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This is a paper I wrote on American Capitalism. I’m pretty proud of it, so if it is wrong please let me know. I don’t have to turn it in for a while..

April 4, 2012

American Capitalism: Being A World Super-Power and A Democracy

 

By: Brad Nicolas

 

 

 

Abstract

Looking into American Capitalism I want to explore how American Democracy compares to Fascism and Socialism.  Giving examples throughout time and using published literature I will show some similarities and differences then establish the correct criteria to define what is American.  I choose capitalism as the bottom line for this paper because nothing is more American than capitalism, yet it is so often misunderstood by Americans to be a flawed system.  Congress is supposed to be a neutral-watchful eye but reading could make you think otherwise. My personal belief in human nature makes me believe that, while intentions may be righteous, no one is all knowing and mistakes could have been made, skewing the true and pure meaning of capitalisms free-market.  But to do that we have to know how capitalism rose to power in America. We start at the beginning in colonial life, briefly talking about mercantilism, before jumping up to the late 1800s to look into the rise of big corporations threw congressional law, covering the Great Depression and the fiscal expansion necessary to tend to the people’s needs and why socialism could be misconstrued with fiscal expansion, along with how fascism can be misconstrued with Modern Industrial Democracy in America.

Background

Capitalism is:

“1. An economic system in which all or most of the means of production, and distribution, as land, factories, communications, and transportation systems, are privately owned and operated in a relatively competitive environment through the investment of capital to produce profits: it has been the growth of large corporations, etc. that has lead to economic inequality, which has been delt with usually by increased government control “ (Websters 2003)

                This says it all but looking into history we will see that economic inequality is more American than baseball.  “A New View of American History: Second Edition” is a great book that looks into American history with a fresh perspective and academic backing.  Before America was America it was rule by and for the British crown, acting as financial leverage with Mercantilism as the political ideology— The theory and system of political economy prevailing in Europe after the decline of feudalism, based on national policies of accumulating bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade.” (Freedictionary.com) As a colony to the King of England the first settlers were mostly ‘indentured servants’ who worked on contracts to pay for the ship-ride over, only the most ambitious attempted to do the work and only the strongest and smartest survived. (Atack, 1994)

                Working on tobacco plantations or in shipyards, receiving protection from the Indians on land and the pirates on water America thrived as a British Colony.  Industries funded by the King, monopolies by today’s standards, provided enough work and resources to make America a profitable endeavor for anyone willing to take the risk.  Communities quickly grew around ship yards and power was granted to those closest to Royalty.  With the scales already tipping towards social inequality, people were as valuable as they were skilled. Trading a service for food or for other valuable currency, that is mercantilism.  With all intentions going towards the British Crown, the world’s ruling power of the day. (Atack, 1994)

Body

In the 1930s America experienced the worst economic crisis in recent history, the Great Depression.  The stock market crashes and millions are left homeless and looking for work.  A ripple-effect was felt all over the world with Americans taking the brunt of the pain, whole families were put on the street, torn apart by economic misfortune,  ‘shanty-towns’ started erecting, and the beatnik lifestyle portrayed in Jack Kerouac’s “On the Road”, appeared threw the dust storms, but why, and how did we react?

To find out why the stock market crashed, defiantly, would be impossible but there is speculations.  I begin my attempt in the 1800s.  In 1861, Treasury Secretary Chase proposes a national banking system to congress that would be chartered and regulated by the federal government to create a uniform currency. (Atack, 1994) At this time each state had individual currencies, each with different trade-value.  The proposal would create a single currency and the federal banks would be required to invest their capital in government bonds. (Atack, 1994) Two years later in February of 1863, ‘The National Banking Act’ was passed by congress.  The act gave way for federal government to start building a bank role and start to reside over the states.

The build up that arose threw litigation allowed for many great things to happen, but who was it for?  After a few impatient months a tax was placed on the state banks, then another a few more months after that to bully banks into becoming federal, to unify the states under a single currency note.  This injection of law, I think, is an undemocratic act of congress that had serious consequences.  The government’s effect on competition in the banking system inflated the stock market and gave the U.S. a unique position in world politics, changing how everyone played the game—referring to world trade and world influence.  

