SOCIALISM USA STYLE

I've tried to keep my political opinions outside of our newsletters, but today the gloves are off. Today, few understand the real problems inherent with government planning as a way to solve economic and social issues. The past shows us how this path is fraught with dangers and creates bigger long term problems. But as our last newsletter pointed out, like lemmings, most people follow the crowd off the cliff.

 

In the fall of 2001 after the Patriots Act was passed into law, I authored an article entitled “Welcome to Camp America.” This was at a time when American patriotism was at its high point. To even question steps the government was taking post-911 was unAmerican. The hate email in response to the article could have wallpapered my office. My conservative Libertarian views and the American flag flew high and proud in memory of those who perished in the Twin Towers, but I felt someone had to speak out against the path the US was heading by passing the Patriots Act.

 

Today, the USA is suffering a huge "brain drain" (see the WSJ), the government has taken over the banking and financial industry, socialized the home mortgage industry, controls the American automotive sectors, and Bernanke, Geithner and Obama still call for heavier regulations over the housing markets. And too, the government is effectively taking over the medical and health care industry, and now wants your 401(k) and IRAs held in government debt. What’s next?

 

I don’t have a crystal ball, and don’t lay claim to seeing into the future. But I am a good student of history. And while history never repeats itself precisely, there are common paths of denigration repeatedly taken again and again by humanity. It is painfully obvious today that America is on the same path many other fallen political systems have taken before. Where has common sense gone?

 

 

Truth be told, the US is like a mighty battleship on course to its destiny. While the ship might lean to the right or to the left with each new Washington administration, it has been on the same steady course for the past four or five decades, if not before. And even though the current administration has gone full throttle with its new social programs, the course was already determined many administrations before it.

 

While the above might sound incredulous, think about it for a moment.

 

At the turn of the prior century in 1900 America was experiencing domestic and infrastructure growth arguably on par with what China is experiencing today. At that time and during the 200 or more years before, the world was awash in global trade, the free movement of people and capital was the norm, and individual freedoms were greater than at any time during this past century, even when compared to the explosion of globalization during the 1990s following the invent of the Internet. 

 

Recall that America reluctantly entered WWI, and a decade later, after another round of prosperity during the 1920s, the world economy collapsed. To resolve the suffering across America, President Roosevelt signed into law during the 1930s a complex set of programs he called the “New Deal” to provide a social security net for the elderly, and unemployment and welfare programs sprouted into life to fix the “inequities”. The US also entered WWII reluctantly after its naval base was attacked at Pearl Harbor, but after the so called war to end all wars ended, America, along with the USSR and what was left of the former mighty British Empire, carved up the world into a new economic and social order, with the US at the helm.

 

Have no doubt that a planned world order took place during the 1940s. From the Berlin Wall to Bretton Woods, the growth of the World Trade Organization and the United Nations, the global financial, social and economic structure were under new management. The world was to exist for the next 40 years as part of the Roosevelt-Churchill-Stalin management plan.

 

In the US, roads were built to nowhere to create jobs, and the average worker had social programs and entitlements to fall back on. The American government was a full fledged disciple of Keynesian Theory consisting of government planning and control of the economic and social systems. Capitalism and free markets thinkers like Austrian Friedrich Von Hayek and the Chicago School of Economics were non-existent. Free market thinkers were shunned for even arguing that freedoms were lost within a planned system. Post WWII America prospered for a time under the new planned system with its new sense of security at home and in the world. But have no doubt: the seeds of socialism were firmly planted across American soil even though arguably unnoticed, except maybe by Senator Joseph McCarthy.

 

Keynesian Theory in the US was at its heights during the 1950s. But the Keynesian fallacy of the government succeeding at the helm of the economy and providing secure social protection and entitlements were already under strain by the late 1960s and early 1970s. Some called the rebellion that followed against authority “social disorder”, while others called it the dawning of the Age of Aquarius. And a new waive of baby boomers started demanding more freedoms and rights, even as President Kennedy preached a social mantra “Ask not what your country can do for you, but what you can do for your country.”

 

Americans had already become over-confident in its new global place in the world after the two great wars. As President Kennedy drew a line in the ocean against Russian missiles in Cuba, the US was over-expanding its presence in the then Eastern Block countries, and around the globe in Islamic cultures. Of course, subsidized oil was never an issue. Over-extended social and entitlement programs at home, an excessive political and military presence in Vietnam and elsewhere, resentment to American hegemony…..and hubris was hiding just around the corner.

 

 

In 1980 President Reagan and Prime Minister “Maggie” Thatcher of Britain walked onto the scene. These were no small steps as Keynesian Theory, government intervention, and socialism around the globe were taken to the woodshed. Fresh theories of free markets and capitalism gave birth to fresh freedoms and wealth creation. Born-again free-marketers Reagan and Thatcher were disciples of once scorned Von Hayek, and Thatcher proclaimed in Parliament that Von Hayek’s book “The Road to Serfdom” was the new bible. (Von Hayek, ridiculed for his arguments against social programs as a young university student in the late 1930s for writing his classic warning against the dangers to freedom inherent in social planning, won the Nobel Prize for Economics in 1976.)

