Naomi Klein has written a thoroughgoing indictment of Milton Friedman and his Chicago School of economic theory which is functionally supply-side with a penchant for what Friedman called ‘economic shock treatment’. Basically, you create the conditions that allow the economy to get sooo bad that the people will accept a change, any change, that promises to fix the problems. In theory, it should expand services and create wealth across every economic level. In practice, it creates massive stratification and does little to fix or create critical services. It also makes everyone not already wealthy destitute…
Klein argues that Friedmanian free market rules do exactly what they were designed to do: they don’t create a perfectly harmonious economy, complete with the much-lauded “trickle-down” effect, but rather, turn the already wealthy into the super-rich and the organized working class into the disposable poor. Further, she describes these orchestrated raids on the public sphere in the wake of catastrophic events, like war, as exciting marketing opportunities or “disaster capitalism.”
So, why even mention this? Simple. This is about to happen to us and you might as well be prepared for it. Since the supply-side revolution Reagan ushered in more than 26 years ago, we’ve seen economic stratification climb to alarming levels not seen since the Gilded Age. Despite the fact that it doesn’t really help anyone other than those already rich.
Which brings us to the tax issue we mentioned yesterday. The supply siders will tell you that cutting taxes will increase economic growth and create surplus revenues. That’s actually not true since it’s dependent on the Laffer Curve and even it is subject to the law of diminishing returns. What’s needed is a balance in marginal tax rates and efficient use of the money by the government, not endless deficits, mounting debt and low taxes for the already rich. That and the fact that tax policy has less of an impact on business conditions than interest rates.
Think, for a second, about our crumbling infrastructure, our rising deficit, underfunded entitlement programs… it’s all leading up to a situation in which things will spin violently out of the control. Of course, when that happens, then we’ll be ready for shock treatment.
Think it can’t happen here? Cause a massive economic disruption in the US and people will accept anything that will fix it.
They elected Reagan, didn’t they? Think of that as a dry run.
One other note about investments and taxes… I’m a HUGE fan of massive capital gains taxes, especially on gains realized in less than two years. Why? Because I hate traders and speculators. I’m a long term investor…THAT more than anything done by private equity companies actually provides long term stability and growth in businesses. It also stabilizes the retirements of hundreds of millions of people.