The Specter of Socialism

An article about Marxism appeared in a recent issue of Rolling Stone.

I’m not really qualified to speak about Marxism, per se. I’ve never read Das Kapital, nor The Communist Manifesto, nor any other socialist or communist work of note. Given the number of far greater works of literature and philosophy I will inevitably die without ever having read, I’m not especially interested in elevating Marxism to first place on my reading list.

What I do know is that, in the criticisms of Marx I’ve heard throughout my life, no one has ever actually faulted his analysis of Capitalism for any reason other than the fact that his prediction of its imminent demise was, in the most charitable view, premature. Of course, most people I’m likely to run into who critique Marx don’t take a charitable view, so they say that Marx was just plain wrong — that Capitalism isn’t self-defeating, and Marx was an idiot.

Of course, we’re now seeing Capitalism destroy itself in what appears to be pretty much exactly the way Marx predicted, but a century later than he thought.

It leads to the question of, “What happened?” But the question isn’t why Capitalism is destroying itself now — Marx was brilliant for seeing in the 1800’s what any fool can see happening around us right now — but rather, what prevented it from happening sooner.

The part of the article that caught my eye was this:

When he argued for a progressive income tax in the Communist Manifesto, no country had one. Now, there is scarcely a country without a progressive income tax.…

I had no idea that a progressive income tax was something associated with Marxism, and it explains a lot about US conservatism’s hate-affair with progressive income taxes. But it also suggests something more interesting: that the reason Capitalism didn’t self-destruct in the years shortly after the Great Depression may have been precisely because it took cues from the Marxist playbook.

I don’t know how much influence Marxism actually had on the US idea of progressive taxation, but it seems plausible. Marx was writing about politics and economics in the 1840’s, penned The Communist Manifesto in 1848, and published Das Kapital in 1867 (Google is wonderful). Federal income tax began in the US in 1862. The 1862 tax rates already demonstrate the idea that only income above a certain level be taxed, though there were usually only two brackets, a zero-percent bracket, and a single taxable bracket taxed at a flat rate. Perhaps this was influenced by Marx’s writings, perhaps not — it seems pretty obvious to me that it’s pointless (and cruel) to tax people who have very little money — but there was plenty of time between 1848 and 1862 for his ideas to circulate.

There was a break in federal taxation from 1873 to 1912 — a constitutional battle resolved by the Sixteenth Amendment — and when taxing resumed, it had seven tax brackets. By then, Marx was long dead, Socialism was widely known, and the Bolshevik Revolution was brewing. So certainly, Marxism could have had a strong influence on those seven tax brackets, which grew to over fifty within a decade.

In 1932, as the Great Depression set in, the top tax rate shot from 25% to 63%, and then to 79% by 1936. During the four years of US involvement in WWII, it climbed to 94%, then backed off to 91%, where it stayed until 1964, when it dropped to 70%. It didn’t move again until 1982. So the entire period of what might be called the Golden Age of the US economy — 1946 to 1982 — happened under a taxation rate that appears harshly confiscatory and very Marxist.

In the 1930’s, the wealthy in the US were terrified that what had happened to privilege in the Soviet Union, could happen here: multi-billionaire Tom Perkins’ recent puerile comments about a Krystallnacht against the wealthy in today’s world are merely a watered-down and baseless paranoia compared to the realistic fears of the wealthy just after the Great Depression. After all, the bankers had crashed the economy, and followed up by aggressively trying to foreclose on huge numbers of small farms: the resulting armed farm and labor riots of the 1930’s threatened a second civil war, if not a complete government overthrow reminiscent of what had happened in Russia. The wealthy came perilously close to a Marie Antoinette moment.

So it seems entirely reasonable to me that there’s a lot of Marxism folded into the New Deal, and not just progressive tax rates. There’s probably a whole doctoral thesis in this idea, and probably several already written.

That would certainly explain the rabid hatred that conservatives have for the New Deal, which they always claim is Socialism. Perhaps it really is.

Even more interesting is what has happened since 1980. In 1980, Ronald Reagan was elected President, propelled into office by the Evangelical vote. The Evangelical movement was, in turn, a 1947 spin-off from the older Fundamentalist movement of the early 1900’s, which held anti-Communism as one of its foundations (along with anti-Evolutionism). Reagan himself was an old-school anti-Communist “Cold Warrior,” like most of his generation, and his policies began to systematically dismantle the economic policies put in place as part of the New Deal. It makes perfect sense that he would have gone after Marxist elements in our own system.

One of the changes during the Reagan years, for instance, was to effectively eliminate progressive taxation. The top tax rate dropped to 50% in 1982, and then to 28% in 1988. The top rate has not risen above 41% since. It is amusing (though nauseating) to hear modern Tea Party Conservatives and the rich whine and moan about “confiscatory taxation” at the horrible, horrible 39.6% rate they are forced to suffer under Obama, who refused to preserve the Bush tax cuts that kept it at the horrible, horrible rate of 35%.

In a very strange coincidence, if it is a coincidence, Capitalism began to return to the path of self-immolation predicted by Marx right around the time Reagan’s “deregulation” began, and now appears to be moving into its endgame.

