Ron Paul

Lately, many have characterized this administration as socialist, or having strong socialist leanings. I differ with this characterization. This is not to say Mr. Obama believes in free markets by any means. On the contrary, he has done and said much that demonstrates his fundamental misunderstanding of and hostility toward the truly free market. But a closer, honest examination of his policies and actions in office reveals that, much like the previous administration, he is very much a corporatist. This in many ways can be more insidious and worse than being an outright socialist.

Socialism is a system where the government directly owns and manages businesses. Corporatism is a system where businesses are nominally in private hands, but are in fact controlled by the government. In a corporatist state, government officials often act in collusion with their favored business interests to design policies that give those interests a monopoly position, to the detriment of both competitors and consumers.

Government is the problem; it cannot be the solution.

A careful examination of the policies pursued by the Obama administration and his allies in Congress shows that their agenda is corporatist. For example, the health care bill does not establish a Canadian-style government-run single-payer health care system. Instead, it relies on mandates forcing every American to purchase private health insurance or pay a fine. It also includes subsidies for low-income Americans and government-run health care “exchanges.”

Contrary to the claims of the proponents of the health care bill, large insurance and pharmaceutical companies were enthusiastic supporters of many provisions of this legislation because they knew in the end their bottom lines would be enriched by Obamacare.

To call the president a corporatist is not to soft-pedal criticism of his administration. It is merely a more accurate description of the president’s agenda.

When he is a called a socialist, the president and his defenders can easily deflect that charge by pointing out that the historical meaning of socialism is government ownership of industry; under the president’s policies, industry remains in nominally private hands. Using the more accurate term — corporatism — forces the president to defend his policies that increase government control of private industries and expand de facto subsidies to big businesses. This also promotes the understanding that though the current system may not be pure socialism, neither is it free market since government controls the private sector through taxes, regulations and subsidies, and has done so for decades.

Using precise terms can prevent future statists from successfully blaming the inevitable failure of their programs on the remnants of the free market that are still allowed to exist. We must not allow the disastrous results of corporatism to be ascribed incorrectly to free market capitalism or used as a justification for more government expansion. Most importantly, we must learn what freedom really is and educate others on how infringements on our economic liberties caused our economic woes in the first place.

Government is the problem; it cannot be the solution.

The fundamental problem with health care costs in America is that the doctor-patient relationship has been profoundly altered by third-party interference. Third parties, either government agencies themselves or nominally private insurance companies virtually forced upon us by government policies, have not only destroyed doctor-patient confidentiality. They also inescapably drive up costs because basic market disciplines — supply and demand, price sensitivity and profit signals — are destroyed.

Obamacare, via its insurance mandate, is more of the same misdiagnosis.

Gabriel Vidal, chief operating officer of a U.S. hospital system, sees this problem squarely in his daily work. As he explains, Obamacare will only make matters worse because it fails to recognize that “costs are out of control because they do not reflect prices created by the voluntary exchange between patients and providers… like every well-functioning industry.”

Instead, “health costs reflect the distortions that government regulators have introduced through reimbursement mechanisms created by command-and-control bureaucracies at federal and state levels,” he continues. “But it is theoretically and practically impossible for a bureaucrat — no matter how accurate the cost data, how well-intentioned and how sophisticated his computer program — to come up with the correct and just price. The (doctor-patient) relationship… has been corrupted by the intrusion of government and its intermediaries (HMOs, for example) to such an extent that we can no longer speak of a relationship that can produce meaningful pricing information.”

Absent such pricing information, our system increasingly resembles socialist systems with centralized price setting, shortages, rationing, apathy and declining quality of care. As the situation deteriorates, fewer bright young people want to practice medicine and fewer foreign doctors seek to immigrate.

The problem is acute and worsening. Obamacare’s third-party insurance mandate is only the first step toward what the political left really wants: a single-payer government health care system.

Meanwhile, conservatives seem resigned to a third-party insurance system and therefore fail to present a viable alternative to the American people. They continue to speak in terms of saving the health care “system,” when in fact what America needs is a rejection of all government systems in favor of free market mechanisms.

In a free market, most Americans would pay cash for basic services and maintain inexpensive high-deductible insurance for catastrophic injury or illnesses only. Health insurance would be decoupled from employment, which would unleash entrepreneurs who now fear quitting their jobs and losing their health insurance. Costs would plummet due to real competition among doctors, price sensitivity among patients and elimination of enormous paperwork costs. Doctors would be happier, spending their time treating patients, rather than managing their practices.