Over the next ten years the amount of state banks dropped from over 1500 to 274. (Atack, 1994) “The National Banking Act… tried to impose a homogeneous structure upon the banking system despite the heterogeneity of needs.” (Atack, 1994)  And in doing so the flow of money could be controlled by establishing a set amount of money each bank had to keep in the house safe—minimum reserve. 

As an undergraduate economic student I do not claim to know much about economics, but I know that knowing how much money people have is valuable information to an ambitious congress.  Controlling the liquidity of money, uniting the states, and giving the federal government what it needed to grow into a super power. The National Banking act was successful, considering it’s intentions but was it ethical and democratic, and again, who was it for?  Strictly speaking the National Banking Act wondered from the definition of capitalism.  Competition drives the capitalist’s mind and this act tarnished that aspect of the banking system.  Today the banking system and the economic stability of the U.S.A. rests on seven banks: Wells Fargo, Bank of America, JP Chase Morgan, HSBC Holdings, City Group, Goldman Sachs, and USB. (http://www.investorplace.com/2011/07/7-big-banks-going-bust-hbc-jpm-wfc-c-bac-gs-ubs-financial-sector/view-all/)

                Each state acting as a colony for federal powers at large, giving money to fund the fiscal expansion, it is hard to not compare Washington with the King of England.  The greatest period of fiscal expansion was a result of the Great Depression with FDR’s New Deal, when the people needed it most. (Atack, 1994) Maybe this could have been avoided but America wouldn’t have had the opportunity to become a world superpower without the National Banking Act of 1863 and the money and control that were made out of congress passing the act.

                Eugene White argues that this corruption of the banking system lead to the Great Depression. (Atack, 1994) Also under examination is congress passing legislation that gave way to the rise of big business. In 1886 the Supreme Court ruled that the private corporation is a natural person under the Constitution and has the same rights extended to all Americans by the Bill of Rights, included in these rights is the right to freedom of speech.  As Richard Robbins puts it…

“…Thus, corporations, as “persons,” were free to lobby legislatures, use the mass media, establish educational institutions such as many business schools founded by corporate leaders in the early twentieth century, found charitable organizations to convince the public of their lofty intent, and in general construct an image that they believed would be in their best interests. All of this in the interest of “free speech.” “Global Problems and the Culture of Capitalism, (Allyn and Bacon, 1999), p.100 (http://www.globalissues.org/article/234/the-rise-of-corporations)

                Delicately put the ‘Rise of Corporations’ is possible threw litigation, and America is mutating into a foreign state, with ‘rise of corporations’ leaning towards fascism but the rise of federal power resembles socialism. To more fully grasp this assumption we define the two theories:

  1. Fascism: “a governmental system led by a dictator having complete power, forcibly suppressing opposition and criticism, regimenting all industry, commerce, etc., and emphasizing an aggressive nationalism and often racism.” (http://dictionary.reference.com/browse/fascism)
  2. Socialism: “a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole. 2. procedure or practice in accordance with this theory. 3. (in Marxist theory) the stage following capitalism in the transition of a society to communism, characterized by the imperfect implementation of collectivist principles.” (http://dictionary.reference.com/browse/socialism?s=t)

 

Adolph Hitler, a German, is perhaps the most recognizable example of fascist ruler, with Mussolini, an Italian, trailing close behind and both were published and accredited authors on the subject of politics.  Adolph Hitler explains the rise of a new political ideology called Corporatism:

“Just as surely as a worker sins against the spirit of a real national community when, without regaurd for the common welfare and the survival of a national economy, he uses his power to rise extortionate demands, an employer breaks this community to the same extent when he conducts his business in an inhumane, exploitative way, misuses the national labor force and makes millions out of its sweat… (Hitler) concludes that workers and employers should moderate their demands.  The ‘class compromise’ he proposes is called corporatism. (Love 1992)

This excerpt demonstrates the level of nationalism Hitler ruled his Third Reich with.  In “Friendly Fascism: The New Face of Economic Powers” by Bertram Gross, “…Gross predicted America’s future as ‘friendly fascism’, that is, management by a benevolent bureaucracy.” (Love, 1994)  Hitler also says that “…capitalists’ free market and socialists’ class war undermine national prosperity.” (Love, 1994) Which makes congress’ actions seem like a push for national prosperity is more fascist than democratic, and that their actions produced a situation where socialist ideals, like health-care and welfare, had to be established to compensate; Which would agree with our definition of capitalism and could imply that Marx is correct when he said that capitalism is the precursor to socialism. The New Deal is one of the most controversial pieces of legislation ever passed because of the socialist parallels, but it was done for the people.

