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Learning to suffer socialistic capitalism

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By Jim Flynn

In the midst of our serious recession, folks wonder why the yahoo days of capitalism are eventually followed by periods of economic calamity.

Capitalism was recorded way back in Genesis (Abram was very rich in livestock, silver, and gold Genesis 13:2). And there have always been good periods and bad times (Genesis 41).

Capitalists like Abram owned the private wealth necessary to produce goods and services people would buy.

Skilled and unskilled employees work for capitalists. They spend their wages buying stuff made by other capitalists. 

The patron saint of modern capitalism is Adam Smith. His book “Wealth of Nations” was published in 1776, the year of American Independence. It has been the capitalists’ economic bible ever since.

Like the other Bible, capitalists follow the parts of “Wealth of Nations” they like and ignore the rest.

Adam Smith’s premise is that capitalists will produce and sell goods and services for profit that they would never supply for charity.

Isn’t that greed? Not necessarily. Greed is an obsession with getting wealth and power beyond reason.  Adam Smith was openly critical of greed. That’s the part of Smith’s bible that capitalists don’t talk about.

Adam Smith believed correctly that if not interfered with by government, free enterprise and free trade would balance supply and demand, and produce desired goods and services at affordable prices.  You might say he was the first Libertarian.

Today government bureaucracies and business pressure groups devote thousands of hours and millions of dollars trying to influence each other. They curl up in bed together in legal but corrupt relationships. Like a bunch of kissing cousins, Congress people and their aides trolley back and forth between federal employment and lobbying jobs after every election. It’s downright incestuous.

The larger problem of capitalism in the 21st century is that all the big countries believe in it. Adam Smith’s “Wealth of Nations” is as popular in Communist China as it is in the U.S. – particularly the good parts.

China and Russia are practicing controlled but successful capitalism under oppressive political systems. India practices socialistic capitalism, of a sort. Much of Europe practices capitalistic socialism.

Like everyone else, socialist and communist nations are taking their knocks from the current economic downturn. They’re proving that capitalism works going up and coming down under all political systems.

Is the current economic decline worse than the 1981-82 and 1973-75 recessions? Yes. Each of the two prior declines lasted less than a year and a half. We’re already two years into this recession, and it’s nowhere near its end. 

Unemployment hasn’t peaked, and no one can pay down accumulated debt and overdue mortgages without income. Home values and retirement savings have little equity left to borrow against.

Until debt and delinquency are squeezed out of consumer balance sheets, they are unlikely to start another spending boom, no matter how much liquidity the banks have to offer.

On the commercial side, we hardly need more malls and car lots to sell stuff made in other countries. 

Government cannot continue to finance an economy based on houses, cars, shopping malls, and restaurants. Only industry can produce significant real wealth.  Banking produces paper promises. Government produces civil servants and monopoly money.

Until U.S. capitalists revert to making things, putting them in boxes, and selling them on the world market, our phantom recovery will be printing money and increasing our national debt until our currency collapses.

Too much of our economy has become dependent on peddling phony-baloney financial paper. The result is socialistic capitalism. Taxpayers bail out the losses; money managers have already pocketed the gains. Meanwhile, capitalists in China and India are doing what real producers do – create wealth.

Jim Flynn was formerly a corporate counsel, served in military intelligence during the Korean War and once aspired to be a newspaper columnist.