We need a system in America where patients pay cash for basic services, and carry insurance only for serious illnesses and accidents.

Congress needs to let markets work by aggressively repealing health care laws, including: the HMO Act of 1973, the Medicare Part D prescription drug benefit passed in 2003 and the Obamacare bill passed in 2010. Furthermore, we must begin scaling back Medicare coverage altogether for younger generations so they will not rely on a system that cannot remain solvent in future decades. Only by taking these steps now can we begin to undo the harm done by government to the once noble field of medicine.

Instead of mandating the same failed entitlement health care schemes that are bankrupting Europe, Congress should fundamentally re-examine the case for free market health care. Our current model, based on employer-provided health insurance, did not arise based on market preferences. On the contrary, it makes no sense to couple health insurance with employment. But federal wage and price controls instituted during World War II left employers with no alternative to attract workers in a tight labor market other than offering extra benefits such as health insurance and pensions. Over time, these nonwage benefits became the norm, especially since employers could deduct the cost of health insurance premiums from their income taxes, while individuals could not. The perverse consequence is that employees lose both their paychecks and their health insurance when they lose their job.

As reliance on third-party health insurance grew, patients became detached from the true costs of their doctor visits. In the 1970s, the Nixon administration, along with the late Sen. Edward Kennedy, championed the cause of health maintenance organizations (HMOs). Congress accepted the faulty premise that HMOs would reduce costs through centralized management of patients, when, in fact, the opposite was true: More bureaucracy would only lead to higher costs, less accountability and worse patient care.

In recent years, Congress has only intensified the problem with more laws and more regulations, especially with the disastrous Medicare prescription drug benefit. The drug benefit was another example of naked patronage to a politically connected industry, and it exponentially worsened the federal government’s balance sheet. Obamacare will be the last nail in the coffin of our bankrupt entitlement system.

More laws are not the answer. Instead, we need to allow a market system to operate that reflects consumer choices while rationally pricing services. In a market system, patients likely would pay cash for basic services while maintaining relatively high-deductible catastrophic insurance for serious illnesses and accidents. The cost of most routine medical care would drop if the patient paid the bill on the spot, especially if doctors no longer needed to employ large staffs solely to deal with insurance and billing.

Let me repeat: We need a system in America where patients pay cash for basic services, and carry insurance only for serious illnesses and accidents. “Health maintenance” is the responsibility of each of us individually. We cannot continue to collectivize the costs of health care and expect things to get better.

Authoritarianism is bad for your health. Congress should end the Obamacare mandate and allow market-based medicine to flourish.


Ron Paul
for The Daily Reckoning

[This essay is a compilation of Dr. Paul’s thoughts on the Affordable Care Act during his time in Congress.]

Ed. Note: This essay was featured prominently in The Daily Reckoning email edition — a free e-letter that seeks to provide a unique view of global economics and investment news. It currently goes out to over 300,000 subscribers each day around 4 p.m. And that number is growing. Find out for yourself what everyone’s talking about. Sign up for free, right here.

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Ron Paul

Dr. Ron Paul is a former Republican member of Congress from Texas and perhaps the only voice in Washington still advocating "limited" government in the Jeffersonian tradition. He has delivered several stunning addresses before Congress, including: "Sorry, Mr. Franklin, We Are All Democrats Now" and "We've Been Neo-Conned." Ron Paul is also the author of The Revolution: A Manifesto, End The Fed, Liberty Defined, and The School Revolution: A New Answer for Our Broken Education System.

  • Dr. Kim Henry

    Hallelujah that at least one politician can think clearly about health care. Of course, he has to be a physician.

    My fees could be AT LEAST 10% less if I did not have to deal with insurance issues. Running every expense through a third party administrator not only is stupid and inefficient, but multiplies the chance of fraud astronomically.

  • Dave FL

    Sigh.. Ron shows his age, losing touch with reality. He conveniently blames this ACA on Obama, when it was in fact the only bill the rethugs would allow to pass. Then Ron wants you to pay the $130+ per office visit to get a Rx for a statin, knowing that because of government regulations you do not have the right to just go buy a statin, BP or pain med yourself. Heck, even In Mexico you can go buy prednisone and antibiotics over the counter.
    Tell you what Ronny, you put ALL meds “over the counter”, so we don’t need the office visits to snakes like you and we WILL have “FREE MARKETS” not the government mandated participation in your new world of minimal health care. And while you’re at it, how about eliminating the quotas on applicants to med schools? Too “FREE” for you, Ronny? Haven’t head one word about you increasing the competition. And Ronny, why haven’t you proposed allowing med imports from the world where they are so much cheaper?

