How We Got Here - Naked Capitalism

Democracy Destroyed: HOW WE GOT HERE AND WHERE WE ARE GOING -

NAKED CAPITALISM

 From The Second Coming, written by William Butler Yeats in 1919,

 inspired by World War I and the Great Pandemic.

Turning and turning in the widening gyre   

The falcon cannot hear the falconer;

Things fall apart; the centre cannot hold;

Mere anarchy is loosed upon the world,

The blood-dimmed tide is loosed, and everywhere   

The ceremony of innocence is drowned;

The best lack all conviction, while the worst   

Are full of passionate intensity.

Surely some revelation is at hand….

One of America’s basic problems is that unrestrained capitalism (which can have positive aspects) is an economic system that recurrently concentrates great wealth in a few hands. If money is then allowed to buy political power we have a political economy that can destroy democracy. We now have a transactional President who is able to take advantage of this situation to amass power and wealth for himself and his supporters without regard to the Constitution, the historical values of the United States, or attention to the security, freedoms and basic needs of all Americans. The United States, separated from its traditional values -  even admitting it has fallen far short of fulfillment - and without moral scruples, will be chaotic and destructive, and maybe violent - at home and abroad. It took two short weeks for the veneer of stability, dependability and the rule of law to be fractured. We should always keep in mind that chattel slavery and its offspring, racism, in the service of profit, along with cruelty to the poor, workers and minorities, repeatedly produced barriers to the national ideals of equality and democratic respect. These are the inbred and historical results of unfettered profit seeking and capitalist institutions.

For most Americans national politics has always been a distant presence. It is noticed when we vote, a relative goes to war, pay our taxes, receive social security, rebuild after a hurricane, or face a pandemic. Our national government has more basic, foundational, yet subtle and not so subtle, impacts: guaranteeing national security, maintaining the rule of law and a stable financial system; building the interstate highway system; guaranteeing a basic public education; supplying air traffic control, pure drinking water, subsidizing health insurance, among other services. The disaffected who have no savings; who cannot see a bright future for their children; who struggle to pay for groceries, gas, and rent; who are without child care; who cannot afford medical care - even with insurance, have been impoverished by both the Republicans and the Democrats. That is why Trump was elected - civic society had already been destroyed.  The cumulative policies and decisions by the political class have hollowed out many people’s sense of stability, security, purpose, pride and hope for the future. In spite of excellent macroeconomic parameters, due to monstrous wealth inequality resulting from long standing Republican tax policy, the US is, for many citizens, already a failed state.  At least 50% of Americans spend 90% of their income on necessities and have less than $500 in cash for an emergency. They are already serfs to the capitalist system. This is the obligatory other side of the coin of the multibillionaire aberration. Over the years the Democrats have preserved the civic institutions of the USA, but both parties have contributed to hollowing them out. While this reality, this malaise, has become a reality for the majority of Americans, the active political class and most politicians, say those in the top 20% of income, relatively well-off and educated, are isolated from any sense of this precarity, alienation and despair. The crisis of democracy then, is actually a civic crisis of a failing modern government, unable to be responsive to the needs of most of its citizens. People feel that they have been ignored, held back, underpaid and over taxed, overworked, unprotected, regulated, bossed around and intimidated by politicians of all sorts for decades — with bad and worsening results. All this saps the vitality, safety and security of American individuals and families and the country itself. 

Donald J. Trump is not an aberration, The MAGA movement is the culmination of 60 years of coherent Republican Party policy and plans. Donald J. Trump is not a one-off TV star idiosyncratically demagoging his way to the Presidency. He is the ultimate personification of Republican Party values, policies, programs and allegiances. In discussing the politics and policies of Donald Trump it is often said that he is not as dangerous as, say, Mao or Hitler, because he is not energized by zealous commitment to a value system and is totally transactional. This misperception is both incorrect and dangerous. The ideology of the Republican Party and now, the MAGA movement, is Naked Capitalism. It is and will be as destructive to American democracy and world peace as National Socialism was to Germany and the world.

The Oxford dictionary defines “ideology” as “a system of ideas and ideals, especially one which forms the basis of economic or political theory and policy.” : Merriam-Webster defines “capitalism” as an “economic system in which resources and means of production are privately owned and prices, production, and the distribution of goods are determined mainly by competition in a free market.”

Capitalism is the ideology of the United States of America. The citizens of the United States are insensitive to their native ideology because, like the air we breathe, it is invisible until it is disturbed. While the long history of the United States is infused with the vaunted values of freedom, liberty, individual autonomy, equality, and collective democracy, etc. - this is the story we tell ourselves, but it is not quite true! In fact, this is the story chauvinistic historians have spun to de-emphasize and hide the dynamics of our national ideology - Naked Capitalism. 

