Closer look: Capitalism or corporatism

It is obvious that things have not gone as planned in the U.S. and both political parties are convinced the other party has caused the problem. It is obvious that the lack of manufacturing jobs (productivity) is our main problem and is the result of a failed system that needs serious attention and rectification. To determine what went wrong, we need to analyze the activities of both parties.

The Republican Party's main objective seems to be to promote capitalism, a system in which all production and distribution are privately owned and operated without government interference with the belief that competition will make them stronger, more efficient and competitive.

The Democrats believe in free enterprise with equal rights, opportunity and treatment for everyone. They feel that capitalism ultimately results in many small operations falling by the wayside. The strong profit and get stronger, the small get weaker, the rich get richer and the poor get poorer.

As far back as 1776 Adam Smith wrote in his "Wealth of Nations" that capitalism is devoted primarily to the satisfaction and interest of class owners rather than the public. Albert Einstein after World War II wrote, "Capitalism is a failed system and should be replaced by socialism."

The Republicans accused the Democrats of being socialist when they tried to include the government option in the health care reform bill and promoted government stimulus spending to boost the economy. They apparently did not realize that capitalism under the last Republican regime resulted in overconcentration of capital in big businesses whose political power enabled them to get laws passed that limited their liability, gave them incentives to move manufacturing out of the U.S., produced uneconomical subsidies, lowered the income tax rate for the wealthy and ignored the monopoly laws, letting the big get bigger and richer. This, of course, was not socialism or interference by big government.

The major problem in the U.S. is not capitalism but the slow conversion from capitalism to corporatism. This started about 20 years ago when the government ignored our monopoly laws and corporations started buying up everything in sight, becoming bigger and stronger. For example, AT&T bought up practically every telephone company in the East and Midwest. And virtually every corporation did likewise. This may have started out as capitalism, but it became corporatism an swamped out individualism and destroyed free enterprise.

Corporatism did not greatly affect the economy negatively until about eight years ago when the executive officers and directors decided they were doing such a good job they needed more money. Since many of their salaries were already around $1 million annually, they decided to offer themselves nice incentives, bonuses and other increases in company stock, often as much as $5 million or $10 million worth, in addition to their salaries.

This was also a great tax benefit, because they could wait a year, sell the stock and only pay the capital gains tax rate rather than their already low rate, lower than most of their employees.

The corporations could make huge profits, but after they deducted the officers' and directors' salaries and bonuses, they paid little or no dividends and probably little corporate tax.

The big unexpected benefit was that over the past eight years the officers and directors have issued themselves so much stock that they virtually have complete control over many of the corporations. This powerful wealth has resulted in political influence in their favor and a disparity between rich and poor unlike anything seen before in the U.S.

Now, by virtue of the recent U.S. Supreme Court decision, matters can only get worse. Corporations can and will buy votes for anything they desire.

If this situation is not reversed in the near future, corporatism will rule over both parties. Unfortunately, corporations do not care how the economy goes in the rest of the country. We must quit passing laws that make corporations stronger and offer incentives to bring manufacturing back to the U.S.

Jack Knowlan Sr. is a Jackson resident.