(C.2.a) Baby, You're a Rich Man
One thing about Figure 1 we have not yet explained is Republican's support for "big business." Republicans are more likely to view total wealth as something created by human action, whereas Democrats are more likely to view total wealth as something that is fixed an unchangeable, and the only decision to make is who gets what portion of that wealth.
If humans are alone on a island they can produce little, but they are highly productive when they are matched with machines and technology. Wealth is defined by the amount of goods and services we produce, and so we can only be wealthy if we are productive. Ordinary people today have so much more wealth than their grandparents because America can produce so much more stuff, and this is because we now pair humans and machines in such a way that workers are incredibly productive. Who bought those machines? Who bought the factory? Who gave Steve Jobs the money he needed to develop, produce, and market iPads? Who gave Monsanto the money they needed to develop pesticides and genetically modified organisms?
Some of the money used to buy capital (capital meaning the assets people use in the workplace, from computers to a welding machine) comes from the savings and investments of the middle-class, but most of it comes from rich people. Yes, the rich people fund the building of factories, machines, and equipment that increase our productivity at work, and thus allow us to earn higher incomes. What would happen if Republicans followed Democrats lead and disapproved of big business? We could go around confiscating the wealth of the wealthy and give it to the poor. We could be modern-day Robin Hoods. We would become wealthier now, but this type of confiscation would discourage the wealthy from investment the money in factories and machines, and without those two assets, we would become much poorer in the future.
In 1991 the Library of Congress surveyed Americans, asking them to name a book that had made a difference in their lives. The most cited book was the Bible. The second most cited book is Atlas Shrugged, by Ayn Rand. Recently made into a movie, this novel depicts an America where successful businesspeople find their businesses increasingly regulated and confiscated by the government. In protest, the capitalists exile themselves from society. Without the capitalists the world simply doesn't work. Factories are not built, maintained, or operated efficiently. The trains don't come on time, and they crash.
Rand's purpose in writing the book was to demonstrate that a business-person can only become wealthy by providing value for society, and if they are not allowed to make profits, then society loses, also. Rand would know. She emigrated from Russia, where she saw the communists confiscate her fathers pharmacy and destroy the nation.
Video 14—Opening scenes of movie Atlas Shrugged (Part 1), Based on Ayn Rand's Novel
(must use Internet Explorer)
(watch and comment at Critical Commons)
Indeed, fear of confiscation is one of the reasons the Great Depression was "Great." We have already seen how the Progressive Movement was a democratic movement seeking to constrain the wealthy and place them under, not above, the American citizenry. As labor battles became bloodier and the Depression harsher, many of America's wealthy feared a fascist or socialist (there's really little difference between the two) takeover of the country. Indeed, one group of businessmen actually sought to install a fascist dictator they could control (sounds outlandish, but I assure you it is true).(B1)
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As for private businessmen, they still hesitated to make new investments. Why, the president mused one night at dinner, did they lack confidence in the economy? Because, Eleanor replied tellingly, "They are afraid of you."
—David M. Kenneddy. 1999. Freedom From Fear. Oxford University Press: NY, NY. Page 363.
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A poll was conducted in 1941 asking business executives what they thought America would be like after the war was over. Around 40% of the executes said they thought America would become a semi-socialisted society with little room for the private sector.(H1)
It should not be surprising to learn, then, that one of the main obstacles to a recovery during the Depression was a lack of private investment. Business people simply did not have confidence they would be able to keep a factory they built, because the government would either seize the factory, would tax them into non-existence, or labor unions would gain control of the factory. If you think about it, if a factory is unionized then the factory can only hire through that union, which means the union can shut down the factory anytime they wish by calling a strike—this essentially gives the workers a partial ownership of the factory, ownership they took by force, not by payment.
Figure 6—Labor and Capital Need One another
 labor needs capital.jpg)
The point is that labor and capital need one another, and the wealthy do not necessarily take the wealth of others as they gain wealthier. If they act ethically, they give people like Bill Gates money to start Microsoft, that company creates world-changing products like Windows, and the whole world benefits from that product. Windows, iPads, these things would not exist if rich people were not allowed to invest their money in pursuit of more money, and nor would the jobs those inventions create. This is an economic fact that Republicans are more willing to admit than Democrats.
This belief that one can make the world a better place while one earns profits is relatively new in the history of humans. Prior to the eighteenth century the pursuit of profits through industry or trade was considered rather ignoble. The ancient Chinese class system put merchants at the very lowest class, below peasants and artisans. Jesus expressly said rich people would not get into heaven, so it is not surprising that Medieval merchants were thought to live a sinful life, or that Saint Francis of Assisi refused to touch money. There was only one society that respected merchants in the Medieval Age—Islamic society. This negative attitude towards business people was amplified once the communists assumed control over China, and herds of young revolutionaries would beat and kill people simply for owning a store (see video below).
Video 15—Attitudes of 1960 Chinese Towards Capitalists, from the documentary, The Mao Years
(must use Internet Explorer)
For most of human history business people were not respected for their trade. Then something remarkable changed in eighteenth century Holland: for once, the earning of profits was deemed a virtuous activity. More people then pursued profits, and did so by building factories, learning better ways of producing products, and increasing trade. All of these activities increased the amount of goods and services produced, and in the processed increased Holland's wealth. This was the beginning of the Industrial Revolution, where for once, a successful factory owner was respected by society, not only for his wealth, but for how he acquired his wealth. Britain recognized Holland's success and copied it, then America copied Britain.(M1,M2)
Both Republicans and Democrats carry on the American culture of respecting the pursuit of an honest profits, but Democrats have their limits. A small business owner in the Middle Class is respected by most Democrats, but many Democrats have trouble believing "big business" is a contribution to society, and this you see their disapproval of big business in Figure 1.
(C.2.b) American political ideologiesThe purpose of tis article is to help students think deeply about the politics behind economic issues. Hopefully, a few found their political identity in these readings. I leave you with an editorial written in The Wall Street Journal, suggesting big government is here to stay, but America will still be a pleasant place so long as Republicans play their role of preventing government from growing too large and making government more efficient. I agree with the editorial, and hope that you can see a productive role as an involved citizen, regardless of your political affiliation.
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The first entrenched reality is that big government is here to stay. This is particularly important for libertarians to absorb. Over the last two hundred years, society and the economy in advanced industrial nations have undergone dramatic transformations. And for three-quarters of a century, the New Deal settlement has been reshaping Americans' expectations about the nation-state's reach and role.
Consequently, the U.S. federal government will continue to provide a social safety net, regulate the economy, and shoulder a substantial share of responsibility for safeguarding the social and economic bases of political equality. All signs are that a large majority of Americans will want it to continue to do so.
In these circumstances, conservatives must redouble their efforts to reform sloppy and incompetent government and resist government's inherent expansionist tendencies and progressivism's reflexive leveling proclivities. But to undertake to dismantle or even substantially roll back the welfare and regulatory state reflects a distinctly unconservative refusal to ground political goals in political realities.
Conservatives can and should focus on restraining spending, reducing regulation, reforming the tax code, and generally reining in our sprawling federal government. But conservatives should retire misleading talk of small government. Instead, they should think and speak in terms of limited government.
—Berkowitz, Peter. December 12, 2012. "Conservative Survival in a Progressive Age." The Wall Street Journal. A17.
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