So I’m wondering if Marxist economic principles adopted during and after the Great Depression — particularly the “confiscatory” tax rates — were directly responsible for the otherwise inexplicable longevity of American Capitalism.

If so, the irony, were we not already drowning in irony, would be entirely too delicious.

So would it make sense to restore a little more Red to the Red, White, and Blue?

I don’t know, but I’m guessing it wouldn’t work at all this time.

The United States in 1946 was a very different place than now. In 1946, we had a spanking-new industrial build-up, were still making our own steel and pumping our own oil, and we were the last man standing (with the Soviet Union) in a world exhausted by war and hungry for products they could not make for themselves. Today, our infrastructure is aged and eroding, our mines and oil wells are played-out, and we are exhausted by war and buying products made by other countries.

The wealthy aren’t really frightened, yet, despite the ridiculous remarks of Tom Perkins and his ilk, and the poor aren’t yet starving in large enough numbers to prevent politicians from trotting out the “only the lazy starve in America” trope. There is no incentive for political power to do anything, and plenty of incentive for it to do nothing. They aren’t going to legislate the New New Deal under current conditions.

But I think the biggest issue is that, if this thin speculation is in any way true, Marxism didn’t really work the last time and is less likely to work now. At best, it slowed the self-destructive properties of Capitalism, but didn’t stop them. Furthermore, it had the side effect of passing the benefits of Capitalism back to the masses: which sounds like a good idea, but it turned a war-weary population hungry for basic goods, into a ravenous mob of “consumers.”

Had the New Deal never been crafted — had FDR, for instance, followed the advice of many of his advisors, suspended the Constitution, and declared himself dictator of a fascist nation — American Capitalism would likely have burned out right on schedule, following the prophecies of Marx, and we’d be living in a very different country (more likely, countries) right now. In particular, the “throwaway consumer society” would never have come into existence in the first place. We’d be using (and wasting) a lot less energy, wasting a lot less raw material, and depending on a lot less hyper-fragile high technology. Peak Oil might be centuries away, and global warming might be a non-issue.

But that’s speculation: consumer society did come into existence, and when the Evangelicals and Ronald Reagan came into power, they were not reptilian creatures from Zeta-Reticuli come to (bwa-ha-ha) destroy our pitiful American economy. They came into power because there was already a problem in the consumer society that the New Deal had created, and they tried to fix it: they called it stagflation at the time, a stagnant economy that was, nevertheless, inflating. It’s something that inescapably happens to any economy that insists on systematically rewarding investment with more than investment is actually worth.

It came about because the US production economy had expanded so fast in the 1950’s and 1960’s, that it effectively saturated all its markets. They could keep making more and more stuff, faster, better, and cheaper, but there was no one left to buy any of it. Everyone who wanted a car and could afford one, already owned one. They were giving away toaster ovens if you opened a new bank account, and all but opening children’s mouths and pouring in Coca-Cola.

The only real solution to this problem is to value investment at what it’s actually worth, which is zero in a zero-growth economy. That was completely unacceptable to the investment class — many of them do not know how to do anything but write checks — so Reaganomics was born. Reaganomics is a shell game (no, don’t look over there, look over here) and it’s why “economics” is such a perilously difficult subject right now: it’s difficult because it’s basically an attempt to describe how to get fine wine out of a turnip by squeezing it just so.

Reaganomics in practice required that high tax rates on the wealthy (earned income, unearned income, and capital gains) — which forced money to recirculate back into the economy, driving inflation — be reduced. They needed to get rid of various regulations, such as those governing banks, so that the wealthy could have “innovative investment vehicles” that were decoupled from the real economy, which was stagnant. They also needed to remove regulations — such as those governing health and safety — to give businesses new opportunities to cut corners, and thus cut costs and thereby generate more profits. Offshoring labor is merely another tactic in this process of trying to squeeze wine out of turnips, as are the various “free trade” agreements the US has negotiated with various trading blocs.

The result has worked well enough for the wealthy, but it started the current cycle of an increasing wealth gap, decreasing effective income, financial bubbles, corporate cannibalism, and job-loss. It has destroyed our working class, is chewing deeply into the white-collar middle class, and is putting pressure on the professional class — talk to any general practice MD, if you can schedule an appointment with one. When it has reduced the middle and professional classes to crumbs, it will start gnawing on the 2%, then the 1%, and finally, even The Donald. Of course it won’t get that far: as soon as the 1% starts to feel pain, political power will move into action. I can’t even guess what they’ll do.

However, at this point we’re well outside the zone where Marxism has any relevance, because our “economy” is something straight out of Alice’s Adventures in Wonderland. We pay people to paint the red roses white, and the white roses red, and add it all to the GDP and call it growth. Then we lay off one of the painters, give the other his work, tell him to “work smart, not hard,” and call it growth. We water the paint, and call it growth. It’s pure madness.

I’ve heard rumors that some of the big mainstream-media outlets, like the Wall Street Journal, are finally starting to recognize that there is a problem. I smell a whole new school of economics in the wind.

Or maybe that’s just the feed lot in Greeley.

This entry was posted in General.

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