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Why We Need Capitalists February 20, 2014

Posted by Dr. Robert Owens in Politics, Politiocal Philosophy.
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At one time in America most people were financially independent.  I don’t mean by this that most people were wealthy.  What I mean is that they worked for themselves as opposed to working for someone else as a hired laborer.  People were farmers, or craftsmen, trappers, or frontiersmen.  Thomas Jefferson pictured America as a republic based upon the yeoman farmer.

That day has passed.  Today most people who work are employed by someone and draw a wage. As a matter of fact in America today it is not overstating the matter to say that of those who earn their own living the vast majority are exclusively wage earners.

Combine this with the reality of our modern infatuation with democracy and it is no wonder that the majority of voters continue to elect people who are pro-worker and anti-free enterprise.  This is aptly reflected in our labor laws and the radicalized National Labor Relations Board.  It is also reflected in the progressive income tax, the fact that corporate income is taxed twice, once as income to the corporation and secondly as income when the same money is distributed to shareholders.  It is further manifested in the bewildering array of regulations that spew forth from Washington strangling business in red tape.

The masses of wage earners have fallen prey to the siren songs of demagogues.  These pied pipers point to the visible difference between the rewards earned by those who risk their capital and their personal efforts to start and build an enterprise and those who earn wages to work for those enterprises.  These differences in reward are labeled as unfair.  It is either intimated or stated directly that those who start enterprises and build their bigger reward have done so by taking from those who earn a smaller reward by working for the enterprises they build.

We hear endlessly about a fair deal, a level playing field and building ladders to the middle class.  Government control is offered as a gateway to utopia where those who earn too much give to those who earn too little; from each according to their ability to each according to their need.  The Svengalis of redistribution seek to mesmerize people removed from anything except doing a proscribed task for an agreed upon amount.  They teach that free enterprise is the cause of the unfairness portrayed as America’s legacy.  Our state controlled schools drum the same message into our children until it become to them common sense.  The subservient media sing the same song in movies, on TV and in the news.

Building upon this multipronged barrage of propaganda the worship of democracy kicks in to warp our Republic.  When we combine those who succumb to the collectivist delusion among the wage earners with government workers and those who are living off the dole and we have a solid majority dedicated to restricting freedom to gain security.  A bargain our Founders warned us leads to having neither.

This is where we stand today.  The entrepreneur is looked down upon as a parasite on the economic life of the wage earners.  Entrepreneurs are portrayed in movies, on TV, and by our leaders as grasping schemers who care nothing for the environment or their fellow man, and the only reason they aren’t throwing grandma off the cliff is because someone is watching.  Try to remember the last time Outside of an Ayn Rand novel or movie that you saw capitalists portrayed as anything positive in America.  It is generally believed by the low information voters that the only way people get rich is to steal from the poor.

This is a trap; a trap that swallowed Russia and held it captive for generations, and a trap that impoverished Eastern Europe and turned China into one big internment camp.  Those who spent most of the 20th century sitting in the dirt eating leaves as a result of their campaign against free enterprise have broken their chains and are today the Tigers of East Asia and the power houses made of BRIC.

Entrepreneurs are necessary.  They are the engine that makes the wheels of innovation turn.  They are the ones willing to take a risk.  They will turn away from the guaranteed wage and the benefits all our parents taught us were necessary for a good life.  They are the ones willing to take the chance and hazard their all for something others can’t see.  They are the ones who build the organizations for others to work within. Without them economies stagnate, suffocate, and die.

If the government were to take over every business in America and ensure that every wage earner could continue to earn their daily bread does anyone think this would be the America that we have known?  Does anyone believe it would be the America that grew from thirteen impoverished war weary states on the edge of civilization into the greatest power the world has ever known?  This has been tried before and everywhere it has ever been tried it has failed.  Don’t believe the political savants who tell us this time it will work.  The ones who say they will do it differently and whose every program proves they are doing it the same.

In Russia the government actually took ownership of everything, and then ran it all into the ground.  In Italy and Germany they tried it another way.  They allowed for private ownership but with strict government control.  Here in our American version we are following the Italian and German path with crony capitalism building fortunes on political access.  Our stock market does not move in response to innovation and enterprise it moves in tandem with government policies. The Too-Big-to-Fails make the cronies at the top wealthy as they plunder the assets, buy back the stock, and enrich their friends with options.  All while making sizable campaign donations along the way to those who make it all legal.  Then when the bubbles burst they get bailed out and the tax payers foot the bill.

