The Enemy Is Us
BROCKWAY, GEORGE P.
The Dismal Science THE ENEMY IS US BY GEORGE P BROCKWAY HARDLY A DAY goes by without your being asked by a political party or a news organization or some other public-spirited body to name the...
...MODERN CAPITALISM depends on ongoing indebtedness to support ongoing investment in ongoing production that will provide ongoing income...
...Everyone knows this, and everyone, from the President to this year's kindergarten graduate, says it every day...
...Enemy" suggests a couple of lessons from World War II...
...Given our clearly not having the money to pay for the War, we should have surrendered and undertaken the close study of German and Japanese management practices from the ground up...
...That sounds like bankruptcy if you have heard Warren B. Rudman and Paul E. Tsongas making a fuss over the present ratio of 66.8 per cent...
...Alexander Hamilton foresaw that a national debt, widely held by prominent citizens, would be a stabilizing and unifying element in the new republic, and so it has been...
...And what about your mortgage...
...What do you think has pumped up Wall Street so that bored TV anchors tell us "trading was moderate" on days when half again as many shares change hands as in the frenzy of the Crash of 1987...
...Of course, this increased the national debt left to their children...
...In the United States at present we have upwards of 17 million potential workers who are either unemployed, underemployed, discouraged, or turned off...
...we can't fix our roads and highways...
...The additional taxes paid by newly employed workers would far more than cover that...
...we have the money, all right...
...Two years later we still didn't have the money, but we started the Marshall Plan and saved Europe...
...As recently as a hundred years ago, most American corporations were chartered in New Jersey or Delaware because other states would grant charters only for limited and specific purposes...
...If you die before the mortgage is paid off, your estate will have to pay the balance and your children's inheritance will be diminished...
...To begin with, rather than burdening themselves with ongoing indebtedness, goodmercantilists followed Polonius' advice: "Neither a borrower nor a lender be...
...Let's say it will take $20,000 for each of the 17 million people in our "resource," or $340 billion...
...This is something quite new under the sun...
...It is little more than half of what I call the Banker's cola (the extra interest the Federal Reserve Board encourages lenders to charge to "protect" themselves from inflation, which is itself a principal cause of inflation...
...What we don't have is good will or strong will or, honestly, any will at all...
...If you have one, it is because you want a better place to live and to raise your children than you could otherwise afford...
...Where are you going to find $125,000 apiece to send them through college...
...Most of the money would be borrowed, just as businesses borrow the money they require...
...We also have all the urgent, if not desperate, needs we mentioned in the beginning...
...When money was gold or silver or some commodity, or was convertible to some commodity, the amount of borrowing that could be done in an economy was limited by the amount of the money-commodity...
...Second, instead of investing in ongoing enterprises, mercantilists looked for big deals where they could make a killing...
...If they did borrow, they did so for a specific purpose and paid off the loan as quickly as possible...
...The reason is simple: We don't have the money...
...Now I ask you: Would the Boomers have been better off if they had not been saddled with a victorious America, prosperous parents, and a recovered Europe...
...We could have done more (President Truman tried to get universal health care almost a half century ago, but was blocked by the American Medical Association and the Republican Party...
...It didn't have the money...
...By 1945 the national public debt reached $235.2 billion, or 111 per cent of Gross National Product...
...Third, because of its ad hoc investing, the characteristic mercantilist form of profit is the capital gain, which is realized when the investment is withdrawn and the enterprise ceases...
...we can't hire enough cops and judges or build enough jails to curb crime—because we don't have the money...
...What we don't have is the ability to learn from our experience...
...Think about the Baby Boomers...
...Do we not...
...To be sure, the two systems have run together, and certainly are not disentangled yet, but let's try to focus on their differences...
...nevertheless, what we did do was better than we have managed lately...
...Aft erall, when Germany attacked Poland we were slowly pushing our way out of the Great Depression...
...Today, when money is realized credit or debt, the amount of borrowing is limited by the amount of unused resources, especially labor, available to the economy...
...Their parents and grandparents won the War and passed the GI Bill and saved Europe with the Marshall Plan...
...we can't have a welfare system we're not ashamed of...
...In contrast, AT&T, industrial giant though it is, rolls over its massive debt as that comes due...
...They were overwhelmed...
