How the U.S.A. Abandoned Capitalism, Part I

Republicans declare war, and Democrats make peace.

Author’s note: This piece started out as a follow-up to my three-step plan for Democrats. After too many days of working on it without finishing, I’ve realized that it’s more of a corollary to that plan than a follow-up and that it will take many more days to finish. I’ve decided to release it in parts to make it more manageable and so that I have a bit more space to write about other topics stacking up behind this one.

I look forward to your comments.

The U.S.A. is no longer a capitalist country.

That’s a strong statement, I know. Before I begin what will be a multi-part explanation, let me be clear: I am a capitalist who believes that business and economic competition make the world a better place.

I’ve owned several small businesses over the years, and lately—probably over the last 10 years or so—I’ve developed a sneaking suspicion that American capitalism isn’t working as it should. Competition is supposed to drive innovation, but that’s not happening anymore.

Corporate consolidation has shut down true innovation in America. Every new and exciting idea is immediately acquired by one of the Big Tech corporations, and legacy industries are dominated by fewer and fewer major players that work together to shut out and shut down small, scrappy competitors.

It’s only since the last election and Donald Trump’s cabinet appointments that I’ve begun to understand the relationship between corporate oligopoly, authoritarianism's rise, and capitalism's downfall.

At the core of the problem is the fact that powerful corporations aren’t just monopolies that own the majority of one sector; they have become pluropolies with monopolies across multiple sectors of the American and global economies.

One can blame Democrats, Republicans, or Donald Trump for capitalism’s current state, but blame won’t solve the problem. Nevertheless, it will help to provide a little background.

How We Got Here

Since at least the New Deal, the Republican Party has been the pro-business party, and the Democratic Party has been the pro-people party. This difference manifested in how each party viewed the proper relationship between a democratic republic and a capitalist economy.

Republicans generally saw the Government as a mechanism to encourage capitalism. Its role was to build the infrastructure and educate the workforce that Business needed to operate and compete internationally. Beyond that, Republicans wanted the Government to get out of their way.

Democrats generally saw Government as a mechanism to constrain capitalism’s tendency toward overreach. Its role was to ensure Business didn’t take advantage of workers, consumers, the environment, and other “public” resources.

The competitive push and pull of these two viewpoints, within the brilliant (if limited) structure of the U.S. Constitution, led to relative peace and prosperity through the rest of the 20th Century. There were wars, but they didn’t become World Wars. There were recessions but not depressions.

Ironically, the most stabilizing force throughout this period was the great threat of the Cold War. For all Americans, Republicans and Democrats alike, the fear of global thermonuclear war with the Soviet Union was unifying. Everyone here in the good ol’ U.S. of A. generally agreed that capitalism was good and communism was bad, and we were all just trying to achieve the right balance.

By the mid-1980s, however, it was becoming clear that the USSR was losing the war. The threat disappeared when the Berlin Wall fell in 1988, and the stabilizing, unifying force was gone.

At the same time, a new radicalism was bubbling up in the GOP. The Rush Limbaugh Show was syndicated nationally in 1988, and his attacks on Democrats, feminists, and people of color were heard everywhere by people who were proud to call themselves “dittoheads.”

Newt Gingrich became House Minority Whip in 1989, having been elected to Congress eleven years earlier with the belief that “Republicans would have to learn to ‘raise hell,’ to stop being so ‘nice,’ to realize that politics was, above all, a cutthroat ‘war for power’—and to start acting like it,” as described in a 2018 examination by McKay Koppins.

In 1990, Gingrich and pollster Frank Luntz pushed a memo to the GOP arguing that Republicans should describe Democrats using words like "betray, bizarre, decay, destroy, devour, greed, lie, pathetic, radical, selfish, shame, sick, steal, and traitors."

Although Gingrich resigned from Congress in 1999, the Republican Party internalized the tone he set, and the GOP has been breaking norms ever since.

The Thinking Person’s Party

While the Republicans were on a quest for raw power, the Democrats were transforming, too.

Bill Clinton and Al Gore were a different kind of Democrats. They were technocrats who didn’t mind cozying up to businesses—especially businesses based on the new technologies of home computers and the Internet.

While the businesses that drove the nation in the late 20th Century (think energy, manufacturing, petrochemicals, etc.) usually fought with Democrats over regulations, the businesses based on new technologies were much more aligned with the Democratic Party’s 21st Century vision.

The World Wide Web, e-commerce, and social media were all about democratizing global economies and politics, which was very much in line with Democratic principles.

In a recent article about Silicon Valley’s swing to the right, Henry Farrell explains how this worked:

Politicians like Hilary Clinton bought into this vision, delivering speeches and implementing policy around it. Journalism bought into it too, so that a thousand puff pieces on Silicon Valley leaders were inflated by Kara Swisher and her ilk, ascending majestically into the empyrean. And, most importantly of all, Silicon Valley itself bought into it…the general assumption was that liberalism and technological innovation went hand in hand.

(You should read the whole thing.)

In the 45 years since Ronald Reagan became President, the Democratic Party has essentially adopted the Republican premise that government should be a mechanism to encourage capitalism.

And that has been very bad for Americans.

One of the most frightening anecdotes Farrell shares illustrates just how dangerous the Democrats’ embrace of Big Tech was. “Rob Reich recalls a meeting with a bunch of prominent people in the Valley about what an ideal society for innovation might look like,” he says, “It was made clear to him that democracy was most certainly not among the desirable qualities.”

How the U.S.A. Abandoned Capitalism, Part II will be out soon. If you think someone you know would find this article interesting, please share it.