If we are to survive let alone thrive we have got to open the way for the innovator.  We have got to once again encourage the risk taker, quit punishing success, and stop subsidizing failure.

To give a good day’s work for a day’s wage is an honorable thing. To be a faithful and responsible employee is something we can teach our children.  However without the new energy and markets created by innovative entrepreneurs the system will eventually stop growing.  When the pie stops growing everyone ends up fighting over the size of their piece.  When the pie stops growing and the population keeps growing everyone’s piece must get smaller, except of course for those who do the dividing.

Why do we need capitalists?  So that everyone else can have a job.

Dr. Owens teaches History, Political Science, and Religion.  He is the Historian of the Future @ http://drrobertowens.com © 2014 Contact Dr. Owens drrobertowens@hotmail.com  Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens / Edited by Dr. Rosalie Owens

 

Not Worth a Continental June 15, 2012

Posted by Dr. Robert Owens in Politics.
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The Federal Reserve System (the Fed) was established in 1913 as one of the cornerstones of the Progressive agenda.  They said it was a way to stop the boom and bust cycle which has always been a fixture of capitalist economies.  The Fed is America’s third Central Bank.  The First and Second Banks of the United States were born out of Alexander Hamilton’s ideas as expressed in his famous Second Report on Public Credit in 1790.  The first bank was allowed to expire and the last was ultimately killed by Andrew Jackson in 1833.  Jackson believed the Bank had too great an influence politically and economically.

The United States grew to become the greatest industrial power on earth in the next eighty years without a central bank.

Established in 1913, the Federal Reserve is America’s central bank.  It is semi-independent/semi-public depending on which role is needed to justify its actions.  It is run by a board of seven Governors.  These Governors are nominated by the president and confirmed by the Senate.  Led by a Chairman who is also appointed by the president and confirmed by the Senate these eight people control a system of twelve Regional Federal Reserve Banks which have numerous branches throughout the United States. The Fed can expand or contract the money supply in many ways.  They print money both physically and digitally, they set interest rates, they can loosen or tighten the regulations for lending, and they can purchase debt from the Treasury.  Most of these measures are neither understood nor noticed by the general public.  This helps build and maintain the impression of a mysterious institution behind a curtain pulling levers and pressing buttons secretly controlling the economy.  In many ways this impression is correct

Ben Bernanke is the current Chairman of the Federal Reserve.  Some believe that this is the most important post in the United States because the Federal Reserve controls our economy through its control of the money supply.  Mr. Bernanke acquired the nickname Helicopter Ben from a speech he delivered in 2002 entitled, “Deflation: Making Sure “It” Doesn’t Happen Here.”

In this famous speech he said, “The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand – a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending–namely, recession, rising unemployment, and financial stress.”  This is a well stated summation of the problem of deflation.

As a defense against the ravages of deflation the future Chairman of the Federal Reserve never actually said he would drop money from a helicopter.  What he said was, “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”  Which was coupled by later analysts and pundits with the statement, “A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.”

In the popular imagination this has been shortened into the oft misquoted belief that he said he would get in a helicopter and drop bales of money to combat deflation.

The collapse of the Housing Bubble in 2008 brought the American economy to a standstill and threatened to escalate into a systemic collapse of major banks and other financial institutions.  To stop the wheels from coming off the commercial cart the politicians reacted with unusual speed and vigor.  George Bush famously said, “I’ve abandoned free market principles to save the free market system” when he advocated and passed the Troubled Asset Relief Program (TARP) which was designed to buy mortgage backed securities in an effort to inject money into the American banking system and thus restart the economy.  This 700 Billion dollar fund (later resized to 475 Billion) was eventually used instead to bailout major banks, AIG, and buy GM and Chrysler with only 22 billion ever going to buy toxic assets.

This was followed by President Obama’s stimulus bill which cost another 800 billion and was supposedly designed to kick start the economy by providing jobs.  The Congressional Budget Office eventually evaluated that these shovel-ready jobs cost 4.1 million each.  But then again as our President later joked, “Shovel-ready was not as shovel-ready as we expected.”

Spending government money to prime the economic pump cannot work.  The government doesn’t produce anything.  It must either take the money out of the economy through taxation taking from the productive for the benefit of the unproductive or print the money thus causing inflation.  All the government can do is redistribute wealth; it does not create it.  And when the government is in the business of picking winners and losers we all lose freedom, liberty, and opportunity.