    Best yet, how about just letting us all create our own accrediting agency that can self appoint ourselves as doctors, just like your looney demon seed did?

    You, Ron, continue to show yourself as a typical lying Libertarian who, when he says we don’t need government regulations REALLY means we don’t need government regulations to apply to himself, just to everyone else.

  • stephenjacobs

    Progressives in America are to see to it that the nation is to receive now:

    Obamacare or maybe even better, some complete Medicare for everyone of every age group in America, no exceptions and no questions asked.

    And for this vital improvement in healthcare, we on the left of the political spectrum may be willing to now work with conservatives for such reforms which they might be working for such as a dollar backed by gold and silver.

    Another reform on the left which we want is bilingualism, Spanish and English, especially in the Southwest.

    Another reform that we want on the left is more open and welcoming borders to workers and settlers from Canada and Mexico, so that America joins the rest of the continent and the world.

    Stephen Jacobs,
    Watsonville, California

  • Dr. Kim Henry

    Whoa, what a comedian you are!

    Goal of having Medicare for everyone! And that system is rapidly going bankrupt! Not many physicians want new Medicare patients, as the fees are so low they lose money treating them! Not to mention the claim hassles, worse than private medical insurance. And you want it for everyone! Ha-ha!

    As for “more open borders,” I can only repeat the words of the great economist Milton Friedman from many years ago. “You can have open borders, or you can have a welfare state, but you cannot have them both.”

    Thanks for your post. It demonstrates what ridiculous delusions collectivists operate under! No wonder we call California the cereal state- it is filled with fruits and nuts!

  • Dr. Kim Henry

    Yeah right. A collectivist dufus like you knows all about health care, and a physician who has practiced all his life knows nothing. Thanks for enlightening us.

    * I don’t know what “quotas” you are talking about for medical school. Education is very expensive, and not everyone can make the cut, so class sizes cannot be infinity. Maybe you think every Richter-scale IQ welfare recipient who wants to go should be admitted to Med school. But if you think the problem is not enough physicians, consider that a lot of graduates cannot find jobs that will support them once graduated.

    * After thinking about it, its probably a good idea to make dangerous drugs over-the-counter like you suggest. Then know-it-all liberals who think they could prescribe for themselves by merely reading up on the internet, would probably cripple or kill themselves by self-medication.

    * Don’t know where you live, but I pay $75 for office visits because I don’t burden the physician by a stack of stupid insurance claims submissions. 3rd party claims administrations raises costs astronomically, and collectivists like yourself want more of it!

    Hey, you are mad about government regulations that don’t apply to the regulators? What do you think about Congress exempting itself from the ACA? Aren’t you proud of your God Obama?

  • Kait

    Amen. Who is supposed to PAY for all this FREE healthcare? Oh, yeah, those of us still employed. The left can talk talk talk about making things better, but they are not based in reality with logic and real numbers.

    As for this guy’s request that we are bi-lingual in the SW, oh, hey, we already are. I cannot call ONE number to any larger business or agency without having to listen to the entire message in english and spanish before being cued to dial ONE for english. Annoying.

    I completely agree with Ron Paul’s assessment. My husband lost his job and I bought high deductible insurance. Not a bad cost, covered a few things, helped with a few others. I’d rather pay cash, and at times I did anyway, but overall was pleased with the value. I just got a letter that stated that my current policy was no longer going to be valid for Obamacare starting 1/14 and I had to buy a more expensive policy. But, I might be able to qualify for a government subsidy.

    Who is benefiting from this again?

  • frankania

    Right on, Dr Paul. Here in Mexico, we have free enterprise medicine, and you can see a real private (not govt!) doctor for as little as $2. If you don’t like his diagnosis, go to a different one for another $2. Medicine is also non-prescription and very cheap. So cheap that some of our USA friends buy medicines here for LESS than their “co-pay” and take them back to the USA.

  • Dr. Kim Henry

    Guess I am angry that so many Americans are complete economic illiterates, but think they are experts on everything.

