as “socialism” and crushed by using superior contacts and resources and ratcheting up culture war issues.
But danger lies ahead for the beneficiaries of the current regime. Business interests have lost control of the GOP, largely due to its failures to help voters who don’t look like them; after all, you can’t eat culture wars. Economic nationalist ideas which threaten “freedom” are on the rise in both parties, and the legitimacy of the political system that protects property is in question.
Sometimes, you have to be wise enough to give ground in order to save what you value the most. There are some indications that elements of the business community are beginning to understand that. How far will that go, and how long will it last? Based on the events of the last forty years, it’s hard to be optimistic.