Our economy could aptly be described as the clothes that we wear; it defines us and exposes us. It illustrates both our follies and our wisdom; fine jewelry would quickly be traded for a warm cloth coat on a Minnesota January morning. Yet without the desire to own such jewelry few would ever leave the warmth of the hearth.
Our success at climbing the evolutionary ladder for all these many eons has been tempered, for while we’ve reached these great altitudes our climb has been uneven. We stand on the intellectual threshold of unlocking the very secrets of the universe yet deep down inside we are still that same little primate. We still carry the baggage from the bottom rung, scared, fearful, boastful and prideful.
We want all the bananas even if we can’t eat them all and our inability to rise above who we are in our most basic elements poisons our society from real progress. The lure of money and power is too strong, so that everything that might be established for the good of the economy as a whole quickly becomes corrupted by it. It is a blood cancer, money is our society’s life blood, yet it is killing us.
In the tribe of the Ogalala Lakota a few young men were chosen each year as shirt wearers. It was a high tribal honor that was granted to Th’ašúŋke Witkó (Crazy Horse). Their role was to assist the less fortunate and to care for the old and to mentor the young. It was a tribal society that valued honesty, modesty and fidelity. The members were dependant on each other and the voices of the older members carried great weight. They watched these young men, and those who did well, would rise in the esteem of the tribe.
Th’ašúŋke Witkó however, lusted after another man’s bride, and convinced her to run away with him and he lost his position in the tribe. No matter how altruistic the society, there are still our carnal and venal instincts. What would you call a society such as the Lakota created, Socialism? Communism? It was communal tribalism where a small group cares for itself and prospers because their needs are in common. To call it socialism or communism is a shirt that doesn’t fit; it is tight in some places and loose in others. These people traded goods amongst themselves and with other tribes, and their goal was always to profit from it.
“The white man knows how to make everything, but he does not know how to distribute it.” Tatanka Iyotaka (Sitting Bull)
Winston Churchill once described Capitalism as “A healthy horse pulling a sturdy wagon.” Mr. Churchill a life-long opponent of Socialism was correct in his analogy. Capitalism only works when it is highly regulated. The horse carries a bit in his mouth and blinders on his eyes. The horse wears a heavy collar and is strapped to the wagon with a leather harness. Above him sits the driver with reigns in his hands and a whip at his side. A healthy horse without restraint would run amok destroying the sturdy wagon and injuring if not killing the operator.
I am reminded of a story of two farmers Zep and Joe, both farmed forty acres and both rose at dawn to begin their plowing. Zep pushed his mule hard never stopping for a rest or for water. Joe would always stop after the end of several furrows to give his mule a rest or a drink of water and because of this the mule always pulled hard to reach the end of the furrow. As they ate lunch under a tree Zep complained, “I don’t know how you do it Joe but you always get the best mules while I’m stuck with this lazy hay burner. You wouldn’t want to sell me that mule of yours would you Joe?”
Joe answered, “No, I care for him too much to ever sell him, but I tell you what I’ll do,
I’ll trade with you for a day. The next day the farmers traded and at lunch Zep again complained, “Danged If I ain’t having the same problem with your mule Joe! You reckon my plows bent?”
Television programs such as “The Deadliest Catch” illustrate clearly what happens when an incentive is offered. The men are willing to work long hours under grueling and dangerous conditions because they are working for a share of the profits. The retailer Western Auto once competed with the likes of Sears and Montgomery Ward nationally in the appliance business. In the early 1980′s, Western Auto management decided to streamline their business model and placed all of their sales associates on salary and eliminated sales commissions. Very quickly, Western Auto disappeared as there was no longer any reason to pull for the end of the furrow.
The world wide economic collapse of the 1930′s was in many ways brought about by bad economic policy extending back to WW1. The industrial revolution played a part as the mechanization of farming created industrial jobs in the cities. It meant that with machines a farmer could handle more acreage and could become more prosperous. As they became more prosperous many tried to buy more land creating an artificial bubble as land values soared. City consumers buoyed by rising industrial wages took on debt and invested in the stock market.
During the 1920′s America’s commodity exports were high due to the effects of the war in Europe but as Europe recovered, farm prices began to fall. After initial jitters in 1926, Wall Street prices recovered. Only slowly did it become apparent that agricultural losses were filtering up through the economy. Land prices collapsed, machinery orders fell and lay-offs began. Bankers in New York began to take notice of bank defaults on loans in the farm belt.
During this era worker productivity rose thirty-two percent, but wages grew by only eight percent, so
that more product was being created than could be consumed and the difference was subsidized with credit. Stock traders for the big banks would pay newspaper reporters under the table to say nice things about particular stocks, and then after the price rose they would sell out.
