Find it here: http://www.dailykos.com/storyonly/2010/8/10/891885/-The-free-market-is-anti-American
--Kim
The free market is anti-American
by Mark Sumner
Sun Aug 15, 2010 at 06:00:02 AM PDT
The pair of words at the top of the conserva-dictionary these days has to be those Bobbsey Twins of political attack: anti-American and un-American. Michelle Bachman has called on the press to investigate "anti-American" members of Congress. Rand Paul called the president "un-American" for trying to hold BP accountable for the damage to the Gulf region. Oliver North says that President Obama has a "core-philosophy of being anti-American." The appropriately named Dick Morris says that Obama is the "first anti-American president."This isn't exactly a new coinage. The un and anti have been pulled out many times to fling against those who have in the past protested some aspect of national policy, especially those who've failed to cheer loudly enough for war. But these days it's not so much generic hippy punching that brings out the twins. Instead they're generally fired over the bow of anyone the right sees as deviating from the one true path -- that of the unrestrained free market. President Obama is a frequent target because of his many real and imagined slights against the market. After all, while the current president didn't start the bank bailout (even if many Americans think he did), he did support at least mild regulation of Wall Street run wild, and he spent all that money on "shovel ready" infrastructure products even though it meant running up the debt, he did invest in the failing auto industry, and he... um, well, he's done lots of other socialist things too. They're sure of it. Barack Obama has even promoted the kind of America where children give away lemonade (really, that's what's wrong with America -- too much free lemonade).
Conservatives pull out the "anti-American" tag in going after every intrusion of the government into the economy. They leave little doubt that America and the "free market" are synonymous. But here't here's the thing: there is an American eonomic system, and while defining what it is takes a little time, defining what it's not is simple. It's not the free market.
The American economic system -- the system defined by George Washington and Alexander Hamilton -- came directly out of the challenges faced by our nation. America, as a new country, was at a huge disadvantage to Europe when it came to the ability to produce manufactured goods. American-made goods at the time were often lesser quality, more expensive, or both when compared to products coming from European factories. Both men were well aware of free market principles (On the Wealth of Nations was published in 1776) and there were those among the founders that pushed Washington to run the country along a purely market-driven philosophy. An unregulated free market backed up by the gold standard was the basis of the "English System," and the British had enjoyed more than a little success.
Washington and Hamilton might have emulated the nation they had just defeated on the battlefield, but that wasn't the path they chose. Instead, steep tariffs were imposed on imported goods. These inflated the price of products from European factories and allowed American makers to both capture more of the market and turn a higher profit. With that money, American factories were enlarged and became more numerous.
There was another problem at the time -- states were nearly bankrupt. The cost of financing the War of Independence had emptied the coffers, and many states were having trouble paying off their loans. At the same time, hundreds of state and local banks were operating under different rules, different rates, even different currencies. The country was awash in speculators taking advantage of differences in exchange rates and shipping costs to rack up fortunes while farmers and craftsmen suffered. Think Wall Street was crazy in 2007? Imagine a country with dozens of different currencies and no one regulating the exchange rates. Now imagine how many people learned to game the system.
To address this, Hamilton proposed that the federal government bail-out the states and regulate the financial markets. There was only one problem with this idea -- the federal government was also in debt, and banks were unlikely to loan them money that would be used to regulate those same institutions. Hamilton had an answer for that. He proposed that the US government become the largest stockholder in a bank. Not an existing bank, a new bank. The government would create this bank as a private company, but the government would own the majority of stock. The government would also lay down the rules for the bank, including limits on who could buy stock and what type of investments the bank could make. From this new bank, the government would borrow the money to pay off the states and address federal needs.
The first and largest federal need? The $2 million it would take to buy stock in the new bank. The solution? The new bank loaned it to us. Got that? We made the bank, the bank then loaned us the money to buy the bank. Even paying back the loan was more than we could afford, so Hamilton made a proposal popular with politicians in any age, a "sin tax." In this case, it was a tax on imported and domestic spirits (to see how well that went, just look up the Whiskey Rebellion).
With the money from the new government-owned bank, the US could take care of its own debts and those of the states. The government could regulate currency and set rules on trading. It also started in on a series of large infrastructure projects -- roads, canals, and public buildings.
That, brothers and sisters, was the American economic system. Those who worry that we've wandered too far from the vision of the founding fathers might want to remember that in George Washington's first term, the government was involved in:
- selectively restricting imports
- bailing out debts of states
- being the majority owner of a private company
- clamping down on fiscal speculation
- executing a "stimulus plan" of infrastructure projects
The American school of economics was founded on these ideas: selective tariffs, government regulation of banks, and strong investment in infrastructure. Under later presidents a fourth plank was added to this platform -- investment in public education.
Within a space of decades, the American school of economics gave us... America. America the economic power that matched, then surpassed any of its European rivals. The success of American economics was so clear that Lincoln's economic advisor, could write these words...
- Two systems are before the world;... One looks to increasing the necessity of commerce; the other to increasing the power to maintain it. One looks to underworking the Hindoo, and sinking the rest of the world to his level; the other to raising the standard of man throughout the world to our level. One looks to pauperism, ignorance, depopulation, and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilization. One looks towards universal war; the other towards universal peace.
Of course, the American school of economics was never followed by 100% of Americans. It's fortunes waxed and waned, taking huge hits at the start of the 20th century -- particularly under Woodrow Wilson. These days, we're taught to believe that protectionism was one of the causes of the 1929 stock market crash, but the truth is it was leaving the old system that caused a unsupportable increase in stock prices. Reduction of tariffs, easing of regulation, and the end of the National Bank system moved money away from internal investments and toward international trade and speculation. The Smoot-Hawley Tariff Act was signed into being after the crash in an attempt to restore some fragment of the old system. It's not clear what, if any, effect these tariffs had, but under the New Deal funds were diverted from speculation back to infrastructure -- pulling America up from the depression.
These days we're also fed the idea that in this "flat" world, any attempt to return to the American system would be disastrous. We couldn't possibly impose tariffs as post-war Japan did until it was operating at a trade surplus. We couldn't possibly deal that way with our "partners" such as China -- where American automobiles face steep tariffs so steep that their products are uncompetitive unless they partner with Chinese-owned companies. The evidence of the last century is that nations practicing a "free trade" system, always export jobs to countries practicing the American system. But hey, America can't possibly use the American system. It would be... un-American.
The free market system was not the original economic system of America. It wasn't the system that brought us to international power, not the system that carried us through World War II, not written into our Constitution in any way. In fact, one of the primary powers granted federal authority is the regulation of the economy. It was clearly understood that economic anarchy was incompatible with democracy.
In saying that any move against an absolute free market is un-American, conservatives are declaring that Washington was un-American, Hamilton was un-American, Lincoln was un-American.
The truth is that the free market is opposed to the American economic system, but America the country has no predefined economic system. It's not hard-coded that we follow the American system, the free market system, or any other system. One of the goals of the constitution was to give us the flexibility to adapt economic policy to the times. Pretending that we must remain wedded to one system no matter what (even when that system has as long a record of failure as the so-called free market) -- that's really anti-American.
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