Is This the End of American Capitalism?
As the modern system of capitalism faces the most serious challenge of its existence since Adam Smith, the name of John Maynard Keynes (1883-1946) is being regularly invoked by economists, politicians, bankers, and the media. And with good reason. Born in Cambridge, England, in 1883, the year Karl Marx died, Keynes probably saved capitalism from itself and kept Communists at bay. Keynesian Economics advocates the use of government monetary and fiscal policy to maintain full employment with low inflation.
Keynes described Capitalism in the following words: "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."
A well-known anti-Semite, Keynes once said, "It is not agreeable to see civilization so under the ugly thumbs of its impure Jews who have all the money and the power and brains." As in the past financial crises, powerful Jews on Wall Street and in Washington are being held responsible by many as the culprits of the current economic collapse.
In response to a severe recession or possible depression, Keynes suggested: "The government should pay people to dig holes in the ground and then fill them up." He advocated massive spending by government to stimulate demand when all else fails.
Who was Keynes? Here is how UC Berkeley's Robert Reich described him a few years ago: "A Cambridge University don with a flair for making money, a graduate of England's exclusive Eton prep school, a collector of modern art, the darling of Virginia Woolf and her intellectually avant-garde Bloomsbury Group, the chairman of a life-insurance company, later a director of the Bank of England, married to a ballerina, John Maynard Keynes--tall, charming and self-confident--nonetheless transformed the dismal science into a revolutionary engine of social progress."
Keynes was clearly a very smart man. His ideas of modern Capitalism have created unprecedented wealth and lifted hundreds of millions of people out of poverty. And his ideas may still help save capitalism yet again. At least, that is the hope of the Obama administration and the backers of the massive stimulus package of about $800 billion recently passed by the US Congress. However, what Keynes couldn't have imagined are the new heights of avarice and wickedness of the modern political-industrial elite in America that has threatened the very foundations of the system that brought them wealth and power. During the last decade, the behavior of American capitalists and politicians has been unbelievably self-destructive.
Even Alan Greenspan, the icon of modern US capitalism, was forced to show contrition in October, 2008. The former Federal Reserve Chairman told a House committee that the banking and housing crisis is a "once-in-a-century credit tsunami." When asked if his ideology pushed him to make bad decisions, Greenspan said he found a "flaw" in his governing ideology that has led him to re-examine his thinking. There has, however, been no acceptance of any responsibility for the current crisis by the members of US Congress and powerful finance, banking and appropriations committees responsible for overseeing the US finance and economy.
The American economy continues to deteriorate rapidly with the devastating credit crunch and major loss of confidence by consumers, businesses and investors. At this point, tax cuts or just handing out cash to banks or big infrastructure projects or re-regulation are not likely to help hasten economic recovery. The Obama administration will need to take more drastic measures, including nationalization and recapitalization of major banks to ensure that the much needed credit to businesses and consumers starts flowing again. Ideological aversion to nationalization will only delay recovery and take a much heavier toll on ordinary Americans in terms of job losses, home foreclosures and loss of other basic necessities of life.
The problem that some of the the critics of the Obama economic team and their Congressional overseers, derived mainly from the Clinton administration and the hold-overs from Bush-era, point out is articulated well by Nassim Taleb, the author of Black Swan. “We have the same people in charge, those who did not see the crisis coming,” he said recently on CNBC.
The roots of the current crisis can be traced to the Reagan revolution. Beginning in the early 1980s, Reaganomics transformed the United States in fundamental ways. Since the world saw the fall of the Soviet Union and collapse of Communism, the Conservative Republican ideas of less government and more deregulation have continued to change the economic landscape in America and the rest of the world. This revolution has now lasted almost three decades under various US administrations including Bush 41, Clinton and Bush 43. The Reagan ideas have also been adopted and preached by international financial institutions like the World Bank and the International Monetary Fund.
The continued wave of deregulation engineered and supported by America's predominantly Jewish political-industrial elite has led to the creation and trading of what Warren Buffet describes as "financial weapons of mass destruction". Such newfangled, unregulated financial derivative products as some mortgage-backed securities, credit default swaps and other wildly speculative futures and commodities contracts have produced hundreds of billions of dollars worth of personal gains for the financial industry executives and hundreds of millions of dollars in political contributions for American politicians who are now grand-standing as saviors of the American and the world economy.
The fate of many new-comers from the emerging economies of the world is closely tied to the success or failure of capitalism in America. It appears that some of the countries such as Brazil, Russia, China and India, who embraced the conservative American ideas of "economic reform" and "deregulation", may already be too late for the party. However, the European and Asian nations with substantial population of savers and entrepreneurs will recover rapidly and thrive again, as long as they keep their banks and financial institutions on a tight leash. In particular, the world's top creditor nations such as China , Japan and Germany with high savings rates, massive trade surpluses and large central bank cash reserves are likely to come out ahead at the end of the current crisis. Others may not be so lucky. But all the follower nations that have essentially been copying the US model will have to develop their own original ideas with financial systems and economic models to move forward in uncharted waters. Clearly, any new models will require a deep understanding and introspection of what has worked and where has the American capitalism gone wrong.
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