 

And then, 1989 was a “miracle year” as solidarity was found in Poland, the End of the Cold War led to the Berlin Wall coming down, and protesters in Tiananmen Square stood up to Chinese government tanks, as free markets, capitalism and freedom spread again across the planet…..all before the Internet took hold. Then the growth of globalization sprouted during the 1990s, but this was to be short lived.

 

During the 1990s the free markets first expanded, but then boiled-over into bubbles fueled by excessive amounts of cheap money pumped into the financial markets by obliging Federal Reserve banks across the globe. This was led by America and Japan, the two largest economies, with the most to gain. A financial crisis fueled by excessive government liquidity began in Mexico in 1994, and then Asia during 1997 and 1998.

 

The global contagion spread from Asia to Russia to Brazil and Argentina and then brought down the impenetrable US Ivy League “genius team” at Long Term Capital Management participating in global financial investments in excess of $1 trillion around the world. By the late 1990s the financial markets had become like a drug addict in need of withdrawing from its addiction to excessive cheap money. But in each case, governments around the world, led by the US Federal Reserve, gave another shot in the arm of more cheap money as the fix.

 

There should be no surprise to Greenspan’s response to the Tech bubble bursting in 2000 or when Bernanke’s started dropping money from helicopters at the onset of the 2008 crisis. Or even the Republican Party’s response in 2001 to September 11 – the once conservative bastion and protector of economics and freedoms – to gear up more rules and regulations, and more cheap money. The free movement of people and capital was to be governed by the passage of the inappropriately named “Patriots Act”, one of the worst recent laws in the US.

 

And then the Day of Reckoning appeared in late 2007, early 2008. The world was coming to an end as we knew it. But as sick as the global patient appeared, the cure was to be even worse. “We’re from the government, and we’re here to help you” echoed across the globe.

 

But the day of official proclamation to the loss of our free markets, capitalism, and freedoms came when a newspaper headline read in large bold letters: “Are We All Keynesian’s Now?”

 

Few economists and bureaucrats bother to argue that Reaganomics and Thatcherism are still intact. It really boils down to how far and how fast we are drifting away into the abyss of more government planning and more government controls. The swift acceleration of government planning in America and Western society into every aspect of our lives, quickly spread like cancer and is apparent everywhere…you don’t have to go looking for it.

 

And new government planning is built upon an already faltering system: government border controls firmed up in the name of a war against terrorism; government tax increases and compliance regulations discouraging individual investment and spending offshore; government managed and funded legal systems out of control; government planning and ownership in the once mighty automotive industry; government financial markets taken over and increased regulations in the making; failed government outcome based education, social security, VA and welfare programs; local government police trained to act diligently in the name of terrorism as paramilitary agents in place of those once designed to serve and protect; America’s Exit Tax passed against individuals seen as fleeing the US; more and more taxes to redistribute your income and assets “equitably” as some government stooge determines what is fair..….and the list goes on and on.

 

And now forced buying of US government debt with your 401(k) and IRAs, and government control of your health care? I’m starting to feel really ill.

 

 

Other groups before the US have already tried a system of highly regulated industries, with tight, vigorously enforced regulations. Each of them found it didn’t work. For one, ask the Russians, comrade.

 

Government planning is almost complete. When will someone in America have the courage to stand up against the loss to their liberties?

 

The Italians, the Germans, and the Russians, to name but a few, didn’t wake up in the 1930s to totalitarianism and fascist governments on a Sunday morning. In all cases social planning expanded slowly over decades. As David Hume once famously stated “It is seldom that liberty of any kind is lost all at once.” Yes, liberties and freedoms are generally lost one step at a time.

 

Sorry to say, but from where I sit, it makes no difference who is at the helm of the battleship US. Whether it leans to the right or leans to the left doesn’t matter when its heading is off course. The changes at home are far more serious than America’s threat of terrorists offshore. There is more than enough damage happening right at home.

 

I love all that America once stood for and as I remember as a young boy. America once offered the opportunities of choice, liberty and freedom to succeed or fail as a young man. But the “old norm” and the “new norm” will never be the same.

 

Every time a new law or another government control is passed, it means more lost liberties and freedoms for individuals. The trade off is simple. Either you are in control, or someone else is in control of you.

 

Fortunately, our family took steps years ago so that our children and their children might have fresh choices being multi-national citizens with access to the world. Having choices is what freedom is all about. Respect for other people and their cultures and religions is where it starts. It is my wish for all Americans to have that same opportunity, at home or offshore, in search of the new Global Dream. But it won’t happen on its own. You will need to take steps for a fresh future. Worth repeating is that either you are in control, or someone else is in control of you.

 

You too can pass on your legacy by opening the doors with international planning and global diversification not found at home. But the exit is getting crowded as everyone tries to leave at the same time. Here’s a link with a few more tips.

 

Until next time……

 

David