Economic Justice

Introduction

How do we think and talk about economics in America? Typically, we start with the assumption that capitalism is good, communism is bad, and socialism is just a form of communism that eventually becomes communism. Bottom line: Capitalism is good and both socialism and communism are bad. As a result, the U.S. economy is run almost exclusively as a capitalist enterprise.

But we have a problem in our economy. The distribution of wealth is all out of wack. Wealth is not being distributed. Wealth is being accumulated in fewer and fewer families. Poverty is growing, and the number of families and individuals living from pay check to pay check, living in economic insecurity and stress, is growing. That is unacceptable in the richest country in the history of the world.

Obviously, our economy is being run badly. But how do we fix it? A major assumption I established in Let’s Get Civil is that how we fix things depends not just on what we think but also on how we think. So let’s start there. How do we think about economics? And to help us think, we are going to use The Golden Mean, a very old intellectual tool. Intellectual tool: a pipe wrench for the brain.

Mean is the middle or average of things. The Golden Mean is precious, something to be sought, achieved. Good. The Golden Mean has been used in moral philosophy since Aristotle. Courage is good. We all want our children to be courageous, but we also want them safe. And we sure don’t want them taking stupid risks. So how do we talk to them about courage. The Golden Mean helps.

The two equally dangerous extremes of action that involve courage are recklessness and timidity. When we are reckless we act without considering the dangers, the results of our actions to ourselves and others. We risk causing undue harm. When we are timid, we cannot act. We risk doing undue harm by not acting.

Courage is the Golden Mean between the extremes of recklessness and timidity. Notice, by identifying the extremes of courage, we gained insight into the Golden Mean of courage, and we can even think of behaviors that fall on the continuum from reckless to the Golden Mean and from the Golden Mean to timid.

What is the Golden Mean in economics? Well, what are the extreme forms of economics, the dangerous forms of economics. One extreme is communism. It destroys itself in practice. But what is the opposite of communism? What is the other extreme that combined with communism helps us think about economics?

We have just identified a major problem in how we think about economics. Capitalism is not an extreme. Capitalism does not inevitably destroy itself in practice. But it is currently flawed by becoming radical. But if it is becoming radical, what is it moving toward?

In Let’s Get Civil, I attempted to rekindle interest in Mercantilism. Mercantilism was the economic system that operated in England and much of Europe at the time of the American Revolution against England. Our forefathers rejected Mercantilism and adopted capitalism which had been introduced by Adam Smith in 1776 with his book, The Wealth of Nations.

So what is Mercantilism? It is the economic system that replaced feudalism. Feudalism was a loosely organized economic system that put the vast majority of decisions in the hands of lords and their vassals who were mutually responsible to each other. The King owned all of the country’s resources and divvied them up among the nobility as a means of maintaining control. But lords and vassals had a lot of control. And by extension, so did emerging craftsmen and tradesmen.

But then monarchs figured out that they could get really rich if they took the same kind of control over their economy as they had over other laws. The result? Mercantilism. A few keys to mercantilism. First, the goal of mercantilism is to increase the nation’s wealth. Second, all of the nation’s wealth was owned by the monarch. I discuss mercantilism in greater length in Let’s Get Civil, so this is adequate here.

What we must know is that all decisions are made by the monarch and his closest allies among the aristocracy. These allies are known as oligarchs. The monarch shares the wealth with the oligarchs whose major job is to protect the monarch. Old theory, totally out of date? Nope. It is alive and thriving in Putin’s Russia. Putin controls the Russian economy and has used that control to make himself what some claim is the richest man in the world. No dispute, he has made himself really rich. And his henchmen, his oligarch, very rich. Rich by the standards of the very rich.

Now back to the Golden Mean of Economics. The extremes are mercantilism and communism.

Socialism’s extreme is communism. Capitalism’s extreme is mercantilism. The King of England used mercantilism to rip off the American colonies and it is the system our founding fathers rejected in favor of capitalism. Putin is using mercantilism to rip off the Russian people, and Donald Trump who is a big fan of Putin appears to want to move the American economy toward mercantilism. Are Trump and his friends oligarch wannabes? So now we have our extremes, mercantilism and communism, and a new sense of urgency about understanding both. What is the Golden Mean?

