The Five Pillars That Made America Prosperous
Free Enterprise, Socialism, Capitalism, Regulation, and an 80-percent Average Top Marginal Tax Rate
In spite of much fevered insistence that things must be All One Way – unregulated, laissez-faire, free-market capitalism - or All The Other Way – full-blown Leninist-Stalinist communism – there is, in fact, a THIRD option. This might be called The American Way: That is, to take what works for the public good, and to use it to support, maintain, direct, and discipline the energies of a free market – also to the benefit of public good.
Let’s take these elements one-by-one and look at how they built American prosperity:
#1 Socialism: Back before the word even existed, the practice was essential. The raising of the barn, tilling of the soil, and clearing of roads were necessary acts of communal survival, and remain so today. These foundations, known as “the commons” provide the necessary infrastructure and platform for …
#2 Free Enterprise: Entrepreneurs create small businesses and still provide the vast majority of jobs in the United States. This allows for a strong consumer class, flowing tax revenues and large-scale development of social infrastructure. We The People pooled the tax revenues, and, based upon decisions made in democratic elections, chose to build roads, schools, the electrical grid, and a whole host of other things that created an educated work force, access to electricity and gas, and long-distance transport of goods and services, which allowed free enterprise to flourish, people to become wealthy, and the institution of ...
#3 Capitalism: Contrary to the popular belief that opening a lemonade stand is “capitalism,” capitalism is simply the act of making money from money. This works astoundingly well in fostering free enterprise (“I shall fund your lemonade stand for a cut of the pie!”). Unfortunately, while great wealth brings great power and influence, it is no assurance of morality, ethics or social consciousness. This led to the creation of the next two pillars …
#4 Regulation – America’s founders had learned a bitter lesson in their dealings with large corporations in bed with the British Crown. The East India Company, in particular, had gained a monopoly on the American tea trade, enforced by the power of the Monarchy. America’s revolt, and subsequent formation of democracy, can be said to be a direct result of their experiences with this corrupt combination of wealth and power. They knew that given free reign, there are plenty of wealthy elite who might say, "I shall buy Glenwood Canyon in Colorado, and charge vehicles $100.00 to pass through on I-70, and I shall become wealthy beyond dreams, as there is no other route." This, of course, would kill free enterprise, socialism, and eventually capitalism itself, so We The People created certain rules: You can’t dam all the rivers and blackmail people for water, for example, and you can’t hand out free vials of crack to school children to create a customer base. Another was the Corporate Death penalty, which was used regularly for our first century: Your business was reviewed once a year to answer the question, "Are you serving, or harming, the interests of society?" If the latter, your corporation was dissolved.
To be sure that the monied powers were serving the public interest to begin with, one of the most successful rules We The People ever created was ...
#5 The 80-percent Average Top Marginal Tax Rate: Over the 50 years prior to 1980, the top marginal rate (taxes on income above $3.2 million) had ranged from 68 to 94 percent. This is enormously successful because, when facing such a tax, folks will do ANYTHING to avoid paying it. How? Simple: Deductions were written into the code specifically to direct capital to that which was of benefit to society. You can then write those off as a business expense: Things like hiring new employees, opening new factories, and buying inventory and equipment.
Today, commitment to the common good has floundered. As once feared, a wealthy elite has hijacked the republic, and is again using the power of government to enforce scantily-disguised monopolies, while denying both dissent and competition. Even free enterprise itself is once again at stake. This system will lead to neo-feudalism – a small number of wealthy elite lording over a broadly impoverished underclass.
We can change that – but only by knowing our history.