Saturday, 10 September 2011


The mega economic/financial crisis  of the early 21st century is that the debt economy is collapsing, largely because the public sector has failed to absorb surplus capital from the private sector owing to welfare capitalism, which has been replacing social welfare, combined with large defense/intelligence outlays. This is especially the case for the world's largest economy, given that the US spends more on defense and intelligence than the rest of the world combined and has nothing to show for it except a public debt that is threatening the social fabric and political system. The solution to the economic/financial crisis is political, but if politicians are so dependent on finance capitalism and the defense/intelligence establishment can they be free to take bold policy measures in order to restore confidence?

The average American believes that the government taxes too much, without giving a second thought on how capital is absorbed from the private sector (who pays taxes and how much), and how it is spent. US taxes as percent of GDP is 28, while the OECD average stands at 35, with Sweden Denmark, Belgium, France and Norway leading the pack in the forties. Mexico and Turkey have lower taxes as percent of GDP, but both of those countries have a higher percentage of 'informal economy', which includes narcotics and other illegal activities, than the US. The US has a lot of room to move closer to the OECD tax rates as a means of reducing the deficit, but who pays is the issue, not how much government takes in.

That the US always seeks to stimulate growth via the private sector as a conduit entails that it remains committed to welfare capitalism even now after evidence shows welfare capitalism is the root cause of the problem, to say nothing of the major scandals involving banks and financial institutions that the Department of Justice has named in law suits.

When US corporations have taken out of the country more than $2 trillion and refuse to reinvest it in the national economy unless they receive special tax breaks, and the government (Republicans more and Democrats less) is refusing to use its considerable power to raise taxes as percent of GDP to OECD levels, that is an indication that the crisis of state-protected capitalism will continue to undermine the economic system.

The only other way for government to keep expenses in check is to force lower living standards on the middle class and workers, and that is exactly what the US is doing, and many countries around the world are following the American example. As long as the fiscal structure is rigged to favor the wealthy, as long as taxes as percent of GDP in the US remains far below OECD levels, and as long as the state is used as a conduit to strengthen private capital at the expense of society, the road to decline will continue and that means that China will overtake the US much faster than anyone anticipates.

However, the US will have a very strong capitalist sector with a small percentage of very wealthy people, and a weaker middle class that has been the backbone of the political system in the last two hundred years. How long can a society headed for downward social mobility maintain its political system that is already showing obvious signs of authoritarianism justified in the name of internal and external security?

1 comment:

Anonymous said...

Not addressing the real problem was a conscious decision in regard to the finances of the American people, by the establishment.

This resulted in massive unemployment, the housing bubble, and jobs being sent overseas; the objective was to create a more centralized economic environment.
The fundemental reengineering of how resources are governed has and is occurring.

Sovereign governments--not just the United States--have submitted to Central Banking Warfare.

Now, although not common, the United States along with allies have perpetrated global taxation systems that no legislature can categorically regulate.

Educated citizens of America loudly voiced their fact-findings about China's inability to pay their regional taxes in a global economy when addressed at the WTO--before they were given membership. This led those same voices to quantifiably provide the answer. And by doing so, the answer encompassed results found using a qualitative analysis.

These were not the warnings of Joan of Arc in the late 1990's, although to explain the sqauwkings of the messenger at that time it seemed to provide a rational conclusion. To intellectualize it now and exploit the language of academia to sound off is just not right. You should beg forgiveness Dr. D. but since your loved, Forgiven.