American Capitalism
The United States of America pioneered a revolutionary type of Free Market economics inspired by the teachings of Adam Smith. The idea of capitalism took on many different forms throughout US history.
Adam Smith, the Father of Capitalism, released his book “An Inquiry Into the Nature and Causes of the Wealth of Nations” in March of 1776. In July of that same year the American colonies declared their independence from Great Britain. In the Declaration of Independence, America’s founders included a long list of grievances with the King including;
failure to enact necessary laws,
enacting authoritarian laws,
mandating excessive taxation,
depriving the colonists of due process,
and cutting off trade for the colonies,
America’s founders realized that life under autocracy was no longer tolerable, so they revolted. They said;
“Governments long established should not be changed for light and transient causes…But when a long train of abuses and usurpations…reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security…”
“Governments are instituted among Men, deriving their just powers from the consent of the governed,.. whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government,..
The history of the present King of Great Britain is a history of repeated injuries and usurpations,.. of an absolute Tyranny over these States…
In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people…
these United Colonies are, and…ought to be Free and Independent States;.. they are Absolved from all Allegiance to the British Crown, and…all political connection between them and the State of Great Britain, is and ought to be totally dissolved” -Declaration of Independence
Then in 1777 the founders of America created the Articles of Confederation to design their initial minimalist structure of government. The Revolutionary War ended in 1783 and it quickly became apparent that the United Colonies were going to fail because of their weak and ineffective government. They fought the Revolutionary War against tyranny, not against government, so they chose to institute a new stronger government to secure their future. By the time the Founders created the Constitution of the United States in 1787, many of Adam Smith’s teachings had inspired them. Adam Smith described the many ways tyrannical governments interfere in the economy to makes things worse, but he also described ways in which government was necessary for the economy. Since the government of the United States was created as an alternative to the role of monarchs, the founders tried to preserve the necessary economic functions government serves while minimizing the threat of tyranny. Instead of ruling a territory through force to exploit the citizens and extract their wealth, the American government was created through the consent of the citizens to represent their interests. Those interest which government serves, as written in the Preamble of the Constitution, are,
“To form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.”
Despite being aware of the many ways in which a tyrannical government could harm the economy, and fighting a war to gain independence from a tyrannical government, they still recognized the vital function government serves. The founders granted Congress the power to regulate commerce, levy taxes, and coin money. America’s founders granted Congress those powers in the interest defense, but also of promoting the general welfare of our society and to secure the blessings of liberty to our citizens. American Democracy and Capitalism grew simultaneously after that. Within the framework of our Constitutional Republic, government developed a new relationship with the economy. Part of that relationship is explained here by Elon Musk;
"It's government's responsibility to establish the rules of the game and ensure that those rules are properly enforced sort of like the referees on the field...you've got the rules and the referees and you've got to make sure the rules are the right rules and that the referees are enforcing the rules. I think that's an important role for government."
-Elon Musk - WSJ
Aside from the most ardent libertarians out there, most people agree on that basic function for government in the economy. There is some disagreement on what the rules should be and how far they should go, but using government to establish rules is a fundamental aspect of American capitalism. Even in a market economy with absolutely no rules at all, economic participation is never truly free. But by establishing necessary rules and regulations, a government can create a mostly free market with rules to enforce fair economic conduct. Government should stay out of the parts of the economy where it isn’t needed, but it is also important for government to be in the places it does belong. That’s what Adam Smith’s Capitalism represented; making sure government is used to create necessary laws which establish a fair economic system while preventing that same government from restricting freedom unnecessarily or unjustly. But there is another vital aspect of American and Adam Smith’s Capitalism which is not so widely agreed upon. As I described in Adam Smith & the Origin of Capitalism;
Smith described an eternal and ubiquitous struggle in all societies between the economic elites versus the working-class; he called elites the Masters of Mankind who stood in opposition to laborers which he called the Workmen. The masters of mankind were a parasitic class of elites who made their wealth through exploitation rather than by providing a good or service. The Masters possessed a sick sense of entitlement to everyone else’s money and acted on it by extracting all of the wealth created by laborers.
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” -Adam Smith…
He described a natural imbalance between the negotiating power of the Masters and the Workmen in which the Masters always had the upper hand. Adam Smith pointed out that the Masters of Mankind use their influence over governments to enact corrupt rules and regulations to benefit their own interests at the expense of everyone else. He warned to always be skeptical of the legislative priorities and recommendations of the economic elites…
Even with the Constitution, the Masters of Mankind still reigned supreme in the United States and they violently put down the workmen over and over. Starting with the evil economic exploitation of slavery, the Masters of Mankind were adamant that government had no power over their right to own slaves. The Civil War was fought because Southern slave owners were defending their right to own other humans and extract 100% of the wealth their labor produced. Since the governments of the South were made up of slave-owning aristocracies, Southern states still allowed slavery and collectively fought for their States’ Right to legalize slavery. The Masters of Mankind from Southern states lost the battle over slavery in the Civil War, but that didn’t end their eternal quest to economically exploit others and steal their wealth. And Northern economic elites were barely any better. After the Civil War the Masters of Mankind employed indentured servitude alongside decades of Labor Wars where they would murder unionizing workers in massacre after massacre all throughout America.
