It's becoming more and more evident that America's system of capitalism, while still generating huge profits for the masters of Corporatism, is, in the longer term, unsustainable. I say it's unsustainable for one critically important reason; and that is that you can't keep sucking the wealth out of America and not pump anything back in without eventually breaking the system.
The business sector of this country needs to recognize these facts of life and go "Back to the future", reentering the era of the "Virtuous Circle of Growth", that period in our history when capitalism really worked for the common good, and was the rock solid foundation of this country and its economy.
Going "Back to the future", as many movie buffs know, refers to time travelers who go into the past to accomplish something of importance and then return, or, go back to the future. So the premise of this article is to suggest that the masters of Corporatism in America need to go back into the past and review how Henry Ford, the founder of the Ford Motor Company and many of his business colleagues, used the principles of capitalism of that time to create an atmosphere in which companies, their workers, stockholders and the U.S. economy mutually benefited; that, in essence, is the "Virtuous circle of growth."
Here's an excellent article from the New York Times and its former Washington Bureau Chief, Hedrick Smith entitled, "When Capitalists Cared". It describes this virtuous circle of growth as "Well-paid workers generating consumer demand that, in turn, promotes business expansion and hiring." Henry Ford was a strong proponent of this method of doing business; he knew that providing good jobs to workers and paying them well was the way by which businesses would flourish and also strengthen the nation's economy. And so he and others like him followed those very wise business principles which proved to be very successful.
What did this special set of business principles actually produce? The period from 1945 to 1973 was one of constant growth in the economy; corporations were extremely profitable, workers prospered, the middle class expanded, and this nation created the world's largest and most productive manufacturing sector. The secret of this success was that each of the parties involved in the overall effort contributed something unique to the process and then was rewarded for doing so.
So everything went well until the 1980's when this scenario began to unravel as the masters of Corporatism discovered cheap foreign labor and sent the Virtuous Circle of Growth into the dust bins of history. The insatiable thirst for foreign labor to generate greater and greater profits totally brushed aside the previous spirit of cooperation and common objectives that had once prevailed. This, then, opened up a new era featuring a form of capitalism that later became known as globalism; and then America took a sharp turn down the wrong economic road.
After America entered the 21st Century conditions in the economy and our society began to change and not for the better. While we were busy and not cognizant of what was really happening, a massive inequality of wealth and income was rapidly developing in the nation; one in which those at the top were gaining more wealth and those in the middle and at the bottom continued to lose ground. That can be directly attributed to how radically the principles of capitalism changed.
Contrast what has now happened in America to what Mr. Smith's article brings out; "In Germany, still a manufacturing and export powerhouse, average hourly pay has risen five times faster since 1985 than in the United States. The secret of Germany's success, says Klaus Kleinfeld, who ran the German electrical giant Siemens before taking over the American aluminum company Alcoa in 2008, is "the social contract', the willingness of business, labor and political leaders to put aside some of their differences and make agreements in the national interest."
And he also states that "In short, German leaders have practiced stakeholder capitalism and followed the century-old wisdom of Henry Ford, while American business and political leaders have dismantled the dynamics of the "virtuous circle" in pursuit of downsizing, off shoring and short-term profit and big dividends for their investors." This says it all; it couldn't be more clear that capitalism in Germany has adopted and stayed with the Virtuous Circle of Growth and greatly benefited as a result, while capitalism, American style, has rejected it and is rapidly headed in the opposite direction, seemingly a road to nowhere.
You would think that the corporations of America and this government would learn from these lessons of history and return to the times when capitalism really worked, restarting the process based on those time-proven principles. It's time for change; it's time to admit that this economic system's basic flaws must be addressed. For where is it written that capitalism is some kind of sacred entity that must not be touched, that neither this government nor the people of America have any say on how business in this country is conducted?
So here's the recipe or plan that I can envision being used to resurrect the old, proven kind of capitalism that worked quite well and to which this nation can certainly return:
*Corporations have to realize they are going in the wrong direction, that the capitalism that is being practiced today is unsustainable in the longer term.
*They need to adopt the Henry Ford Doctrine, aka the "Virtuous circle of growth" by which businesses realize that when workers have jobs and are paid well, it will guarantee their profitability in future decades and the nation's economy will prosper as a result.
*This government, Democrats and Republicans alike, need to become a part of the restoration process and completely overhaul the corporate tax structure; new legislation must be enacted in order to eliminate ineffective, damaging rules and regulations and replace them with ones that will spur all forms of economic development.