From the inception of the country, enterprising individuals with the support of government appropriated the means of production from indigenous peoples. From our birth the dehumanization of people into indentured means of production (slavery and the consequent racism) have been incorporated in our DNA. Forty-one of the fifty-six original signers of the Declaration of Independence were slave owners. The Civil War can easily be cast as a fight for mercantilist, capitalist power between Northeastern manufacturing (based on “sweatshop” labor) and Southern agriculture (based on indentured slaves). Reconstruction failed because the government of the capitalist oligarchs of the time united around reconstituting and preserving capitalist enterprise, rather than embodying universal human and democratic values.

 At the start of the 20th century capitalism ran wild in the First Gilded Age.This was a period of explicit rule by capitalist oligarchs. Senators were ‘owned’ by corporations. In 1895 and 1907 J.P Morgan twice personally bailed out the country after banking panics which were recurring and frequent due to unfettered capitalism. The Supreme Court twice ruled that restricting child labor was unconstitutional. Andrew Mellon as Secretary of the Treasury in the 1920s lowered the top personal marginal income tax rate from 73% to 24%. Arguably this fueled the capitalist speculation that led to the Great Depression. Nonetheless, during this period some “robber barons” had an affinity to use their wealth to support civic infrastructure and development. Leland Stanford started a university on his family farm. Andrew Carnegie’s donations built 1,679 libraries around the US. Julius Rosenwald, President of Sears built over 5,000 schools and teachers homes for Blacks across the South. Now, in the era of Naked Capitalism, the capitalists of the Second Gilded Age have little concern for nurturing community or civic

life.

FDR and his New Deal, of necessity, invented innovative and creative government restraint of Naked Capitalism through the institution of regulations, a more equitable rule of law, and a national government funded employment and manufacturing policy (all against great opposition) that saved the day - with the helpful incentive of fighting World War II. In his famous 1941 State of the Union address FDR enumerated “four freedoms”(freedom of speech, freedom of worship, freedom from want, and freedom from fear). He also articulated the goals of our democracy: “Equality of opportunity for youth and for others. Jobs for those who can work. Security for those who need it.

The ending of special privilege for the few.” The preservation of civil liberties for all.” He thus conceptualized and institutionalized American values and aspirations for the modern era.

Rebounding from the deprivation and devastation of the war the United States entered an unprecedented period of growth, prosperity and economic equality. Uniquely in all our history during this period, capitalism was not a sum zero game. This allowed the flourishing of the political economy as envisioned by FDR. The rich got more wealthy; the working class became prosperous; the middle class got educated and professionalized; unions were allowed to grow, and civil rights could expand (against fervent opposition - e.g.  the American Liberty League). Few people realize that this prosperous period - from 1945 - 1970 - was historically wholly unique in allowing the blossoming of the best democratic ideals. By 1980, the capitalists felt threatened enough by government policies supporting broad civic participation to re-exert their power. Naked Capitalism as the national ideology was hidden as both major political parties promoted their policies and programs. The Republicans became the explicitly embodied modern party of capitalism with President Reagan (1981-1989) who during his acting days spoke out for the American Medical Association against Medicare, as a “socialist” program that would steal our freedom. In his 1981 inaugural speech he declared, “Government is not the solution to our problem; government is the problem….It is my intention to curb the size and influence of the Federal establishment and to demand recognition of the distinction between the powers granted to the Federal Government and those reserved to the States or to the people… It is no coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government.” Thus began the long, usually quiet, process of unwinding the legal and regulatory structures of the modernized New Deal state which mobilized the rule of law, regulatory authority, and fiscal policy to constrain the excesses of Naked Capitalism in broad support of all citizens.  The Republican Party was dedicated to building a federal government supportive of Naked Capitalism while leaving the majority of Americans, in a civic sense, naked. 

Reagan’s tenure was famous for adopting “trickle down economics,” the theory that tax cuts for the wealthy and corporations will stimulate production and eventually benefit everyone. By cutting taxes for the wealthy and starting the taxation of service worker tips (in support of Naked Capitalism) while boosting military spending, behind his sunny disposition Republican President Reagan actually suppressed wage growth and boosted the ever widening income inequality while deepening the peacetime, post war federal deficit. Meanwhile, the Federal Reserve had to keep interest rates high to prevent the induced inflation. High interest rates resulted in an increased value of the dollar, tanking manufacturing exports, thus starting the decline of the domestic manufacturing sector. For the Naked Capitalists the intended, complementary aspect of this tax policy was to curtail federal funding, thus shrinking government capacity and agency, and restraining any redistributive social welfare policies funding civic equity and support of ordinary citizens and families. 