So the response from the workmen all throughout the United States was to mount a Labor Movement to employ Adam Smith’s teaching’s;
“Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters. When the regulation…is in favor of the workmen, it is always just and equitable; but it is…otherwise when in favor of the masters.” -Adam Smith
The American Labor Movement built upon Smith’s teachings by using government to represent the interests of the working-class as opposed to the Masters of Mankind. America’s best political leaders realized that,
“It has so happened, in all ages of the world, that some have labored, and others have without labor enjoyed a large portion of the fruits. This is wrong, and should not continue. To secure to each laborer the whole product of his labor, or as nearly as possible, is a worthy object of any good government.”
–Abraham Lincoln
Lincoln’s mentality inspired a new form of Capitalism to be developed in the United States, explained in Theodore Roosevelt’s New Nationalism speech;
As Theodore Roosevelt explained, the US Labor movement symbolized the eternal struggle in human history between “those who possess more than they have earned and those who have earned more than they possess.” In the New Nationalism speech, Theodore Roosevelt called for;
An end to the political activity of corporations
Breaking up monopolies
That anyone who worked full-time should be able to provide for themselves and their family
That no one person was more entitled to special privileges than another
The right to regulate the terms and conditions of labor…directly in the interest of the common good
& The right to regulate the use of wealth in the public interest
“I stand for the square deal. But when I say that I am for the square deal, I mean not merely that I stand for fair play under the present rules of the game, but that I stand for having those rules changed so as to work for a more substantial equality of opportunity”
-Theodore Roosevelt
Lincoln and Roosevelt’s economic ideology inspired FDR’s New Deal Reforms which established a minimum wage, maximum workweek, and greatly improved working conditions. Those reforms created a floor of the economy somewhere above abject poverty and created the American Middle Class which was a revolutionary new segment of society. The Masters of Mankind hated it; they despised the Workmen keeping so much of their own wealth and losing their desperation. But the American people overwhelmingly supported Labor so the Masters of Mankind had to do something to stop it; widespread propaganda and an assassination spree. The values of the Labor Movement became viscously stigmatized by the economic elites as radical socialism. As I explained in Working-Class Capitalism;
“There was a long process of labor movements making substantial improvements to our economy first represented by Republicans from the time of Abraham Lincoln till the time of Theodore Roosevelt. It was then championed by the Democrats under FDR’s New Deal thru Truman’s Presidency till the 60s when multiple labor leaders including MLK Jr. were assassinated leaving the labor movement in disarray. After that, mainstream American politicians and media finally succeeded in rebranding greed-is-good trickle-down as the only form of capitalism while continuing the intense decades-long vilification of the working-class labor movement as radical socialism; “Socialism is a scare word they have hurled at every advance the people have made in the last 20 years… Socialism is their name for almost anything that helps all the people. When the Republican candidate inscribes the slogan ‘Down with Socialism’ on the banner of his ‘great crusade,’ that is really not what he means at all. What he really means is ‘Down with Progress” (Harry Truman, 1952).
The Masters of Mankind succeeded in rebranding the capitalist values of the American labor movement as socialism and then convinced America to abandon socialism. So today Bernie Sanders-inspired Socialists are more closely aligned with the values of Adam Smith and America’s founders than the 1% of today are. Sadly, the economic elites ushered in a new era of corrupt capitalism called Trickle-Down economics and we now inherit 50 years of their control over our economy. That has led to a massive redistribution of wealth away from the working-class back to the Masters of Mankind;
“Since the 1970s, there has been a $47 Trillion redistribution of wealth away from the working class to the 1% in America (RAND). Worker pay grew far below the national level of economic growth because income inequality increased dramatically. That means if America maintained the level of income inequality that existed in the 1970s, the bottom 95% would be collectively compensated $2.5 trillion more every single year than they are now. Instead, that extra compensation was redirected away from workers in the bottom 95% and sent to corporate executives in the top 5% and especially to shareholders in the top 1%…
“In 2018, the typical full-time worker earned about $50,000 — but if that same worker had kept up with the economy's expansion, they would have earned $92,000 annually, the Rand analysis found…” (CBS News)…
Essentially, if income inequality didn’t increase due to Reaganomics, every single worker in the bottom 95% would be significantly wealthier while the 1% would be less wealthy. Instead, workers made less so that corporate executive and shareholders could make more.”
