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Saturday, August 07, 2004

The Economics of Liberal Values - Part Three: Consumption vs Savings

The core religious dogma of liberalism proclaims that equality of income and wealth is the foundation of a good political society.  The attempt to achieve equality of income and wealth impels liberals to subsidize consumer spending and to tax individuals’ savings. 

Every society embracing this credo has gone downhill toward economic and social oblivion.  That’s the prospect facing the United States over the coming decades.


High rates of consumer spending play a critical role in the secular religion of socialism and its American sect of liberalism.  Liberals, both Republicans and Democrats, place their hope for salvation in the purely materialistic factors of economic welfare.  If, as liberal-socialists believe, there is no such thing as human nature, then carefully planned and controlled channeling of consumer spending power toward favored social and economic classes can perfect human behavior and create heaven on earth.

Liberals’ world view is very different from the world view of the colonists who founded the United States.  The cosmological perspective of liberal-socialism extends no farther than the present time and the material goods and services immediately at hand.  While liberals speak of “investing” in the future, for example with education expenditures, the reality is not improved education, but simply bigger teachers’ unions that provide stronger political campaign support for liberal-socialist politicians. 

In stark contrast, the traditions of Western civilization when the United States was founded were embodied in Judeo-Christian spiritual religion and its emphasis on individual responsibility.  Personal conduct was regulated by principles of morality, not least among them being the dictum of hard work and self-denial to provide for a better life for future generations.  This meant saying, “We can’t afford that,” and putting money aside for children’s education and long-term projects such as home-ownership.

Judeo-Christian morality stands athwart the path toward socialistic equality and hedonistic license, both expressed in heedless consumer spending.  Liberals therefore aggressively attack spiritual religion as the enemy of progress and the oppressor of human rights.  Blather about the First Amendment’s anti-establishment clause is merely a cover for the extermination of spiritual religion.

Liberal-socialism, when it’s boiled down to essentials, is no more than the belief that the meaning of life is “eat, drink, and be merry, for tomorrow we die,” the credo most blatantly exemplified by Hollywood.  Since there is no God, no Hereafter, and no Final Judgment Day in the cosmology of atheistic liberal-socialism, one need not be concerned with oppressive traditions of morality that interfere with immediate, hedonistic gratification. 

Materialistic Aspects of Emphasizing Consumption:

The bottom line for liberal-socialists naturally becomes consumer spending as the be-all and end-all of life.  Liberal politicians like Democratic Senator Ted Kennedy and the late Republican Governor and Vice President Nelson Rockefeller become, in effect, the priests of this secular religion, proclaiming the gospel of the political state as the savior of humanity and the dispenser of the wherewithal to consume.

Liberal politicians reflexively denounce “tax cuts for the rich” and demand increased handouts for their religious faithful (“the people”) to support higher consumer spending.  There being no future beyond one’s own lifetime, in the atheistic doctrine of liberal-socialism, the imminent and ineluctable bankruptcy of Social Security and Medicare and the certainty of a crushing tax burden on our children and grandchildren are not valid subjects for political consideration.  The political priests of liberalism blithely propose to compound the disaster by enlarging entitlements with a full national health system.  Tomorrow is socialism’s Never-Never Land, and they will be out of office when the chickens come home to roost.

Economist John Maynard Keynes, the guru of government spending in the 1930s Depression, articulated the liberal-socialist economic rationalization for exclusive focus on consumer spending.  Keynes theorized that the cause of the Depression was the people’s bad habit of saving money for the future of their families. 

This is what Keynes called the liquidity trap: if people don’t immediately spend whatever they receive in their paychecks, then business has to decline and eventually go into a recession.  If people save 5% of their paychecks, then consumption expenditures, in Keynes’s simplistic theory, will drop 5% each payday, sales will decline, and businesses will have to lay off workers.

On the face of it, this is ridiculous nonsense.  If nothing else, one may ask how the United States became the industrial colossus of the word while people still prudently saved as much as they could.  What magic event in the cosmology of socialism could possibly support the Keynesian, socialistic theory that all of history had been invalidated by the mystical revelations delivered to Saint-Simon, Comte, and Karl Marx?

On an empirical basis, that is, looking at real daily life, it is obvious that savings by individuals don’t disappear; they are not buried in the back yard or stuffed under the mattress.  They are invested with banks, insurance companies, mutual funds, and other fiduciaries.  Those institutions, in turn, invest the savings to finance business expansion and the building of newer, more productive plant and equipment.  Businesses that design and manufacture these production buildings and equipment, needless to say, must employ and pay people to do their work, which means that Keynes’s liquidity trap is an absurdity.