This introduced the era of free market fundamentalism, or “neoliberal economics,” which continues to the present day. In 1981 Republican President Reagan famously kicked off a successful on-going federal policy of active antagonism toward unions by firing 13,000 striking air traffic controllers. Over time marginal personal income taxes for the wealthy were cut; estate (“death”) taxes were minimized; redistributive social welfare programs (Medicaid, food stamps, Aid to Dependent Children, rental assistance, etc.) were hamstrung; public, civic government functions were outsourced (as in privatizing Medicare, promoting charter schools, and privatizing space flight - to “improve efficiency”  allowing the Naked Capitalist corporations to capture tax money) and supportive government functions were exploited for profit taken from our own citizens (student loans, Medicaid, Medicare Advantage). The dominant ideology of Naked Capitalism was accepted as the implicit norm as the Democratic Party joined the movement. President Clinton curtailed the regulation of the banks and financial sector (allowing the speculation which led to the Great Recession) and passed the North American Free Trade Agreement (NAFTA) accelerating the devastation of the manufacturing sector, blue collar workers, and the midwest by facilitating off-shoring of factories. Obama with capitalist neoliberal advisors responded to the Great Recession of 2008 by famously bailing out Wall Street (with essentially free money with no criminal punishment for any capitalists) while leaving Main Street to suffer with wholly inadequate stimulus program (5 million homes -1 in 54 - lost to foreclosure, 13 million jobs lost, and 7 years for the economy to recover). President Biden claimed he sought the presidency “to restore the soul of America,” and actually created several innovative and progressive domestic initiatives, responding not only to the pandemic, but also the years of neoliberal civic deprivation. Nonetheless, there was no fundamental shift in governance and in the last election American voters traded that ‘soul’ for the possibility of cheaper eggs and fundamentalist, white nationalist ideals.

Admittedly this is a selective history, but it is sufficient to demonstrate that the policies of Project 2025 are deep in the DNA of both our political parties. The Democrats actually joined in, while appearing to support democratic institutions and more progressive values and policies. Since the 1970’s the effects of Naked Capitalism have left the vast majority of Americans out in the cold. Between 1979 and 2024 productivity in the US grew 80.9% while average wages stagnated with an increase of only 29.4% (a lag of 270%). The median family income in the US has gone from $10,000 in 1971 to $55,000 in 2024 (increase of 550%) and the Federal Minimum Wage increased from $1.60 to $7.25 (up 400%). In 1971 the average office worker who made $10,000 a year would earn $74,000 in 2024 (up 700%).  Compare these earnings to purchasing power: the median cost of a car has gone from $4,000 to $48,000, (up 1200%); the median cost of a home has gone from $25,000 to $357,000, (up 1400%); the average cost of healthcare per person has gone from $400 to $15,000, (up 3700%). American households that were food insecure—who didn’t have enough to eat, and didn’t know where their next meals would come from—increased from 10.5 percent in 2019 to 13.5 percent in 2024; that’s about 4.8 million more households, or around 10.2 million American adults and children without enough to eat. More than a quarter of US families spend more than 95% of their income on necessities. According to a Federal Reserve study about 50% have less than $400 in cash savings for an emergency. 

In this Second Gilded Age there has been an explosion in the maldistribution of income and wealth (all within the apparent preservation of federal agencies and policies) which explains the widespread economic insecurity, anger and restlessness of the Americans drawn to the MAGA message. One widely used income inequality measure – the 90/10 ratio – takes the ratio of the income of the top 10% of earners in the U.S. to that of the bottom 90% of earners. In 1980, the US 90/10 ratio stood at 9.1, meaning that households at the top had incomes about 9 times the incomes of households at the bottom. The 90/10 gap reached 12.6 in 2018, an increase of 39%. In 2021 the top 10% of wealthy US families held 70% of the nation’s personal wealth, while the bottom 50% of all households together had less than 2.5% of the nation’s wealth. Wealth is even more concentrated in the few top 1% of households which owned 30% of the country's net worth in 2023.  Since 2007 wealth has actually declined among all US families except for the top 20% of households. About 7% of families had negative net worth in 1989, increasing to 10.4% of households by 2019. Student loans are the most prevalent type of debt, held by 71% of negative net worth households. In 2019, these unsettling disparities were documented to be magnified among minority citizens, mainly due to lack of home ownership. The median white household had $189,100 in wealth, nearly 8 times higher than the median Black household (which had $24,100) and over 5 times more than the median Hispanic/Latino household (which had $36,050).  It is estimated that between 1981 and 2021 so-called supply-side economics moved $50 trillion from the bottom 90% to the top 1%. These stark figures demonstrate that we are far advanced into the victory of Naked Capitalism. The ascension of President Trump now promises total victory of this ideology by removing the guardrails of the neutral rule of law and federal agencies that restrain the exploitations of corporate entrepreneurial behavior.

