Cycle Trading

[No-Quarter]

I remember a college prof of mine explained capitalism similar to this.

Marx assumed the capitalist class was so powerful, only revolution could bring about change. Here Marx was very wrong. It is in fact possible for democratically elected governments to act against, or co-opt , the capitalist interests and enact pro-labour change. This is something that FDR did very successfully. FDR managed to get corporates to agree to raising prices and wages, in return for government protection from other producers threatening to undercut profits. In effect, FDR offered corporate America protection from competition in return for raising prices and wages. What FDR began was greatly expanded in the Post World War II period.

As I understand the Ying/Yang of capitalism/government, the problem to solve is the tax code. Corporations and the wealthy 1% ers find legal ways to reduce and avoid paying 'their fair share'.

Marx observation was that capitalism’s constant search to lower costs would destroy wages and hence demand at some point. If I look at modern capitalism (ie 2024), my observation is that corporates go to extraordinary efforts to shield income from tax (another cost). Converting income stream to capital gains is the underlying organizing principal of private equity, and much of large cap share buybacks. Hence, the risk to capitalism is not collapsing wages and a deflationary spiral, but the collapse in government credit worthiness driven by capitalism’s urge to minimize taxes. As Brad Setser recently posted, US corporates have been shifting an ever large amount of profits to tax havens.

When Steve Forbes was running for president, i recall one of his platform items was to simplify the tax code such that all that was necessary was year was for tax payers to fill out a post card sized form. Everyone was to pay the same percentage of income, and when the money ran put, the government had to stop spending. What a concept.