    While fewer and fewer docs treat Medicaid and Medicare, as it is impossible to make money on them without billing fraud, some people think similar government single-payer plans are our ultimate nirvana. Meanwhile, hospitals losing money on Medicaid patients have to charge private patients more to make up the difference.

    Health care costs money to provide. Health care education is very expensive. Obamacare taxes just raised the cost of our supplies. I could go on and on about government increases the cost of health care, but it would go on ear and out the other with collectivists.

    Here is something for you to ponder. With fees at money-losing levels, what will you do to health care providers to get them to treat patients? Put a gun to their heads and say, “Do the procedures at our prices, or else!” A retired Gastroenterologist told me Medicare was paying him $7 for a hospital visit!

    Imagine forcing road-building contractors to pave interstate highways at a loss, and make up the difference paving roads in new subdivisions. Would you have an ethical problem with that? How do you think that would work?

    Why does Tom Sawyer read these Daily Reckoning articles, anyway? They are apparently antithetical to everything he believes. It would be as productive for me to read a DNC blog every day and lampoon the articles!

  • DelmarJackson

    I like Ron and his son rand, but they both are blind to immigration, which will make all their positions on Liberty,the free market and small government seem quaint in the future when we become a 3rd world Balkanized country , ungovernable and driven by ethnic and tribal politics and ripe for the picking by the Globalists at the top.

  • Dr. Kim Henry

    Here again we only have to remember Milton Friedman’s warnings. Suppose illegal immigrants had NO chance of welfare or free admission to hospitals. Suppose illegal immigrants routinely died in childbirth while trying to drop an anchor baby. Suppose illegal immigrant babies WERE NOT automatic US citizens and were not entitled to any welfare benefits. How much illegal immigration do you think there would be?

    The roots of so many problems in the US are rooted in LBJ’s Great Society handout programs. Thanks, LBJ, for nailing the coffin shut on the US!

  • Jahfre

    Word meanings also evolve. Today the practice of buying votes through government spending, i.e. Moral Hazard, rests on the premise that such policies and programs socialize risk…in the way that risk-management-based insurance companies do. Government does NOT manage the risk (yet…that government form of risk management comes later in the CONTROL phase of the standard progressive strategy for growing government) For now though, government programs do NOT manage risk, they merely spread it from those at risk to those not at risk against the will of those not at risk.

    Still, the notion of socializing risk through oppression of free markets is often called “Socialism” today even though it has nothing to do with the original meaning of the word.

    So, rather than flinging labels such as “Socialism” or “Corporatism” as if they have eternally unchanging meanings is only marginally effective when the flinger uses the appropriate label in their fling.

    The real problem is the unlimited growth of government that enables politicians to concoct these programs…NOT the label used to describe them.

  • kifaru

    Does Dr. Paul favour the abolition of the physicians’ cartel? Currently, a physician cannot practice medicine unless he is licensed by a monopoly endorsed by government.

  • Dr. Kim Henry

    Pray tell what you mean by cartel. Do you mean the group of people who graduated from an accredited medical school? Is this what you call a “cartel?”

    I am trying to imagine what you are saying. State boards of Medicine grant licensure by tests. You want to abolish these boards? If so, who will take disciplinary action against dishonest and/or incompetent physicians?

    Maybe you want anyone who claims to have read a medical text to be able to practice medicine and prescribe drugs without any testing or board. Is this what you want? Just curious.

  • kifaru

    Who devises the tests? A monopoly.

    Abolish boards? Only if they represent a monopoly.

    Who will take disciplinary action against dishonest or incompetent physicians? The medical society to which the physician belongs. What if he’s not a member of any society? Caveat emptor. A patient who sees a doctor without credentials takes his chances. If the patient is wronged, he can sue for damages.

    In a free market, anyone can offer his services for a price so long as the vendor does not misrepresent his goods or services. That is all I seek, here: a free market.

  • Dr. Kim Henry

    You are really confused about how things work. The medical society does not administer discipline, the State Boards of Medicine do. There are 50 State Boards of Medicine. Sound like a monopoly?

    All right, you want no physician licensure. I assume you want no licensure of any profession, right? Just want to make sure you are consistent. I really doubt that hospitals would grant priviledges to physicians and physician-imposters without any credentials.

    Who devises the tests to license physicians? Other physicians and academics, of course. How could it be otherwise? Do you think plumbers and electricians should write the tests for physicians?

