What Are Capitalists Thinking?

If they’re worried about what’s driving the growing appeal of socialism, they need to look in the mirror.

.. You want fewer socialists? Easy. Stop creating them.
.. The conditions under which the czars forced Russians to live gave rise to Bolshevism. The terms imposed at Versailles fueled Hitler’s ascent. The failures of Keynesianism in the 1970s smoothed the path for supply-side economics.
.. the kind of capitalism that has been practiced in this country over the last few decades has made socialism look far more appealing, especially to young people.
.. If you’re 28 like Alexandria Ocasio-Cortez, the New York congressional candidate who describes herself as a democratic socialist, what have you seen during your sentient life?
.. As that happened, you’ve seen the rich get richer, and you’ve perhaps noticed that the government’s main response to this has been to keep cutting their taxes
.. You witnessed the financial meltdown of 2008, caused by big banks betting against themselves. Capitalists might want to consider how all that looked to a young person who came from a working-class family and who probably knows someone who lost a job or even his house, while some of the bankers who helped create the mess walked away with golden parachutes, like that of Countrywide Financial’s Angelo Mozilo, which The Times valued at $88 million.
.. You’ve watched corporations hoard profits, buy back their stock and not reinvest in their workers the way they once did as they move jobs to Central America and Bangladesh. If you read a lot, you know that stock buybacks were permitted under the Securities and Exchange Commission’s Rule 10b-18, which dates to the Reagan era, and that since it’s just an S.E.C. rule, it can be changed without having to pass legislation, but no one in either of the Democratic administrations since then bothered.

.. Back in the days when our economy just grew and grew, we had a government and a capitalist class that invested in our people and their future — in the

  • Interstate highways, the
  • community colleges, the
  • scientific research, the
  • generous federal grants for transportation and regional development.

.. during all this time, socialism didn’t have much appeal. Back in the 1910s and ’20s, during an era of intense labor strife and before the existence of the welfare state, there were a couple of Socialist Party members in the House of Representative

.. But during the “Trente Glorieuses,” to use the French term — the glorious 30 years from 1945 to 1975 when everything largely worked in Western economies — socialism’s appeal in America waned.

.. So, back now to our 28-year-old. She was born in 1990. She will probably remember, in the late ’90s, her parents feeling pretty good about things — median household income did go up under Bill Clinton more than they had under any president in a long time, even more than under Ronald Reagan. But ever since, the median income picture has been much spottier, hardly increasing at all in inflation-adjusted dollars over 18 long years. And those incomes at the top have shot to the heavens.

.. if you were a person of modest or even middle-class means, how would you feel about capitalism? The kind of capitalism this country has been practicing for all these years has failed most people.

.. Yes, it’s given us lots of shiny objects to gush about. A smartphone that can display slow-motion video is a wonder. But an affordable college education, though perhaps not a wonder, is a necessity for a well-ordered society.

.. And if you’re a capitalist, you’d better try to understand it, too — and do something to address the very legitimate grievances that propelled it.


The economy is on a sugar high, and tax cuts won’t help

Consensus expectations for 2018 are only marginally greater today than they were before the election.

.. The U.S. stock market has been very strong, rising by close to 25 percent since the election, which is far more than most observers expected a year ago. This appears to be heavily driven by increases in corporate profits. But performance is running behind that of Japan and Germany, belying the idea that the market is being driven by U.S.-specific policy factors.

.. If something fundamental had happened to improve the U.S. business environment, we would have seen capital inflows and an appreciating currency.

.. Even very innovative companies such as Apple and Google cannot find enough high-return investments and so choose to engage in large-scale share repurchases.

.. There will be no meaningful and sustained growth in workers’ take-home pay without successful measures both to raise productivity growth and to achieve greater equality. Only in this way can we achieve healthy growth.

.. The bipartisan Simpson-Bowles budget commission was surely not biased toward big government. Yet it concluded that the federal government needed a revenue base equal to 21 percent of gross domestic product. The tax-cut legislation now under consideration would leave the federal government with a revenue basis of 17 percent of GDP — a difference that works out to $1 trillion a year within the budget window.
.. This will further starve already inadequate levels of public investment in infrastructure, human capital and science. It will likely mean further cuts in safety-net programs and cause more people to fall behind. And because it will also mean higher deficits and capital costs, it will likely crowd out as much private investment as it stimulates.