...Like all good rhetorical questions, these have obvious answers...
...More than that, as we demobilized our Army and Navy, we enacted the GI Bill of Rights, enabling the wartime generation to be the first in history to have a college education and to buy their own homes...
...Or will we do anyone a favor by leaving children essentially uncared for while we force their mothers to work at jobs that won't pay enough to lift them out of poverty...
...You could try all day and never guess why...
...we can't keep our libraries and museums open as long as they were 60 years ago...
...The resulting problems have equally obvious solutions, if we stop long enough to consider the distinguishing marks of the capitalist system we praise so mindlessly...
...so I'll tell you...
...In contrast, the characteristic capitalist investment continues indefinitely, produces a regular flow of goods, yields regular dividends, offers regular employment, and pays regular taxes...
...It has been an enormous economic success in many ways, but the market, as economists rather coolly admit, has imperfections...
...What we lack are brains and guts...
...But everyone is wrong...
...Is that mortgage against your children's interests...
...For convenience we will call what we previously had mercantilism...
...Yet somehow, before the year was out, we won the War...
...Germany would lose because its gold reserves were too low, even though Hjal-mar Horace Greeley Schacht had been trying to conserve them by bartering instead of paying cash for the things it needed...
...Let's look at a somewhat less impersonal situation...
...we can't clear our streets of garbage...
...Pogo was right: We have met the enemy and they is us...
...If you subsequently reflect on your answers, you are likely to realize, whether sadly or cynically, that little or nothing will be done about any of the problems, even those that have a large majority worried about them...
...The merchants of Venice took shares in a particular voyage of a particular galley...
...In contrast, a modern corporation is usually at least moderately diversified and is, theoretically anyway, immortal...
...When Germany started the War, the papers were full of prophecies that despite its possible superiority in tanks and airplanes and training, it would surely lose...
...The Dismal Science THE ENEMY IS US BY GEORGE P BROCKWAY HARDLY A DAY goes by without your being asked by a political party or a news organization or some other public-spirited body to name the three or five or 10 most urgent problems facing America today...
...Are we doing them (or the nation) a favor by cutting the deficit so that those who happen to survive the measles (we don't have the money to vaccinate them all) will grow up half educated and in dangerous, squalid surroundings...
...Afterward we enjoyed a quarter century of more rapidly rising wages than we've had since, higher corporate profits after taxes than we've had since, lower inflation than we've had since, and lower unemployment than we've had since— all at once...
...Finally, think of your own children...
...What we don't have is intelligence...
...Modem capitalism has tried to do that and has failed...
...They lacked manpower...
...Our problem is to use this resource to meet those needs...
...Then as now, the Federal budget deficit was on everyone's lips...
...During World War II the Treasury and the Federal Reserve cooperated to keep the prime rate at 1.5 per cent...
...That's about an eighth of our work force and represents an enormous available resource, greater than the labor power of most nations of the world...
...If the government borrowed the entire fund at 1.5 per cent, the interest would be $5.1 billion per annum—less than one tenth of 1 per cent of the GDP...
...Everyone knows we can't have universal health care...
...Next, let's think about the Boomers' children—the present younger generation that we are worried about saddling with debts we don't have the money to pay...
...Five and a half desperate and bloody years later, collapse did come, but not because the Germans lacked gold...
...we can't have a super accelerator...
...There remains the nagging mantra: We don't have the money...
...All we had to do was to sit back and wait for it to collapse...
...We don't even have common sense and ordinary decency...
...The state, therefore, has to create the jobs—and that will take money...
...We were on the road to serfdom (at the time inflation was more a promise than a threat...
...At the end, they tried to defend their "heartland" with half-trained regiments of teenagers and retirees...
...Why must brokers and bankers weary themselves thinking up $14 trillion worth of "derivatives" (three times as much as our total national debt) for people who don't know what to do with their money, while others search out ways to speculate on growth industries in Tashkent, now that they have ruined Mexico...
...we can't clean up the pollution of our air and water...
...During the War we had a money problem too...
...Should you go into debt, along with them, or should you give the whole thing up...
...Well, $340 billion sounds like a lot of money, but it is really only 5 per cent of the current Gross Domestic Product (GDP...
...we can't improve our schools and colleges...
Vol. 78 • March 1995 • No. 3