    One problem with no licensure: how will federal prescribing licenses be granted? Or would you have every drug on the market sold over the counter?

  • kifaru

    I am not confused. I did not claim that medical societies administer discipline. In the absence of monopolies such as state boards, a medical society would administer discipline.

    Fifty state boards: every one of them a monopoly within the state.

    Government licenses: abolish all of them.

    Drugs: each vendor would have its own rules for determining what drugs ought to be sold to what kind of consumer. Or the vendor itself would belong to a society of vendors with its own guidelines.

  • Dr. Kim Henry

    Would not a medical society be a monopoly?

    How would it discipline physicians who are not members? The majority of physicians are not AMA members now.

    I thought I was a radical libertarian. You got me beat by a mile.

  • kifaru

    No, Dr. Henry. A medical society would not be a monopoly; there would be, in the natural course of events, several if not dozens of societies.

    A society can only discipline its own members. If a physician chooses not to join a society or is rejected by all, then only the market or a court of law can discipline the physician.

    Each society would compete for members. Consumers would gravitate to physicians belonging to societies having the highest standards and best track records.

    The same idea applies to unions. In a free market, unions would not disappear. Instead, they would fulfill a function that is useful both to consumers and tradesmen.

    As an aside: note that Ireland prior to Cromwell developed a panarchistic system in which anyone above a mere labourer could choose which tuath to join. These tuatha were societies that co-existed within the geography we know as Ireland.

  • ralfyman

    Corporatism is the result of free market capitalism.

  • Dr. Kim Henry

    Corporatism is the inevitable result of Big Government. Restrict the size and scope of government, as the American founding fathers advocated, and the government will not have the means to grant corporate favors.

    Don’t like corporatism? Abandon stupid laws like Obamacare, you collectivist ninnies!

  • ralfyman

    Corporatism is the result of free market capitalism, from which Big Government also emerges. The latter, in turn, deregulates so that Big Business can profit readily through financing. This is what happened from the early 1980s onward.

  • Dr. Kim Henry

    What a mixed-up collectivist critter you are. Are you perchance a public school teacher?

    1. People expand government because they are lazy, and the prospect of getting something for nothing (with someone else, typically the “rich” paying for it) is naturally appealing.

    2. Once government is enlarged to provide services it never should provide in the first place, it is an easy transition for business owners (including farmers) to want in on the largesse.

    Pretty soon, all the citizenry are morally bankrupt, absent of any moral responsibility. Hence the vast dependent crime-prone welfare class we presently have in the US

    Moral lesson: The more government you have, the more corruption you will have. Why? Since government lacks competition, there is no penalty for inefficiency and corruption.

  • ralfyman

    I’m not a school teacher.

    1. People don’t expand government because they are lazy. Rather, government becomes bigger as the economy becomes increasingly complex. This is especially the case for a free market capitalist economy that was soon controlled by industrialists, followed by bankers.

    2. That’s part of my argument.

    Also, it’s just just a crime-prone welfare state but a middle class propped up through credit provided by private corporations, entitlement provided by government, the dollar propped up by the military, and a combination of consumer spending and financial speculation enabled by all three.

    The moral lesson is that when you have a reserve currency economy and greed, then expect borrowing and spending to increase across households, corporations, and government, which is exactly what happened from 1981 to the present.

    The government was deregulating, allowing more large corporations to profit through financial speculation.

    The result included the ff.

    – Households spending happily by maxing out on credit cards, leveraging and even flipping homes, and engaging in all sorts of financial speculation to support a middle class lifestyle. In return, they voted for one pro-business government administration after another.

    – Big Business provided the credit and the consumer goods, which led to a consumer spending economy. Meanwhile, it engaged in financial speculation, leading to exposure to almost $400 trillion in unregulated derivatives, while selling arms to the government and foreigners. It should also be noted that of the three groups, it’s Big Business that calls the shots, as it essentially controls the U.S. economy through Wall Street and the Fed, which is a private consortium of commercial banks.

    – Big Government used credit from Big Business to strengthen the military, which it used to coerce governments and ensure that the petro-dollar was propped up. Households not only supported the pro-business stance of Big Government but even supported the war costs in the name of “freedom” and “democracy.”