The poorly regulated stock and credit markets crashed leaving poor Herbert Hoover holding the bag. Hoover’s Quaker beliefs taught him that sometimes we’re dealt a bad deal in life and that it just must be endured. Easy enough to believe in the abstract to a man with a soft warm bed and eating three square meals in a big White House. Hoover was blaming God like Zep was blaming his plow. His administration was willing to try funding the banks and bailing out the railroads but was unwilling to help the mule for fear of damaging it’s self esteem. Why if you were to give that mule a rest and some cool water once in a while they thought that mule would get lazy and would expect it all the time. It is a dark and cynical philosophy that believes workers will only pull for the end of the furrow by fear or by whip.
The parallel’s to our own time are striking as deregulated mortgage and credit markets over leveraged and subsidized by easy credit have brought about yet another collapse. Poor Mr. Obama surrounded by a cadre of investment bankers and Federal Reserve protégé’s asks, “What do we do now?” The chorus that surrounds him answers, “Easy credit, lower interest rates, tax cuts!” But when a small voice says, “stimulus” the chorus around the President says, “You’ve got to be careful that it’s not too large.” This was Herbert Hoover’s greatest fear, a fear of raising the deficit.
The sturdy horse deregulated, with his blinders off, and free to choose his own path, has dragged the economy into the ditch. The federal government’s answer has been to offer the horse inducements to pull the wagon out of the ditch. “Please pull the wagon out of the ditch; we’ll give you more oats in the form of tax cuts. We’ll buy you a new blanket with even more tax cuts.”
Why should the horse want to pull the economy out of the ditch? As long as it remains in the ditch the horse gets whatever it wants from the driver. The large banks and Wall Street brokerage houses were the primary culprits of the mortgage and stock market crash and are now the primary beneficiaries of Washington’s largesse. The horse sits joyously in the back of the wagon and Washington pulls as Obama even offered tax credits to those with money and credit to buy a new car? The economy is in a ditch and you offer incentives to the already affluent in a market primarily controlled by foreign manufacturers?
A free money policy for the banks means that the banks can borrow as much money as they like for $2,500 per million dollars borrowed. Free to invest it anywhere in the world that they like, the horse is now free to find a new wagon to pull because this one’s in a ditch. Yet for the poor mule there is no water and no rest. Obama’s stimulus was twice the size of Germany’s stimulus for an economy three times its size. On top of that, the stimulus was thirty-five percent tax cuts meaning the poor mule got a shot glass of water instead of a bucket.
Someone must grab the reigns and hold the whip; all players must be treated equally. Government must be the arbiter of the economy and mustn’t root for either the blue or the green. Government must work for the betterment of the economy as a whole. Healthy worker paychecks are just as important as corporation’s profit margins. Alabama cotton planters were quite successful in the 1840′s but did little to help the state’s economy as a whole. Their slave labor force received no benefit from their work and so could not buy from merchants who in turned paid few taxes. It created a stifled society of landed gentry, poor farmers and struggling merchants.
Franklin Roosevelt said, “Out of the collapse of a prosperity whose builders boasted their practicality has come the conviction that in the long run economic morality pays. We are beginning to wipe out the line that divides the practical from the ideal; and in so doing we are fashioning an instrument of unimagined power for the establishment of a morally better world.”
Roosevelt’s Tennessee Valley Authority not only helped to pull us out of the last depression it made possible the modern cities of Knoxville, Memphis, Huntsville and Atlanta without the TVA that growth would have been impossible. Harry Truman’s GI bill at the end of WWII deferred ten of thousands of returning GI’s from entering the job market by making them full time students. Rather than swamp the job market the federal government spent money on tuition rather than on unemployment checks.
The college educated workers earned higher incomes and returned more in taxes back to the treasury. John Kennedy’s call to put a man on the moon before the end of the decade cost this nation over twenty billion dollars. It created the greatest scientific and technical revolution in human history that was created in the fires of the grasp for the moon. That twenty billion spent created the computer industry, the cell phone industry, the satellite industry and literally thousands of other products that we now take for granted.
It was Roosevelt’s words in action, “in the long run economic morality pays” the growth prompted by the TVA far exceeded its cost and was for all intents and purposes free. The GI bill created a generation of engineers, scientists, teachers and researchers who expanded our knowledge and multiplied our prosperity. They went on to answer Kennedy’s challenge to create things that did not exist, to create profitable new industries to employ from hundreds of workers to hundreds of thousands of workers.
The future is always waiting for us to seek it out. Our country is always wanting for improvement and our children deserve no less than the best education to build our country and to prepare our future. These are the three elements of the good economy and the fourth is to abstain from war. To understand and to write across our hearts that war is the failure of intellect and intellect is all that separates us from the lower primates.
These first three items will cost money but cost almost nothing in the long run when compared to the preparation and costs of war. To surmount that lone obstacle makes the others easily affordable and our grand-children will rejoice at our memory and our economy will be attired in the noblest finery.