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Third World Capitalism

How did this happen? America, the czar of capitalism, is becoming a third world country!

According to the most recent U.S. Census Bureau report 46.2 million Americans are poor. Of course, the naysaying dissenters claim poor families, as defined in the U.S., include households with adequate food most of the time, a home, a TV, a telephone, and likely a DVD and/or a PC, and a car. Not so bad after all! This is likely very true; however, consider the poverty threshold, as defined by the Census Bureau, for a family with two children in 2010 at $22,113; dissenting naysayers say: So what, over three billion people live on less than $2.50 per day. So, what’s up with this claim that 46.2 million people in America are poor? Are they really poor?

A typical family of four in America spends $664.20 per month on food, assuming they eat on a low-cost plan, according to the USDA statistics; a liberal plan is $1013.80/mo. This means the family has $1,178.55/mo. remaining for everything else like health insurance of $414/mo., which is the nationwide average monthly premium. Thus, the family of four has 764.55 remaining for items like car payments, and the average car payment in America is $475, but since these are the poor, let’s assume it is half this amount for an inferior car or $237.50/mo., and average car insurance according to a national index is $137.91/mo. and median monthly housing costs run about $700 for renters. Adding and subtracting all above= a negative $310.86 per month. Thus, the average family of four has to cut out $310.86/mo. from food, health insurance, transportation, or housing costs in order to break even. No wonder so many Americans do not have health insurance because if they eliminate health insurance, they have $103.14, or $3.44 per day, left over for washing clothes, dental, movies, shopping for clothing or shoes, books, magazines, gasoline, car repairs, emergency expenses and whatever else one desires. They really are poor!

Unfettered free market capitalism does not work! It is an outmoded socio-economic order that systemically fails the middle-to-the-bottom classes. The Council of Foreign Relations published a paper, “The Evolving Structure of the American Economy and the Employment Challenge” March 2011, arguing that free-market solutions do not work. Likewise, the World Bank issued a report in 2011, stating: “… countries must develop more legitimate, accountable and capable national institutions that provide citizen security, justice, and jobs.” And the IMF weighed in within the past year in a paper entitled, “Inequality, Leverage and Crisis,” stating extreme inequality between workers and rich was a reason for the current Great Recession and suggests radical changes in tax systems and debt relief for workers. The majestic temples of capitalism get it!

Is Karl Marx’s Theory of Alienation correct? It states alienation is a systemic result of the nature of capitalism whereby workers invariably lose control of their destinies subject to bourgeoisie control of means of production designed to extract the maximum amount of surplus value from workers within the state of industrialists’ competition. This is exactly what unfettered worldwide capitalistic free markets have engineered, exporting the value of labor to the lowest worldwide bidder, a la, China and India, Mexico, and SE Asia. This, in turn, has crushed the middle class in America and opened the door for enlargement of a permanent poor class of citizens, which, in turn, sparks political debate about affordable health care and engenders, in a boldly designed defensive manner, at Republican debates, how lower taxes in America will create more jobs. Taxes haven’t been this low in fifty years and more jobs were created under LBJ, whose average annual increase in jobs of +3.9%, according to BLS, is the highest of any president since WWII, when taxes were twice as high. What are they talking about?

The unfortunate fact is quite simply this: The Theory of Alienation has merit because capitalism, once turned free to set the rules, examples: distorted taxation policy that favors capital over labor and abolition of the Glass-Steagall Act, has crushed the dreams of middle America and turned lose rampant impoverishment of a third world order across the land. Middle class families feel poorer than ever and insecure about work, and the real poor are hopelessly at a loss. Is this capitalism at work?

Sixty percent of Americans live paycheck to paycheck. The bottom 80% of American households holds 7% of liquid financial assets. Over 40 million Americans are on food stamps. Stories of a collapsing middle class are rampant among America’s most cherished publications: Atlantic Monthly, Time, Arizona Republic, LA Times, NY Times, and a Pew Charitable Trust report in the Washington Post. These articles bemoan the crumbling state of America’s middle class.

Wall Street, however, is fine because it walks in ‘tall cotton,’ the international corporations that bottom-line benefit by access to pools of substandard labor conditions and clever offshore taxation schemes. As a result, and in combination with rules and governmental favors favoring financial capitalists, the rich get much richer. This is capitalism at work in today’s society, modern-day capitalism turned free, the invisible hand of the free market, as preached by prophets like Milton Friedman… let the free hand of the markets work and the trickle down theory will perform miracles… for whom? Recent history shows that Supply Side economics is more of a ‘gush up’ theory!

Meanwhile, America increasingly looks like a Banana Republic with a permanent class of poor, a shrinking and an increasingly poor/powerless middle class versus the enriched rich, the aristocrats who deftly control who assumes which public office, like presidente, and if Mitt Romney lucks out by winning the presidency, the incipient groundswell of dissent, e.g., Occupy movement and the Wisconsin coming-out of middle America against the establishment, will experience a renaissance. The Republicans want to lower taxes again which will do nothing for the poor or the middle of America but will tip the scales more in the direction of fat cats, who are supposed to use their new-found riches to grow America. Frankly, this has not worked very well ever since Reagan managed to strangle the nation with record debts (making the U.S. the world’s largest international debtor nation during his administration) while performing reverse Robin Hood economics, taking from the poor and middle classes and giving to the rich. The Reagan agenda continues to haunt the poor and the middle with little relief for a federal government starved for revenue as federal tax receipts as a percentage GDP are the lowest since the 1950s, referred to as ‘Starving the Beast’ by Supply Side republicans.

Whether a continuation of Obama in the White House will suffice to placate the poor and middle classes, serving to blunt future outbreaks of dissent by a downwardly spiraling citizenry is questionable.  Most likely, nothing much will change other than continuation of the slow, grinding undercut of lifestyle for the poor and the middle classes in America, languidly leading down the path towards certain dissent/revolt by the masses, validating the ingeniousness of the Theory of Alienation!

Maybe the U.S. will be forced, to avoid rioting in the streets, to adopt what Denmark is famous for: The Danish Cooperative Movement, which is a means of economical organization under leadership of consumer and/or producer-controlled corporations wherein each individual member owns a part of the corporation. According to the Wall Street Journal, and the Heritage Foundation, Denmark ranks 11th among the world’s most free economies. According to U.S. Department of State data, “… its standard of living is among the highest in the world, with a GDP per capital of $58,500, making Denmark the 18th richest country in the world.” The overall tax burden in Denmark is 46%. The Economist claims Denmark is one of the most competitive economies in the world. The mixed economy, including a large welfare state, ranks as having the world’s highest level of income equality, and its living standards are above the European average. Maybe this is a viable alternative to retrograde Banana Republic status.

Robert Hunziker earned an MA in economic history at DePaul University. He lives in Los Angeles.

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Robert Hunziker lives in Los Angeles and can be reached at rlhunziker@gmail.com.

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