Written by michael payne   

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 must recognize these facts of life and must 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 must realize they are going in the wrong direction, that the capitalism that is being practiced today is unsustainable in the longer term.

*They must 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, must 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.

*Corporations, based on the revamped corporate tax system and the new legislation, must then follow the Ford Doctrine and begin to reinvigorate the U.S. manufacturing sector and its domestic workforce.

*Employee unions, where they exist, must agree to join this movement and do what is best for all concerned rather than just themselves.

If such an infusion of new thinking based on past proven principles of capitalism does not take hold, if the combination of the business sector and the government cannot or will not follow this kind of formula to make capitalism more effective for all concerned, then the day will come, and it may take a few more decades, that capitalism, American style, will collapse in upon itself, it will implode.

Now let’s bring in another dimension into this issue and listen to those in America who strongly believe that free trade and globalism are here to stay, that they are sacred and infallible principles of capitalism, and that the flow of American jobs to overseas nations with extremely low labor rates will continue; that more and more manufacturing, programming, customer service and even engineering jobs will leave this country; and that this is an unstoppable trend that cannot be reversed or even slowed; that it’s reality and that’s just how capitalism works.

This kind of resignation and acceptance of this massive outflow of jobs is understandable to a degree for we certainly know that nations like China, Japan, India and others now have a wealth of engineers, software creators, and millions of citizens with expertise in many different fields that can absorb more and more American jobs. And corporations have the power and are more than willing to continue to slash all manner of U.S. jobs and ship them overseas.

But here’s what that kind of thinking misses entirely. While the hemorrhaging of jobs can and probably will continue, there is a certain point in time when this loss of jobs will become so damaging to this nation and its economy, and so painful and unbearable for its people, that the need for basic survival will become paramount and will generate a massive movement to stop this process in its tracks.

If and when that happens America’s modern-day version of the Virtuous Circle of Growth can then become the guiding principle of this nation’s system of capitalism. We might refer to this new and improved system of economics as the rebirth of the Henry Ford doctrine, a template for corporations to follow in conducting their business affairs in future decades.

Sure the above dissertation represents a fair amount of conjecture and assumptions, but it should be more than evident that we simply don’t have much of a choice in the matter. The only question remains is: where do we go from here? We can certainly continue to pursue the current system of capitalism that is unsustainable, but that would be a grave mistake.

Or, we can resurrect a system of capitalism that once worked for the nation as a whole, one that was a major contributing force for the common good, one in which capitalists actually cared about their country and its people and yet remained very profitable.

Michael Payne