I try very hard to confine what I write to economics, but there is an election in the near future that compels me to make some observations.
I'm afraid I'm in agreement with Paul Krugman that if Republicans gain control of the House we should be "very afraid." I'm sorry to say this, but unless you expect to inherit immense wealth or you are already in the top 1-2% of the income distribution I think you would be nuts to vote Republican. I base my opinion on the stark economic results of their nearly invariant beliefs and their performance over the last 30 years.
Watching Tea Partiers, elderly Medicare beneficiaries, disabled Social Security beneficiaries, those who labor (sometimes 2-3 jobs) to put food on the table, and so-called libertarians vociferously oppose the current administration's amazingly conservative efforts to haul us out of the economic crater that the dominant Republican economic philosophy (aided and abetted by at least a few Democrats) has put us in causes me great alarm. It's like watching serfs, entirely dependent on the (hoped for) beneficence of their feudal lord, stripped of every excess over subsistence of the product of their labor, clamoring that more be taken from them and given to that lord. Presumably because someday they might get lucky and miraculously end up to the manor born (or married).
"But, wait," you say, "this can't be right. The Republicans stand for freedom, liberty, and the American way." To which I say, "Well, you've got a funny idea of freedom." You see, the last time I checked, the US Constitution protects me from the US government. As far as I can tell, there is nothing that protects me from large corporations, except the US government and the court system. And these days, the US government and the courts, largely thanks the dominant Republican economic philosophy, aided and abetted by the bipartisan repeal of Glass-Stegall in 1999, aren't doing such a great job of this.
Here's Senator John Sherman, OH-R (back in the days when Republicans understood the harms inflicted on the rest of us by concentrated power and wealth):
“concentered powers” [if] “intrusted to a single man . . . [becomes] a kingly prerogative, inconsistent with our form of government”. “We should not endure a king [over] the production, transportation, and sale of any of the necessaries of life”.
And yet we have endured kings of finance and production. Republicans and their philosophy have shaped our economy for thirty years.
Unfortunately, thirty years of economic distortion is like thirty years of drug addiction. When you try to get sober, it's expensive and it takes a long time. This is because for a very long time you have made the wrong investments in physical, human, and financial capital. Now you have to figure out where you would have been if you hadn't spent all that time and money getting high and try to restore your life (or economy) to something that approximates it. While all this is happening it's hard to tell for sure whether or not you're on the road to recovery or the road to relapse, much like it's difficult to see signs of economic recovery even when we're in one.
Over time, the Sherman Act of 1890 has been eroded, but it remains as an example of the proper role of government in protecting the welfare of the rest of us by limiting the extent to which concentrated wealth and power can distort investment and extract rents from us. Think of rents as a form of tax (yes, I said "TAX") that we pay to corporations. Rents are profits. High profits can be good when they are reinvested to produce more or better products, to signal other firms to enter a market thereby providing more and driving down the price we pay for it, to reduce costs of production (leading to a lower price that we pay), to produce new and innovative products that make us all better, or when they reward all of the above. If they are used to speculate in financial casinos or if they reflect the higher price above cost that excessive size and market power enable without a commensurate addition to our own welfare, then our well-being is almost certainly reduced.
Sherman recognized something that Adam Smith had also recognized. Here's Smith (Wealth of Nations, I.10.82) :
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
Sherman also recognized something that has been lost in the discourse about capital and commercial exchange: enterprise generally, but large enterprises particularly, have a "quasi-public character." Large firms undertake activities that used to be possible to undertake only by large and wealthy governments. They yield benefits and harms beyond those of the goods produced and exchanged. Benefits might include economies of scale that produce lower prices and higher consumer surplus unless those same economies of scale increase market power and enable monopoly rents. In the case of health insurance, increased scale could lower underwriting costs and spread risk more efficiently. Harms might include pollution and the erosion of competitive forces and the accompanying loss of consumer surplus from monopoly pricing. Harms might also include high unemployment and severe recessions like the current one.
Markets, free or otherwise, will not automatically fix all harms or yield all benefits. That's why, to be successful, capitalism requires regulation and fine tuning.
You see, in a capitalist economy, wealth and well-being are supposed to redistribute to everyone. As capital is allocated and risk managed more efficiently, more opportunities are created for all. Wealth and well-being are supposed to become less concentrated in the hands of a few and more dispersed to the hands of the (often more and increasingly) productive many. Much of Wealth of Nations is devoted to describing the instances and the conditions under which this seemed to be occurring as the economy of Great Britain transitioned from feudalism to one of commercial exchange, industrial production, and small business owners.
After thirty years of Republican economic philosophy, we have extreme and continuing income inequality. Unless you are willing to believe that only a very few possess the skills and abilities necessary to produce universal opulence, you can hardly support a political philosophy hellbent on creating a society in which only a few reap the rewards of societal output while the rest of us bear the costs and fall behind. And if you do believe it, then you had best be able to point to the resulting universal opulence that is supposed to have "trickled down" and in which we should now all be partaking. If you can't, then the underlying philosophy is flawed. This philosophy has dominated the US for thirty years. It has gutted government and packed courts. Things are much worse economically. An alternative philosophy has had only two years to attempt to remedy the culmination of those thirty years and has accomplished much that is good and in the right direction, yet some are ready to throw it out after two years.
Some of you will point out that elected US lawmakers of both parties appear to be wholly owned by corporations and finance. Even if you believe this, it hardly argues for shrinking government, thereby giving corporate and other interests even more unfettered power. It argues for a political philosophy that believes government serves an essential purpose in an advanced, complex capitalist society: that of countervailing force against those interests when they are harmful to the rest of us and helpful to those interests when they are beneficial to us. That philosophy requires government to be as large as it needs to be to countervail. And it requires that government be viewed as capable of being efficient and that the culture and norms of government be those of public service, not public pillage.
Such a philosophy also requires an alert and educated electorate that is not side-tracked by emotionally laden issues, an electorate that recognizes that unless we want to be wholly under the boot of unfettered financial and political power (and the cyclic havoc they can create), some government administered, taxpayer supported economic and ethical stabilizers (such as unemployment benefits that last as long as investment banker-induced downturns, health insurance for everyone, a safety net for the aged, infirm and unlucky, regulation of investment banks and consumer financial products, and government stimulation of aggregate demand when the private sector has become so misshapen that it cannot be jump started through monetary policy alone) are justified.
So when you vote on Tuesday, and you must, remember the goal here should be to elect lawmakers who will stand up to concentrated wealth and power by strengthening government and the laws that protect us, not by dismantling it. Remember that freedom is much more than "nothing left to lose." "Nothing left to lose" is what most of us are likely to achieve if the current Republican party's political philosophy regains power. If that happens, I very much fear, that it will re-create a society not unlike the one that Adam Smith was so glad to see commercial exchange, the division of labor, and the increasingly efficient and prudently risk-averse allocation of capital leave behind.