Nowhere are corporate profit seeking and the successes of Naked Capitalism more visible - and starkly opposed to the basic welfare of individual citizens and families, as well as destructive to national solidarity, than in the health care sector. Placing medical services into a market is inherently dysfunctional and ’inefficient’ because medical care inherently has many effects, that is, benefits, which are non-monetary - in economic terms, externalities. This includes saving lives, relieving suffering, dealing with existential worry and anxiety, preserving individual, family and community welfare, and guaranteeing healthy workers - and soldiers. In addition, a monetized medical system creates financial and administrative barriers to care and rations care according to wealth and class, and in the US according to race. The US healthcare system is unique among developed nations in depending largely, and increasingly, on a complex array of intervening mostly for-profit commercial health insurance companies which have long been promoted and supported by both political parties. Fundamentally this arrangement generates huge administrative expenses and profits extracted from public and private funds spent for the care of the sick. In 2023, the US spent 17.6% of its GDP on health care, an average of $14,570 for each American, which is more than double the average cost in other wealthy countries. In spite of, or because of, health insurance in 2023 Americans had to pay about $500 billion in out-of-pocket expenses for health services. Health insurance no longer adequately protects against financial risk. In 2020, health insurance premium and deductible costs together consumed 11.6 percent of median U.S. household income, compared to an unacceptable 9.1 percent in 2010. Annually the out of pocket costs ranged from $6,500 to $9,000 per family depending on the state. It is estimated that because of administrative complexity and corporate profits, including all insurers and providers, about 25% of the health care dollar is diverted from actual care. The UnitedHealth Group with an annual revenue of $370 billion (generating a profit of $23 billion) with 440,000 employees in 2023 is the fourth largest domestic corporation. The CVS-Aetna complex is the sixth largest corporation with $358 billion in revenue (generating a profit of $8 billion) with 260,000 employees.

Created 2003 Medicare Part D, covering outpatient prescriptions, is an excellent case study in Naked Capitalism as public policy. First note, that the stingy national government took 38 years before covering outpatient prescriptions. Then, under Republican President George W. Bush, Congress invented an array of new for-profit insurance entities outside the low overhead Medicare program to manage the benefit.  Most absurdly, and contrary to the basic needs of the sickest chronically ill, patients, originally Medicare Part D had a coverage gap (starting when the patient had paid $2,250 out of pocket to buy prescriptions that year and lasting until they had paid $5,100 more cash out of pocket) also known as the “donut hole,” when prescription coverage stopped completely. During this gap the patient had to pay cash up front 100% of prescription drug costs or stop taking needed medication. After 20 years of this tragic policy, as part of the Affordable Care Act the donut hole was tapered and was eliminated in 2025.

Naked Capitalism also impacted the management of the COVID-19 pandemic,  spreading infection and placing citizens at increased risk of infection and death. According to the CDC in.April and May, 2020, COVID-19 outbreaks occurred in meat and poultry processing facilities in 23 states with 16,233 cases in 239 facilities, including 86 (0.5%) COVID-19 related deaths. Among cases with race/ethnicity reported, 87% occurred among racial or ethnic minorities. Nonetheless, after industry lobbying President Trump curtailed public health oversight and kept these facilities open with a “necessary for national defense” rationale, seeding infections into many rural communities. Later, under President Biden, in spite of good data that COVID-19 infectivity peaks at 4 days and depending on the variant and vaccination status as many as 50% of COVID patients remained infectious up to 10 days, after lobbying by Delta Airlines, in August, 2022 the CDC lowered the guidance for isolation for patients with resolving illness to 5 days, leaving infectious patients free to go out in public. In the ethos of Naked Capitalism the greatest “public” outcry, even resentment, concerned the encouragement of vaccination (mandatory for some) and the closure of schools and commercial businesses, not the more than 1 million deaths.

An important by-product of Naked Capitalism and an important motivation for its thirst for power is to protect its profits from the increasing natural threats of global warming and pandemic infections. This the origin of a well-organized, well financed, politically connected, expanding campaign of disinformation (“fake news”) and attacks (even violence) against validated science and reputable scientists. The result is that an effective global response to the climate and pandemic threats is frustrated, actually putting all of humanity at risk. What started as a fringe movement to protect the extractive oil and gas corporations has ended up becoming an integral part of the MAGA administration.

