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CPE Articles, Essays and Position Papers

PROGRESSIVE ECONOMIC PRINCIPLES: Creating a Quality Economy

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The progressive economic philosophy is designed to advance human commerce for the betterment of all, while protecting the business environment from itself and the government. Commerce is not perfect and is vulnerable to both human nature and the major flaws of capitalism. The government has to counter the flaws of capitalism, without hindering the market place, and provide a level playing field to insure competition as it facilitates the favorable elements of growth. Economies need checks and balances for successful operations just like the government. Progressive economic principles are the best way to achieve this balance between dynamic fair markets and community interests. Progressive Economic Understanding is the pathway to future financial success for all – a win-win economy! “We are all in this together.” In order to better understand the potential of Progressive Economic Principles, we first need to examine the four fundamental flaws of Capitalism. They include:

  • Inadequate Recirculation of Money
  • Failure to Create Quality Customers
  • Lack of Long-Term Planning
  • Under-diversified Monetary System

THE FOUR FLAWS OF CAPITALISM

The First Flaw: Inadequate Recirculation of Money

In a free enterprise environment, there is a continual, natural flow of capital to the powerful; the highly educated and already wealthy by various means, both legal and illegal or by shear luck. This natural concentration of wealth continually reduces both the number of businesses and ample individual consumers, eventually hurting commerce and society. All studies, computer models, research and statistics in the past and present validate this scenario.

Concentrated wealth, promoted by this flaw of capitalism, creates a system of, “The Rich get Richer” for both individuals and businesses. This natural bias to the already wealthy reduces competition and the number of adequate consumers. The antitrust laws were established to counter this monopolistic tendency in business enterprises. The fiscal system of taxing the rich and redistribution back to the many was created to solve this problem on an individual basis.

Adam Smith stated: “capitalists left to their own devices would rather collude than compete.” This means the natural goal of a commercial enterprise is to attain monopoly status, control or own all or most of their market. (The healthcare industry, medical insurance and pharmaceutical companies are prime modern day examples) This coincides well with the natural goals of many individuals to become as rich as possible. Both Republicans and Democrats have recognized this flaw. In 1890, the Republican Party passed the Sherman Antitrust Act, which was enforced by Republican President, Theodore “Teddy” Roosevelt. Years later, the Democratic Party started the Keynes fiscal policy of redistribution of income and wealth under Franklin Roosevelt.

The First Flaw: Monopoly and Oligopoly

At the beginning of the Reagan Administration the U.S. stopped enforcing most of our antitrust laws because they subscribed to the tents of laissez-faire economics. The laissez-faire-libertarians believe that the market place is perfect and self-adjusting. They have no problem with ever increasing mergers and acquisitions that create monopolies and oligopolies. Therefore, we have seen a massive consolidation of firms in many industries. Unfortunately human institutions, operations and conduct are not perfect and self-adjusting and when taken into account, contradict their economic theories.

These monopolies and oligopolies reduce competition, which produces many economic negatives. It reduces employment, innovation and the quality and free exchanges of goods and services. It increases regulation requirements, bankruptcies and inequality. Monopolies and oligopolies can and do destroy property and liberties. Adam Smith wrote that monopolies raise prices, suppress wages, distort investment, unsettle international relations, pervert the functioning of markets and are enemies of good management. He also wrote that monopolists sometimes destroy men, governments, and nations.

There are many types of monopolies and oligopolies. They are labeled as follows: Horizontal, Vertical, Home-Base, Pincer, Railroad, Trading, Privatized Public, Leapfrog, and Futures. The complete description of these monopolies and their market powers is too lengthy to be enumerated here. You should read “Cornered” by Barry C. Lynn. This is one of the best, current books on the subject. You will see in this book how vast and complicated this topic is besides its obvious effect of the current, gradual elimination of competitive markets.  Also, visit the American Antitrust Institute’s website.

There is no such thing as “free markets.” That is why I call them “competitive markets.” All real markets are political institutions in which some form of market masters regulate economic competition among different groups within a society.

Unchecked, these unregulated so-called free markets are bringing global economies down at an alarming rate. Therefore, the government needs to vastly expand its antitrust division in Justice. We need a large staff to research markets, create and enforce adequate regulations. They have to make sure they are not too aggressive in their enforcement or to weak. They have to determine when to break up companies or just regulate.

Special attention should be directed to the current financial system’s consolidation. The ability to raise and/or create money with a relationship or outright ownership of a commercial bank allows these financiers to become absentee owners. They have so much money at their disposal; they can easily buy up companies and even corner or control markets. Their objectives are usually to maximize short-term profits and/or cash to the detriment of long-term profits thereby creating economic destruction.

The First Flaw: Conclusion

This is why it is very important to have an adequate antitrust policy and enforcement. The more competition the better! Competition creates more employment, which creates more customers. It rewards efficiency, with profits and with losses, and makes it more difficult for individuals and businesses to gain monopolistic control of the marketplace. Diffusing power and distributing wealth are essential to creating a healthy business environment. If we cannot have this multi-firm free market competition, then we have to regulate the monopolies and oligopolies, including prices, to stimulate more competition.

Frankly, I think the word “redistribution” is the wrong word to describe this policy. It should be called “recirculation”. The vast majority of government spending including military is allocated domestically. It is not hoarded so that its recipients can live on its return. It is recirculated through the economy. These monies collected by taxes are spread to more individuals creating better consumers. These consumers are able to spend more in private enterprises, which create wealth for certain capitalists and to some extent for their employees. Unfortunately, this system can be thwarted to achieve the aims of the few rather than the many.

The resistance to the proven Keynesian fiscal philosophy of redistribution persists in the current conservative industrial and political leadership as they resist most types of government spending except military. By not believing in Progressive Economic Principles, they hinder the creation and improvement of effective recirculation programs. They may be politically expedient in supporting certain types of these spending programs, of which Social Security and Medicare are the largest, but by not believing in and in fact hindering effective recirculation, they put capitalistic societies in danger from economic depression-recession or outright revolution.