Liberal policy, however, implicitly denies that productive investment plays a meaningful role in the level of economic activity.  Liberals go out of their way to penalize the savings and accumulated wealth that finance long-term investment in innovation and improved production capacity and efficiency.  Higher marginal income tax rates, Alternative Minimum Taxes, and double-taxation are imposed on inherited wealth and on the dividend, interest, and capital gains income from savings in order to discourage the selfish tendency to save.

After all, those savings, or capital, are what Karl Marx identified as oppressive capitalism.  As Michael Walzer, a leading spokesman for American liberal-socialism, states it, there can be no freedom when some people have more wealth and income than others, because private wealth is, by socialist definition, oppressive power.

What then is to be done when a recession comes along, and some people lose their jobs and have to reduce their consumption spending?  Keynes’s answer, and still the policy of choice for liberals, is to create ad hoc benefit programs that put more money into lower-income hands to stimulate consumer spending. 

In Keynes’s view, it doesn’t matter what the government spends its money on.  The government, Keynes suggested, could employ people to dig holes one day, fill them the next day, then re-dig and re-fill them ad infinitum.  The only important thing is that the government spend as much as possible in order to put consumption funds into consumers’ hands. 

Traditionalists objected that, while spending may temporarily benefit the favored social classes who get welfare-state handouts, over the long run, it damages the economy and society as a whole.  Welfare-state spending that does not produce useful goods and services that people will buy of their own free will, traditionalists said, is both immoral and inflationary.  Keynes’s flippant retort was “in the long run we are all dead,” an answer in full congruence with the “eat, drink, and be merry” hedonism of Hollywood’s liberal-socialists.

Beneficiaries of these make-work projects, in Keynes’s theory, will be too short-sighted to worry about the future and won’t save anything from their Federal paychecks.  They will theoretically rush out and immediately spend every penny they receive to energize the economy.  Thus, in liberal-socialistic Keynesianism, the more money that the government can dole out to citizens, the greater the level of prosperity.  The faster HEW can run the Treasury’s printing presses, the wealthier we become.

Since Franklin Roosevelt’s unconstitutional establishment of secular socialism as our national-state religion in the 1930s, generation after generation of students have been catechized in this version of socialistic economics.  They have been told falsely that its application ended the Depression and will henceforward always keep workers fully employed and promote the happiness of everyone. 

Another particularly insidious falsehood imbedded in Keynesian economics is the belief that paychecks must precede production.  Liberal-socialism teaches that there will be no business activity until consumers spend, that businessmen respond mindlessly, like Pavlov’s dogs, to any temporary increase in consumer spending. 

The more accurate description of the economic process is that consumption is the result, not the cause, of business activity.  Whenever businessmen detect an opportunity to produce goods and services and sell them at a profit, they hire people and produce their goods.  Those workers’ paychecks enable them to buy the increased output of goods and services. 

Very importantly, producing, then buying with production wages is non-inflationary, because the supply of goods remains in balance with the money supply.  Liberal-socialist handouts intended to stimulate economic activity generally do little of that, but always impart an inflationary bias to the economy, because the money supply is continually expanding ahead of increased availability of goods.

Businessmen will hire more workers and expand production only when their costs come into line with market prices for their goods, enabling them to make a profit.  That means that costs of wages and/ or raw materials must decline before the economy can come out of a recession.  They are not going to ramp up production just because the government has popped inflationary dollars into the economy with a one-shot welfare handout.

Franklin Roosevelt’s New Deal state-planning proved this conclusively by failing to end the Depression over seven dreary years of relentless government manipulation.  Businesses were reluctant to expand production and rehire workers in response to the New Deal’s hundreds of agency spending programs, which came and went with bewildering frequency.  At the same time, they were running scared by Roosevelt’s quadrupling income taxes while thundering against the Economic Royalists of Capitalism, in the same way that business now fears Senator Kerry’s denunciations of Benedict Arnold corporations and his promises to rescind the tax cuts that jump-started our present economic recovery.  Business expansion, as most sane people recognize, requires some measure of confidence in future price and demand stability.

If government attempts to invert the normal process by first flooding the market with paper money, the unavoidable result is simply increases in prices for the existing supply of goods, that is, inflation.  Banks and long-term institutional investors recognize this and begin to demand higher interest rates from businesses, knowing that the interest payments they receive in the future will be worth less in future dollars because of inflation.  These increased financing costs narrow businesses’ ability to produce at a profit and act as a roadblock to economic revival.