Adding to the existential distress of many Americans, beyond their current economic insecurity and uncertain future prospects, is a sense of disparagement and disrespect from the successful coastal elites (who have disproportionately benefited from higher education, modern technology, and globalization). The adulation (and, in fact, false sense) of “personal achievement” represented by the elite cultural “meritocracy” over the last 50 years is manifest in the hubris of isolation and arrogant magnification of self-regard and disdain for the lesser impoverished. “Mainstream” American culture talks about “deplorables” in “flyover country,” while abandoning traditional religions and visiting rural areas only for recreation and “an escape to nature.” The national political economy supports rural areas and “the rust belt.”, but hardly enough and rarely in a remedial fashion - and never with real respect and conviviality. Currently the greatest divides in the USA are rurality versus urbanity and college educated versus high school educated. This in turn is met with a self-reliant turn toward libertarianism, fundamentalist religion, support of gun culture and disparagement of the federal government. This process creates an atmosphere of distrust and interferes with any commitment to collective civic engagement.

This widespread failure of our society to provide individual and family security, a living wage able to provide for basic necessities, civic benefits such as quality education, sick leave, and child care, and a hopeful vision for the future laid the foundation for the ascendency of Donald J. Trump and the MAGA movement. Their political ability to plug into and exploit the voters’ despair, deprivations,  heartfelt, restless anger and desire for change won the day. The MAGA vision is, in the end, a duplicious manipulation which is not designed to resolve these problems, but likely to make them worse. It is clear that Donald J. Trump and the MAGA movement intend to extend the Republican Party’s libertarian vision to its ultimate goal - an authoritarian, oligarchic government by the very wealthy, exploiting everyone else. This is inherently unstable. If it is to mount an opposition to this long standing process, the Democratic Party must lay aside its current strategic and ideological middle of the road misalignment with our society and its contribution to our economic deprivations. Then it can focus on the economic subjugation of the majority of Americans by Naked Capitalism and they will start to begin to effectively fight back.

This is the final form of unregulated capitalism, where fantastically rich, aggressive and selfish titans run the world’s most powerful nation for their own pleasure, and what was once thought of as “civil society” cowers in the corner in an effort to avoid provoking the beast. Here we are! Enjoy this spectacle! 

Think about the disaffected; those who have no savings; those who cannot see a bright future for their children; those who struggle to pay for groceries, gas, and rent; those without child care; those who cannot afford medical care - even with insurance; those who have been impoverished by both the Republicans and the Democrats. That is why Trump was elected - civic society had already been destroyed. "Only where there is reason to suspect that conditions could be changed and are not does rage arise. Only when our sense of justice is offended do we react with rage." Hanna Arendt ON VIOLENCE.

( Looting Season in America, The oligarchy blooms.Hamilton Nolan, Jan 16, 2025) This reinforces the findings of Thomas Piketty on CAPITALISM IN THE 21st CENTURY

If you’re interested in the long history of inequality, Walter Scheidel is a useful scholar to read. One of his findings is that, historically, the only things that have wiped away great inequality are enormous disasters. “Four different kinds of violent ruptures have flattened inequality: mass mobilization warfare, transformative revolution, state failure, and lethal pandemics,” he writes. “I call these the Four Horsemen of Leveling.” It was the Great Depression that gave us the New Deal. It was World War Two that gave us the golden age of union power and shared prosperity. You don’t need to be a prophet of doom to make the observation that nations that have gotten to the position that we are in do not usually work themselves out of it in a healthy and peaceful way. Wallowing in doom, though, is not very helpful. Look at it like this: If disaster is the likely end of the path we are on, we should be willing to take extraordinary measures—politically and economically—to avoid that. We should all get more radical. It’s just common sense.

Here’s economist Thomas Piketty, who knows a thing or two about wealth, writing at Le Monde:

• Impressed by market capitalizations and billion-dollar figures, some observers are amazed by the US’s economic power. They forget that these valuations stem from the monopoly dominance of a few major groups, and, more broadly, that the astronomical dollar amounts reflect the very high prices imposed on American consumers. It’s akin to analyzing wage trends without taking inflation into account. When measured in terms of purchasing power parity, the reality is very different: the productivity gap with Europe disappears entirely.

• Using this measurement, China’s GDP surpassed that of the US in 2016. It is currently more than 30% higher and will reach double the US GDP by 2035. This has very real consequences in terms of its capacity to influence and finance investment in the Global South, especially if the US locks itself into its arrogant, neo-colonial posture. The reality is that the US is on the verge of losing control of the world, and Trump’s rhetoric won’t change that.