Inflation is a rise in the general level of prices related to an increase in the volume of money and the resulting loss of value of currency.   The Progressives didn’t invent inflation.  The Obama Administration isn’t the first to resort to inflation to keep the ball rolling without the pain of tax increases.  America was born in inflation.  During the Revolution one of the greatest problems was how to finance the war.  America was effectively blockaded by the massive British fleet and unable to trade with the rest of the world.  So the government printed the money they needed, and printed and printed and printed until the money was effectively worthless coining instead of wealth the shameful saying, “Not worth a Continental.”  These early ancestors to our dollar were eventually redeemed at 100 to 1.

Helicopter Ben has already overseen two rounds of monetary inflation referred to by the mysterious name of Quantitative Easing (QE) which is a fancy way of saying the Fed floods the banks with money.  The staggering size of these have only now begun to come to light showing that since the 2008 collapse the Fed has flushed more than 16 trillion dollars out of the pockets of taxpayers and into the hands of banks and corporations both foreign and domestic designated by the Federal Government as too big to fail.  That is more money in four years than the entire national debt which has taken 236 years to accumulate and QE 3 is on the way.

While running for office and telegraphing his distributive goals Mr. Obama said we need to spread the wealth around. Chairman Bernanke has said the government can produce as many U.S. dollars as it wishes at no cost.  However, no matter what these two wannabe puppet masters may believe there is no free lunch.  In their insolated ivory-tower gated community world they may never have to pay the tab for their misguided attempts to create wealth with the wave of their hand.  Those of us who work for a living who live in the world of family budgets will.  The money we earn will be worth less and less and less until it is worthless.  The money we have saved will lose value day by day.  Someday people may not say, “It’s not worth a Continental.” They may instead say, “It’s not worth a dollar.”

The problem with getting older is you can remember when what we now pay at the pump was a car payment, and what we now pay for groceries was a house payment.  The central-planers behind the curtain in OZ may tell us there is no inflation, but our eyes and our wallets tell us something else: the truth.

Dr. Owens teaches History, Political Science, and Religion for Southside Virginia Community College.  He is the Historian of the Future @ http://drrobertowens.com © 2012 Robert R. Owens drrobertowens@hotmail.com  Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens

 

If I Wanted to Make America Prosperous Again April 26, 2012

Posted by Dr. Robert Owens in Politics.
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First, I would ask myself how did our ancestors build America from an agricultural colony on the edge of civilization into the number one manufacturing and commercial nation the world had ever known.

Why reinvent the wheel if round ones still roll?

The early American colonies of the British were founded based upon the economic ideas of Mercantilism.  Governmental regulation of industries, trade, and commerce characterized Mercantilism as every aspect of the economy was utilized for national policy. This was especially true with foreign trade, which was determined more by national aims rather than individual or local interests.

The definition of wealth began to change in the sixteenth century.  During the Middle Ages, wealth was defined by the amount of productive land a nation possessed.  As transportation, especially by sea, improved so did the ability to conduct foreign trade bringing with it an increase in the amount of cash generated by that trade.  The definition of wealth came to be the amount of cash a nation possessed.  Therefore every nation sought to have a favorable balance of trade.  They also sought to develop monopolistic type environments wherein they provided their own raw materials thus avoiding imports which meant money flowing out and fostering the export of finished goods raising the level of money flowing in.  Defining wealth as the accumulation of cash, the nations of Europe desired to conduct foreign trade on a larger scale, and they began looking for foreign sources of gold, silver, and raw materials.

This brings us to the British effort to develop North America as a source of wealth.

The Chesapeake colonies of Virginia and Maryland were the first successful British colonies in what was to become the United States of America.  Though the initial colonists came looking for gold they soon learned that prosperity came not from a shovel but instead from a plow.  It was tobacco that primed the pump and lifted the colonies from a burden to a benefit for the mother country.  After years of mounting expenses for the British and years of starvation for the colonists the cultivation of tobacco brought prosperity.  Virginia’s production of tobacco grew from 200,000 pounds in 1624 to 3,000,000 pounds in 1638 overtaking the West Indies as the number one supplier of tobacco for all of Europe thus boosting Britain’s balance of trade.

The cultivation of tobacco fostered a plantation system based upon indentured and slave labor.  A gentrified class of great planters sought to replicate the social structure of Britain with a small number of very rich ruling a large number of small land holders who prospered to a certain extent but never enough to challenge the status quo.  The wretched poor of Britain who had come to the Chesapeake colonies to find a better life did find more opportunity and the ability to advance from the landless poor to the ranks of yeoman farmer.  However, there was little opportunity to enter the ranks for the gentry which became a type of American nobility.