Having learned nothing from the failure of socialistic state-planning in the 1930s Depression, President Johnson embarked upon his Great Society with the intent, once and for all, to equalize income and wealth with no-questions-asked entitlements to welfare payments as a permanent career choice.  Once again, what we got was, not harmony and prosperity, but business stagnation and rising inflation.  The Great Society in the 1960s and 1970s produced the worst inflation in the nation’s history.  But liberals today, in the name of the secular and materialistic values of their religion, are anxious to repeat the process.

Moral Impacts of Emphasizing Consumption:

A high rate of consumer spending doesn’t necessarily cause moral corruption, but it definitely facilitates it. 

The surge of prosperity in the 1920s, when the economy boomed after the end of World War I, was accompanied by extensive changes in standards of public conduct and private morality.  The Jazz Age was characterized by the sudden ubiquity of automobiles, night club life, short skirts and turned down hose for women, then-scandalous dances like the Charleston and the Black Bottom, bootlegging, bathtub gin, and a plague of organized gang crime.  With the exception of organized crime, one could say that there was nothing inherently wrong in any one of these excrescences.  Taken together, however, they reflected a sea change in public standards of morality. 

It was during this period that the ACLU organized, paid for, and publicized the Scopes Monkey Trial, not to support Darwinian evolutionary “science,” but as the ACLU proclaimed, to fight the rearguard efforts of Christians to stay the changing standards of sexual morality and social conduct.

The 1930s Depression which followed the Roaring 20s jolted people back to prayerful attention to basics, as did our entry into World War II in 1941.  Monastic asceticism, of course, is not a prerequisite to moral conduct.  But as Winston Churchill reportedly said of a man about to be hanged, it concentrates the mind wonderfully.

Oddly, in retrospect, the student anarchists of the Boomer Generation of the 1960s despised the resumed prosperity and high rates of consumption in the 1950s.  They interpreted it as hypocritical complacency and took to the streets to burn down all aspects of Western traditions of government and morality.  What they could not see at the time was that their heedless and ignorant rampage was made possible by the very prosperity that they abhorred.  The GI Bill and subsequent general prosperity paid for the highest percentage of high school students in history to attend college. 

The net effect of that prosperity and high spending was to expose the Boomer Generation to the socialism that William F. Buckley, Jr., described in “God and Man at Yale.”  Thus, out of material prosperity has come the conversion of several generations of college students to the secular religion of socialism, leading to today’s steady suppression of Christianity, personal responsibility, and individual morality.

State governments eagerly establish lotteries and support gaming casinos to gain more revenues for funding welfare-state programs.  Schools teach young students, beginning in kindergarten, that there is no such thing as right or wrong; anything goes.  The only bad thing is to say something that might be offensive to homosexuals, blacks, women, Latinos, or whoever may be the favored social class of the day. 

Students who were taught that right and wrong are unscientific value judgments became the officers of corporations like Enron and Tyco.  No one should be surprised that they did as they were taught by our Progressive education and lined their own pockets at shareholders’, employees’, and pensioners’ expense.

For the United States as a whole, the gravest danger lies in the source of much of our consumer spending power.  The personal savings rate hovers near zero, and far too many people are in debt up to their eyeballs, egged on by the pervasive culture of immediate gratification via high rates of non-essential goods consumption.  That consumption is hugely subsidized by Federal spending programs.

Inevitably, a collectivized National State of the sort that ours has become since the 1930s New Deal encroaches more and more upon areas formerly reserved for private decision.  Wars, of course necessitate suspension of some personal liberties.  But not until the advent of socialism under Franklin Roosevelt did pervasive Federal regulation become permanent, in peacetime and in war.

Our socialist welfare state has born out the foresight of Otto von Bismarck when he established the world’s first welfare state.  Bismarck declared that he wanted to be able to herd the German people like cattle and that making them dependent upon the Prussian state for their financial security was the most effective way to do it.  Thus today, instead of a nation prepared to fight for personal liberty as the colonists did in 1776, we have a nation largely dependent upon handouts from the Federal government, ready to forego personal independence and personal property rights in exchange for Social Security, Medicare, and the thousands of other Federal benefit programs. 

What remains of liberty is the worship of violence, crude entertainment, sexual promiscuity, drug abuse, and foul language: in short, Hollywood.

Posted by Thomas E. Brewton on 08/07 at 05:08 PM
Economics • (0) Comments
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