To understand the Golden Mean of economics, we must acknowledge the two major goals of any just economic system: to generate wealth and to distribute wealth.

Capitalism is great at generating wealth, but as we have seen in recent and past experience (Robber Barons), capitalism also tends to accumulate wealth.

Socialism is best understood as our economy’s cost center. It does not generate wealth, it uses the nation’s wealth to provide goods and services that are essential to life and safety and cannot be provided justly through capitalists enterprises. No shocker. All capitalist enterprises have cost centers and so does our economy. Police and fire protection are provided to everyone by the government and funded through taxes. Taxes come from the wealth created by capitalist enterprises. Even if we tax the salaries of police and fire protection personnel, we tax money that was paid to them from taxes that were collected from capitalist sources.

Capitalist enterprises create our nation’s wealth and fund socialist enterprises. But without socialist enterprises, there is no just distribution of wealth and essential goods and services are denied to vast numbers of families and individuals.

Capitalists hate taxes and regulations. But without taxes and regulations, capitalism moves inevitably toward mercantilism and destroy itself (it ceases being capitalism and becomes mercantilism) and it destroys socialism by starving it to death.

Socialism depends on taxes and regulations to assure the just distribution of goods and services. But without capitalism, socialism moves inevitably toward communism and destroys itself and capitalism. It starves capitalism of the capital it needs to grow and prosper, to generate wealth. As capitalism’s capacity to generate wealth declines, its capacity to fund socialist enterprises declines. That is how radical socialism destroys itself.

So! The Golden Mean of Economics includes both capitalism and socialism. Both have a tendency to go extreme, so we place them in what I call a morally grounded pragmatic dialectic. You can read more about the morally grounded part in my discussions of moral philosophy and the pragmatic part in my discussion of social science. Here we just introduce them as we focus on dialectic.

Aristotle used the term dialectic to refer to the back and forth that takes place in rational conversations and improves the thinking of all the participants. Hegel was more precise. He defined the dialectic process as consisting of a thesis, an original claim, that is contradicted by an antithesis. Again, there is a back and forth between the two sides and the result is the synthesis of the two which Hegel claimed was always better than either the thesis or antithesis.

I use pragmatic as shorthand for paying attention using the scientific method of social science which I describe pretty fully in Let’s Get Civil. Key is that when we make either a capitalist or a socialist law or policy, we must define its goals and translate those goals into mathematically structure hypotheses so that we can test them in practice and analyze the results using appropriate statistical analysis. That process gives social science a legitimate claim to being science.

The morally grounded refers to the ultimate moral goals of our country which are enumerated in Let’s Get Civil. The goals of our capitalist and socialist laws and policies must contribute to those ultimate goals, even if their application in our economy is more immediate that those ultimate goals.

Readers visiting this website who have read Let’s Get Civil will find all this clear, maybe redundant. Readers who have not read Let’s Get Civil hopefully will realize that they should. But in either event, this brief introduction creates The Golden Mean of Economics which allows us to get rid of several disruptive ways of thinking and talking about economics.

Capitalism is not the ultimate good of our economic system. It is a vital part that must be supported so that it creates wealth and also must be regulated so that it does not go radical, and it must be taxed to support socialist enterprises that are vital to the well being of all of our people.

Socialism is not an inevitable step on the way to communism. It is a vital part of our economic system that must be funded by capitalist enterprises and must be regulated so that it serves our people effectively and efficiently. Effective: it does what it says it will do. Efficient: It uses the fewest possible resources.

Balancing capitalism and socialism requires a process. A dialectic between capitalism and socialism. As an economy/society we decide which economic enterprises should be capitalist and which should be socialist.

How do we control socialism and capitalism? Government laws and regulations. How do we know what works? Set goals. Pay attention to results. When needed, change laws and regulations.

How do we control international socialism and capitalism. International governing bodies that have the power to control both rich and powerful capitalists and rich and powerful socialist bureaucrats.