                Politicians have warned of the ‘trust issues’ between Washington and the people it serves for longer than I have been alive.  From Jimmy Carter’s speech in July, 1979, “A Crisis of Confidence and the American Spirit”, where he warned “…of a threat to American Democracy…”, Carter continues, “… I do not mean our political and civil liberties.  They will endure… The threat is nearly invisible in ordinary ways.  It is a crisis of confidence.” (PBS, 2012)  This eighteen minute speech continues to talk about the lack of faith in the future of America by her citizens, how less and less people are working, how the inflation rate is rising, and how “two-thirds of people don’t even vote.”  This means that political campaigns can be directed towards specific demographics that do vote, or to get people to vote.  No difference here than any other political campaign but with less people voting that leaves more and more room for influence, and when the Supreme Court ruled corporations as individuals it allowed for money to be that influence. 

The increased influence by corporations, congress lobbying, and the increasing number of people not voting lead to the common view that Washington has aspirations beyond social well-being, thus, depleting trust more, creating a cycle of less participation and more drastic change in favor of economic prosperity for select individuals that ultimately is warping American capitalism and American Democracy.   As corporations have grown their influence on people is too, adding to the cycle of madness that results in even greater social inequality, economic inequality, similarities between socialism and American democracy, similarities between fascism and American democracy, and trust in Washington; all of which have been increasing in potency with time, starting after the congress grew out of the defiling of the banking system in the 1800s, in the name of national prosperity.

Conclusion

                Economic inequality is increasing as social inequality grows due to lack of involvement in the political process, which grew out of law, but was always present in America.  Such laws were necessary for the build-up of American and to defend her against evils. However an increasing lack of trust, an increased lobbying, and certain laws passed add to the economic inequality combine, and this is why capitalism looks like fascism and socialism.  In America’s walk to the top, civilians appear to be suffering the growing pains.  As more people lose faith and stop voting and participating, those ‘individuals’ (corporations), by criteria set in 1868 by congress, have more influence on Washington.  Resembling the Nazi super-agencies, to a degree, the ‘rise of corporations’ resembles the rise of a ‘friendly fascism’ in America, where government takes part in a ‘planned economy’. 

                The Great Depression was a shock to America and left doubt in the banking system and the political realm that had been unheard of before then, also created the largest fiscal expansion in American history, which would make a novice agree that socialism has corrupted Capitalism; when in actuality democracy appears to have corrupted capitalism.  Unfortunately, as trust in Washington withers away politicians have less people to campaign towards, and by this happening the view of Washington’s motives, as not in their (common man; the 99.9%) best interest, increases with time.  Trust is important when determining if capitalism can exist in modern industrial nations.  And public involvement is the key to having a working democratic society but is dwindling in recent history.  The increased influence corporations attempt on Washington and American citizens discourages people away from the game of politics while lobbying creates a bigger demand for change in some areas, for financial gain, and the confusion and rejection only increases, silencing more people when the voting polls open, increasing social inequality (threw non-involvement), economic inequality, and fiscal expansion, too.  All of this has warped American democracy into what Hitler calls ‘corporatism’ and others call a friendly fascism.

Suggestions      

A utilization of the internet could prove to be positive for democracy if people are able to form opinions around the vast collection and easy accessibility of ‘facts’.  One discouraging thing to note would have to be a general lack of interest in politics across the board, making it counter-productive for television companies to shine a positive light on thought processes that would lead to a change in Washington, and how politics are perceived by the people most affected by the rising inflation, gas prices, or employment rate, for example.   But the censoring of internet will surely discourage public involvement and America will be turned into something different than capitalism, killing the American Dream of social mobility through the right allocation of energy and resources to accomplish financial superiority.

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