New England, because of the soil, the climate, and the fact that there was no major cash crop that grew well in the area, did not lend itself to large plantations.  Most farmers were operating at a subsistence level.  If they did generate a surplus it was in crops that were not easily transported across the ocean, and they were also crops that could be grown in England and were not needed as imports.

This climatic and environmental adversity did not condemn New England to being a poor relation to the Chesapeake nobility.  Instead the New English diversified, innovated, and used individual enterprise to not only match but to surpass Chesapeake and every other colony in the British Empire.  Those who settled New England were Puritans who sought to purify the Anglican religion of ceremony and return it to what they saw as the simplicity of early Christianity.  They did not believe that good works brought salvation but they did believe that salvation brought good works.  Therefore they sought to occupy their time with productive activity to glorify God through their labors.  This was a manifestation of what the sociologist Max Weber later called , “The Protestant work ethic.”  Whatever you choose to call it, it was this drive to succeed no matter what the adversity that led the New English to look beyond the soil, beyond the climate and to the opportunity.

First they exploited the fisheries of the Northeast.  In 1641 the New English caught 600,000 pounds of fish much of which was exported to Britain.  By 1645 they were catching more than 6,000,000 pounds per year employing more than a thousand men on 440 ships.  They came to dominate the fish trade shipping not only to Britain and its empire but also to Spain, Portugal, the Azores, Madeira, and the Canary Islands.

By the end of the 1600s the merchants of the New English coast began to circle the globe trading the fish, surplus crops, and lumber of their area to all parts of the British Empire.  They became such shrewd traders that soon American ships were carrying trade from one colony to another even when the cargo didn’t originate in New England.  This secondary carrying trade generated a growing profit that in turn rebounded in a number of ways.  The increased profits brought home financed increased industry and growth at home, and it also spawned a shipbuilding industry which exploited the vast resources of the northern forests.

Between 1674 and 1714 the New English built more than 1200 ships, totaling more than 75,000 tons.  By 1700 there were fifteen shipyards in Boston which produced more ships than all the rest of the British colonies combined.  Only London had more shipyards.  This was a significant engine of economic growth.  To build one 150 ton merchant ship required as many as 200 workers, mostly skilled craftsmen.  The shipyards also supported the growth of numerous enterprises to supply their needs such as saw mills, smithies, barrel makers, sail makers, iron foundries, and rope makers. In addition, the farmers of New England benefited by feeding the craftsmen, supplying the ships, and providing the timber.

By 1700 Boston was the third city of the Empire behind only London and Bristol and the New English shippers were earning freight charges for carrying produce and material that was neither produced, shipped to, or shipped from their home colony.  The enrichment of the area spread prosperity far beyond the sphere of shippers, sailors, and their sundry suppliers.  According to Boston’s shipping register for 1697-1714 over 25% of the adult males in Boston owned shares in at least one ship.

All of these linkages produced an economy filled with diversification and development as opposed to the stratified monoculture of the Chesapeake colonies.

These trends continued as time went on leading to the industrial North eventually overwhelming the agricultural South.  The expansion and growth of America was based upon a foundation of hard work and innovation born of adversity.  Finding themselves in a hard place Americans found a way to prosper and grow like a young plant reaching for the sun.  Freed from the rigid restraints of the home country and then guaranteed freedom by the constitution and the limited government it provided America surged to the front ranks of nations.

Today, America labors under self-imposed adversity.  We are in the grip of an oppressive Progressive Movement that after 100 years of incremental advance is poised to transform America from what she has always been into what they want her to be.  America has traditionally been a constitutionally limited Republic operating on democratic principles providing individual liberty and economic opportunity.  The Progressives envision America as a centrally-planned highly regimented social democracy where the wealth is spread around from each according to their abilities to each according to their needs .

If I wanted to make America prosperous again I would take off the self-imposed shackles of a central government on steroids, stop imposing new regulations, and reduce taxes everywhere on everyone.  Then I would stand back and watch our economy takes off like a rocket and we take our place beside our ancestors as free people with economic liberty and a will to succeed.

Dr. Owens teaches History, Political Science, and Religion for Southside Virginia Community College.  He is the Historian of the Future and the author of the History of the Future @ http://drrobertowens.com © 2012 Robert R. Owens drrobertowens@hotmail.com  Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens

 

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