    And where did Big Business, that controls much of the economy, come from? It started with industrialists who took control of the economy and then encouraged the formation of a public education system that served their interests (hence, graduates who are obedient workers and consumers), followed by control of the money supply through the Fed, then the military-industrial complex, then deregulation and financial speculation from the Reagan administration onward, followed by fallout from three decades of such, bailouts (not surprising, as Big Government serves Big Business), etc.

  • Dr. Kim Henry

    You correctly identify many of the problems in our society. To pin the cause on “capitalism” or even “free market capitalism” is quite a stretch.

    I agree with you that the US dollar as a reserve currency has given us special priviledges that have ultimately been our demise. I look forward to the day when there is a new reserve currency.

    The expansion of debt has been possible by:

    1. The creation of the Federal Reserve, which happen under Wilson, I think.

    2. Nixon renouncing international drawing rights for gold against the US dollar in 1971. Reagan had nothing to do with it. Had the spending cuts been enacted that Reagan tried to obtain, the deficits would have shrunk instead of expanded. Remember, tax receipts INCREASED with his marginal tax rate cuts.

    We have to do something to make debt less “normal” to the population. Buying a car with credit, for instance, should not be looked upon as a norm. The only good use of credit is to buy capital investments that create or increase income streams. As we have to pay for housing some way, buying houses with credit also makes sense, as long as residence in them is long enough to have purchase transaction costs economical.

    Of course, what motive to people have to save an invest, instead of borrow, when the Fed has made after-inflation deposit rates negative? That is the real evil being done by the Fed right now.

  • ralfyman

    You need to look at these points in light of capitalism. That is,

    The financial elite that control the economy reached such a status thanks to deregulation, especially from the Reagan administration onward. That’s why spending across the board started rising in 1981.

    Before that financial elite were industrialists which succeeded thanks to the ability to exploit various resources in the U.S., which is what free market capitalism is all about.

    The presence of a reserve currency is the only thing that allows the U.S. to continue borrowing and spending heavily, especially on the military. If a new reserve currency is employed, then the U.S. middle class, the military, much of infrastructure, and the economy itself (which is heavily dependent on the dollar) will fall apart. Households, Big Business, and Big Government, all of which use the dollar, won’t be happy with that.

    The Fed is a private consortium of commercial banks, and much of the credit in the U.S. economy is created by the same banks. The largest component is almost $400 trillion in unregulated derivatives, part of a global market which has a notional value of over a quadrillion dollars.

    Nixon moved away from the gold standard because more countries were having their dollars redeemed, esp. because of war costs due to conflict in Indochina, part of policies to establish superpower status. Later, he struck deals with Saudi Arabia and other OPEC countries, leading to the petro-dollar.

    Reagan deregulated, allowing Wall Street to speculate heavily, while spending on the military to keep the petro-dollar propped up. Recall that Saudi Arabia was asked to support the petro-dollar and invest profits in U.S. financial instruments.

    Meanwhile, the public voted for Reagan and subsequent pro-business administrations in exchange for a credit-driven middle class lifestyle, again part of capitalism. The same public supported U.S. military operations around the world, arguing that it was all for “freedom” and “democracy.”

    So, you see, it was not collectivism, socialism, leftism, or government tyranny that was solely responsible for economic crises in the U.S. but three sectors–households, Big Business, and Big Government–working with each other in exchange for various advantages. That is,

    Citizens voted for Reagan and subsequent pro-business administrations in exchange for tax cuts, entitlements, credit, and consumer goods made available by Big Business. They even supported U.S. military activities overseas which essentially involved protecting U.S. business interests and the dollar.

    Big Business, in turn, provided easy credit and consumer goods to citizens to prop up a middle class lifestyle. Government deregulated, allowing Big Business to enrich itself in Wall Street.

    Finally, government received credit from Big Business, which it used to buy armaments to strengthen the military, which in turn was used to bully other countries and keep the petro-dollar propped up. The citizens’ reaction to that? Not much, as long as they got their commercial mass entertainment and consumer goods, purchased using the same dollar.

  • ralfyman

    But they are all connected to capitalism. Recall that in a free market capitalist system, some become richer than others through manufacturing, mechanized agriculture, and financing. From there, the government eventually works with or for them. An emerging middle class supports both in exchange for maintaining its economic status.

    This is what happened in the U.S., with bankers controlling the Fed and the economy through Wall Street (thanks to deregulation from 1981 onward), the military-industrial complex, and consumer spending.

