Sundin column: Is capitalism sowing the seeds of its own destruction
In his treatise, “The Wealth of Nations” (1776), Scottish economist Adam Smith laid the foundations of classical free-market economic theory. He postulated that rational self-interest and competition can lead to economic prosperity for all, and that pursuing our own self-interest unintentionally benefits society as a whole. But he was wary of businessmen and warned of collusion among them forming conspiracies and monopolies to increase prices as high as they could. He further warned that a business-dominated political system would further the interests of business and industry over consumers by influencing legislation. He pointed out that their interests differ from, and are often opposite those of the public, and when government gives business special privileges consumers suffer, whereas the absence of this abuse of power is beneficial to the entire society.
The post-World War II era (from 1946 until 1978) was a perfect example of a society that was equally beneficial to both business and consumers. Businesses boomed from the pent-up demand for manufactured goods, which had been curtailed for several years to supply the demand for military production. This created an employment boom and a demand for labor that gave the unions the leverage to secure a fair share of the profits of industry. The market for automobiles boomed as people replaced the clunkers they had kept running through the war years. Sixteen million returning veterans, with financial assistance from the GI-Bill, could afford to buy homes, which created a boom in housing construction. The GI-Bill also funded college and technical education for millions of veterans, fueling a boom in industry and manufacturing. Labor law and government policy kept a balance of power that allowed both workers and owners to share in the wealth, and it lasted for three decades.
But nothing lasts forever, and starting in 1978 what concerned Adam Smith and he warned us about has occurred, and has become increasingly pervasive over the past 30 years. The disparity of incomes and complicity between business and government have reached levels not seen since the “Robber-Baron” era of the late 19th Century. Today the top one percent pockets nearly a quarter of the nation’s income and has accumulated more of the nation’s personal wealth than the lower 90 percent. Since 1970 corporate executive’s pay has increased from an average of 40 times what their rank-and-file employees made to more than 500 times their pay. This is largely due to the high profitability of high-tech industries and replacement of American manufacturing jobs with automation and sending jobs to countries with lower wage scales, defeating the unions and allowing corporations to run rough-shod over the working class.
Some examples are: (1) Eli Lilly jacked up the cost of insulin from $35 to $275, then in the face of the outrage gave consumers a 50 percent “price break” to $135.50, (2) Fried chicken producers, distributors and retailers like Tyson kept 93 percent of the retail price, leaving the farmer who raises the chickens a paltry 25 cents per pound, (3) Fast-food chains have conspired to adopt a “no-hire” agreement to prevent employees from seeking a higher wage from another fast-food company.
As Adam Smith feared, the more wealth accumulates in the hands of the wealthy, the more influence they gain to get legislation favoring them, now supported by 1,200 lobbyists distributing over $3 billion to members of their (and our) Congress. The multi-billion dollar tax breaks Congress has given corporations and the wealthy, to the detriment of the rest of us, tells us how well this has paid off. They have gotten Congress to pass legislation prohibiting mass-action lawsuits against corporations for defective or dangerous products, and forced complaints to be settled by “arbitration” boards, which generally rule in favor of the corporations. Corporate interests have even been able to get the U. S. Supreme Court to unbelievably rule in their favor by declaring that corporations are “people” and money is “free speech.”
These inequalities have turned the U.S. into a class society, locking people into the social level in which they are born, killing the “American Dream” and undermining democracy.
Theodore Roosevelt, the non-conformist Republican who became President in 1901 on the assassination of President McKinley, and broke up the Trusts which had controlled Congress for two decades said it best: ”It is government’s power and moral duty to control excesses. Only government can restrain corporations.” We need another Teddy Roosevelt — not what we’re stuck with now.
“As I See It” appears on occasion in the Post Independent and at postindependent.com. Hal Sundin lives in Glenwood Springs and is a retired environmental and structural engineer. Contact him at email@example.com.
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