Class warfare is happening right now, and the elites are dominating. The elites have been in the driver’s seat of the US economy for at least 50 years. Ending the era of Trickle-down economics in our policy and our culture is one of the most important challenges we face in America today. Capitalism in America should be about using government to regulate commerce and promote the general welfare all with the intent to form a more perfect union and secure economic liberty for all of our population. So ask yourself,
“What does it actually mean to be free? Are you truly free if you are unable to go to a doctor when you are sick, or face financial bankruptcy when you leave the hospital? Are you truly free if you cannot afford the prescription drugs you need to stay alive? Are you truly free when you spend half of your limited income on housing, and are forced to borrow money from a payday lender at 200 percent interest rates? Are you truly free if you are seventy years old and have to continue working because you lack a pension or enough money to retire? Are you truly free if you are unable to attend college or a trade school because your family lacks the income? Are you truly free if you are forced to work sixty or eighty hours a week because you can’t find a job that pays a living wage? Are you truly free if you are a mother or father with a newborn baby but you are forced to go back to work immediately after the birth because you lack paid family leave? Are you truly free if you are a small business owner or family farmer who is driven out of the marketplace by the monopolistic practices of big business? Are you truly free if you are a veteran who put your life on the line to defend this country, and now sleep out on the streets?”
― Bernie Sanders
The truth is, economic freedom is out of reach for millions of full-time workers in Americans. Our nation abandoned the gainful employment standard for the minimum wage which Adam Smith advocated for. Instead America has welfare wages; extremely profitable corporations like Amazon, Walmart, McDonald’s, Kroger, and Dollar General pay less than a living wage to their full-time workers. At the same time their full-time employees are using welfare to get by, those corporations pay their CEO’s multi-million dollar compensation packages and spend billions on stock buybakcs. The floor of our economy is too low and that reverberates all the way through to the upper echelons of the working-class. Unfortunately, America stopped valuing labor over the last few decades; instead our nation grossly exaggerated the importance of those with capital. The devaluation of certain forms of labor is a tool to divide the working-class. If white and blue collar workers are fighting amongst themselves by belittling the labor-value of the other, then the elites can comfortably extract the wealth from all of them. America needs to reinstate the gainful employment standard by connecting the minimum wage to the amount a full-time worker needs to afford basic housing, transportation, food, water, hygiene products, and some discretionary spending.
The eternal battle between those who possess more than they’ve earned versus those who’ve earned more than they possess looks like the battle between the working-class versus the shareholder class in modern America. Does the Walton Family deserve to be worth over $240 billion mostly from Walmart stock while their workers made less than a living wage? Did Jeff Bezos deserve to be the wealthiest man in the world for a few years when Amazon workers were relying on welfare? Does Elon Musk deserve to make 40,000 times the average Tesla employee’s compensation? Should Warren Buffet pay a lower tax rate than his secretary? To me, “no” seems to be the painfully obvious answer to these questions. Sadly, few politicians beyond Bernie Sanders agree or even talk about these issues. The ideology of Bernie Sanders is what America needs and the issues he talks about is where our focus should be;
“Today in America you got three people owning more wealth in the bottom half of the American society. You don't see that on television too much, no you don't. Three people! You got the top one percent owning more wealth on the bottom 92%.
Listen to this, this is a statistic we recently saw came from the Federal Reserve. Over the last 30 years the top one percent has seen a 21 trillion dollar increase in their wealth, the bottom half of America has seen a 900 billion dollar decline in their wealth.
So what you have in America today is a relatively small number of incredibly wealthy people…they're smart guys and they use their power over politicians they use their power over the media they spend billions of dollars on advertising on media to make sure that they make as much as they can in profit…these guys have wealth they have power and they could care less about the needs of working people in this country.”
–Bernie Sanders
Special interests continue to corrupt both political parties in different ways; Republicans pass the policy of the elites while just enough Democrats are bought off to stop good policy from passing. Lobbyists, Super PACs, and Dark Money flood our political system and immerse our political discourse in their deceptive narratives.
“Multi-billion dollar operations are incredible power over our society…and that's the dynamic of American politics right now…It makes a lot of people uncomfortable but we are taking on all of these entities and all of their wealth and all of their power and that's what a political revolution is about… And I’ll tell you what I think…the only way change takes place is when ordinary people come together and stand up and fight and say that the status quo is not working and that's what I believe and that's what we're trying to do…with the message of our campaign.”
First and foremost, America needs to end the financial corruption of our political system using Bernie’s Saving American Democracy Amendment.
We also need a cultural shift to reprioritize labor and recognize the role government plays in establishing a fair and truly free economic system. American politicians should also;
Make the minimum wage a living wage
Create a maximum CEO-to-Worker pay ratio
Limit spending on stock buybacks and dividends
Create a truly progressive tax system
Punish corporate executives when a corporation violates the law
Break up monopolies and end the misuse of patents
Create Medicare for all and allow it to negotiate all drug prices
Hold negligent corporations financially responsible and their executives criminally responsible for the harm they cause to society
Expand Social Security and fully fund it by ending the cap on taxes for those making over $160,000 a year