    The U.S. promoted the use of the dollar as a reserve currency after WW2 because that would give U.S. businesses advantages worldwide, not to mention credit to strengthen a military needed for foreign policy and trade abroad.

    As U.S. oil production started falling and war costs in Indochina (where various natural resources had to be controlled for the U.S. and its allies) started rising, the economy moved away from the gold standard. This was later replaced by the petro-dollar, which allowed the country to get oil cheap from OPEC countries while the latter received military support.

    These allowed capitalists to profit: from arms sales to the military and to foreigners, business deals with client nations, cheap oil, easy credit and consumer spending.

    The government, in turn, strengthened and used the military to keep the petro-dollar propped up, and deregulated to allow businesses to profit from Wall Street.

    Citizens voted for pro-business government administrations in return for credit needed to support a middle class lifestyle. They even joined in financial speculation.

    Thus, everything is connected to capitalism and its effects, which include a middle class that depends on credit from Big Business and which means voting for pro-business government administrations, Big Business which depends on protection of the dollar using the military and deregulation by government, and Big Government depending on credit from Big Business and the vote from households.

    This, together with the presence of a reserve currency, might explain why interest rates were kept low. Those allow households to spend readily, thus propping up a consumer spending economy. They also allow Big Government to spend readily, thus providing entitlements to households and funding the military needed to protect the petro-dollar, and for Big Business to extend credit readily and to engage in more financial speculation.

  • Dr. Kim Henry

    Boy, that Reagan and his deregulation. What a mischief maker! Gosh, things were so idyllic in the Carter years, when we were shivering in our houses during the oil crisis. Why, that California cowboy ruined everything!

    Reagan did away with many tax deductions- consumer interest paid for one- in exchange for lower rates of taxes. Revenues shot up, as collectivists always seem to forget. Trouble is, Democrats blocked all the spending cuts. Spending grew faster than revenues!

    You forgot to tell us. When did the important deregulation of Glass-Steagall repeal take place?

    As for the Fed, it has moved from a lender of last resort during bank panics, to a proactive enabler of horrendous Federal deficit spending. Do you think our government would be spending like it does if the Fed wasn’t buying 85 billion dollars of Treasuries every month?

  • ralfyman

    Actually, what I have been doing is connecting the dots.

    Much of money supply is created by private banks and not by government “printing” money.

    The formal public education system follows the Prussian model and was supported by industrialists. That’s why the system itself resembles organizations found in business and in the military: standardization, quantification, hierarchy.

    People like Big Government also because a capitalist system relies on the same, especially when it grows.

    Reagan was not the only politician involved, but spending overall began in 1981 onward thanks to deregulation.

    The Founding Fathers were essentially the first oligarchs of the newly found country. That is why government, together with growing enterprises, were in the hands of white, landed males. The military, together with militias, were used against not only invaders but also against rebelling citizens, Native Americans, and slaves.

    The Fed was, from the start, a private consortium of commercial banks. Thus, even before the Reagan administration, the economy and the money supply on which the government depended on were controlled by a financial elite.

    The same financial elite and its government partners increased credit levels to develop a middle class. Hence, the American dream where, with even a modest income, a household could receive credit to buy a house, car, etc., something unheard of in many parts of the world. In return, that same middle class voted for one pro-business government administration after another to support its own economic status that was dependent on credit, and after Vietnam supported the military as it was used to keep the dollar (and later, the petro-dollar) propped up and ensure access to cheap resources and labor.

    Thus, all groups were working with each other towards their own self-interests.

    Big Business needed to sell more, not only to the U.S. economy, but to the rest of the world, as well as lend more to earn more. The government ensured that by deregulation in the U.S. and using the military to enforce U.S. foreign policies abroad. The result is a consumer spending economy, the rise of Wall Street, the continued use of the U.S. dollar as a reserve currency, and incredible levels of profits for the financial elite.

    The government supported the financial elite by using the military to bully other countries, and in return received credit through the Fed to enrich itself and provide funds for entitlement to citizens, infrastructure needed for a consumer spending economy, strengthen the military, etc.

    Citizens lived a middle class lifestyle thanks to credit from Big Businesses to buy consumer goods sold by the same. In return, they voted for one pro-business government administration after another and supported the military, which kept the petro-dollar propped up and ensure that a “non-negotiable” way of life remained.

    These explain why far from being collectivist, socialist, or leftist, the country is essentially capitalist, and what we are seeing now is the result of the same.

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