Friday, February 18, 2011

Debtism

My high school economics textbook defined capitalism in contrast to what it called "landism" and "laborism." Capitalism, according to the author, is not so much a free market or unregulated system as it is an economy driven by capital., In other words, the most powerful movers aren't those with the largest workforces or most land, but the most available money.

I have been reminded of this while reading about our current economic situation--for banks and other institutions got into trouble because they didn't have the capital necessary to pay back their debts. To maximize their capital, they borrowed more than they could sustain.

The federal government is no different, as the President's budget announcement has reminded us. For a quick review, here is the annual budget deficit calculated since 1960. It is now around $12 trillion.


Yet business and government are not the only two institutions using this model. Average Americans are also. As we can see from a second set of numbers, the federal debt is lower than--but apparently following--another trend. Consider the federal debt placed alongside household and non-profit liabilities (i.e. not business debt), which is now sitting around $14 trillion.

It would appear that, rather than electing politicians who go to Washington and start to spend, we elect those like us who merely continue the habits they practice at home.

And this doesn't even include the trillions upon trillions of business and banking liabilities currently supporting (at least in theory) this capitalistic economy. That is a whole separate post. But Aristotle postulated that there are three types of state (monarchy, aristocracy, and democracy), and each type has a good form and a bad form. Might the same be said of economic structures, where "capitalism" may be a type, but having a good and bad form? If so, is it just possible that we are moving into that bad form, something akin to debtism?
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