1975: Can Capitalism Survive?

Looks like this isn't the first time the doomsayers of Capitalism's demise have raised their collective voices. Here's a cover story article from the 7/14/1975 issue of Time.
"An angry god may have endowed capitalism with inherent contradictions. But at least as an afterthought he was kind enough to make social reform surprisingly consistent with improved operation of the system."

John Kenneth Galbraith

“…Capitalism, Marx reckoned, would pour out more goods than workers could buy with the paltry wages that the system paid them. Wages might rise during a period of expansion, but that rise would cut into profits, leaving capitalists with too little investment money to keep the boom going, and the machine would falter into a slump.

Big capitalists would seize the opportunity to slash wages, buy up the plants and machinery of their ruined brethren and get the boom going again, but the cycle would repeat itself, leading to a worse crash. Eventually, ownership of the means of production would be concentrated among so few capitalists that they would be ripe for overthrow by a proletariat driven by increasing misery into revolution.

Though the apocalyptic prophecy was spectacularly wrong, Marx did point out two highly vulnerable areas in the system. His theory of capitalist concentration anticipated the rising power of large corporations, which can stifle competition and raise prices even in periods of weak demand. More important, Marx heralded the terrifying and prolonged depressions of the 1870s and the 1930s, which classical economics said the self-regulating market would never permit. The nightmare of the 1930s for a while threatened to give Marx the final word.

Fortunately, the Great Depression also inspired the most significant theories of John Maynard Keynes, the British economist who has often been called the savior of capitalism. Keynes insisted that a government could get the free economy moving up again by pumping in purchasing power—through tax cuts, heavy spending and the outright creation of money. Then production would increase, generating more savings, which would be invested. His prescription worked—though it took Government spending on the previously unimaginable scale of World War II to end the Depression. (Keynes also said that tax increases and spending cuts could help contain inflation, but popularly elected governments have seldom been brave enough to follow this part of the Keynesian prescription.)

Since World War II, all capitalist governments have become enthusiastically Keynesian. None would dream of leaving a depression, or even a severe recession, to right itself. By winning acceptance for the idea that government is responsible for the health of the economy, Keynes promoted a degree of state intervention into the market that has helped transform capitalism in a way that Smith never anticipated.

Keynesian philosophy accelerated the trend toward progressive legislation, which had been building in the U.S. since the days of the early trust busters and Teddy Roosevelt, and inspired a bewildering complex of interventionist policies. U.S. companies and entrepreneurs, for example, are restricted by banking and stock market regulations, antitrust prohibitions, consumer protection and antipollution laws, "affirmative action" programs that aim at forcing the hiring of more blacks and women, to name only a few measures. The poor who cannot sustain themselves in the market get Medicaid, welfare payments, food stamps.

Not all of this Government intervention has been beneficial, of course, and some of it has been downright harmful. The operations of federal transportation-regulation agencies, in particular, have often propped up prices and restricted competition. But this complex of laws has on the whole made capitalism both more humane and more effective…”

Read the Time cover story from July 14, 1975.


"You let a Senator get some million dollar contribution behind him and you can't tell me that he wouldn't command some respect and that is what we have got to get back in our Senate that has been lost -- respect!"

Will Rogers


It's All About Decimal Point Placement

Political debate always sends me back to the history books. I was doing a little research on what was happening in and around 1976 and found some interesting quotes that show the debates is the same only the numbers have changed.

Recently a guy at the bar told me "When you were a kid, would you have ever thought that you'd be paying $150 for a pair of tennis shoes?"

I asked the guy who was in his mid-50s (my age), how much he paid when he was a kid. He said $15.

I asked him, "When you were a kid paying 15 cents for a medium come at the Dairy Queen, did you ever think you'd be paying $1.50 someday for a medium cone at the same Dairy Queen?"

"The fact is, we'll never build a lasting economic recovery by going deeper into debt at a faster rate than we ever have before. It took this nation 166 years until the middle of World War II to finally accumulate a debt of $95 billion. It took this administration just the last 12 months to add $95 billion to the debt. And this administration has run up almost one-fourth of the total national debt in just these short 19 months."

Ronald Reagan
March 31, 1976

"As a matter of fact, the Treasury Department just published a prototype consolidated financial statement last month, based on fiscal 1975 figures. It estimated that the deficit in fiscal 1975 was $152 billion, instead of $43 as the final budget figures for that year showed. So, we are really talking about more than a $160 or $165 billion deficit—far more—but even if it were only $165 billion, such a figure would be, and is, fraught with the most serious of implications."

Congressman Phillip Crane 1977
former Illinois Congressman from 1965-2005

"The 1976 Democratic Platform might well add another $200 billion in annual government spending and could, if implemented, create serious and protracted economic problems. The costs in the platform could amount to nearly $1,000 in new federal spending for every man, woman and child in the United States and would create real risks of a return to double-digit inflation which would rapidly erode the savings, earnings, and economic security of all Americans."

William Simon
Treasury Secretary under Nixon

Read more @ Imprimis.


An Unbalanced Check

"You see, in Washington they have two of these bodies, Senate and the House of Representatives. That is for the convenience of visitors. If there is nothing funny happening in one, there is sure to be in the other, and in case one body passes a good bill, the other can see it in time and kill it."

Will Rogers