A few things. One big difference between the 45-75 time period in the US and the present as well as the present US vs. the Nordic countries is the prevalence of labor unions. The decline of private sector unions in the US has been enormous and has affected both the economy and politics - it has led to the decline of defined benefit pensions as well as comprehensive health care coverage and job security. I am not sure whether one might conclude that strong private sector unions may be a necessary component of a healthy capitalist system - that sounds wrong but maybe it is right.
Secondly, free market capitalism is messy. There are entrepreneurs who are negative savers but get money from wealthy investors or friends and family or ELOCs and go on to build very successful businesses without ever having "saved" a dime. Networks of savers, investors, speculators, etc. are very important. Leverage is heavily used in the early stages of many businesses. There are businesses with negative balance sheets which turn out to be successful. Just as not every country can run a trade surplus; so too every household cannot be a net saver. And the data is messy - the second quintile includes single individuals living in low living cost areas who are perfectly capable of saving part of their income as well as families of 7 living in San Francisco on public assistance.
Neoliberalism is the ideology everyone suddenly loves to hate but it 1. gave us low tariffs and free trade which are starting to look pretty good, 2. eliminated feudal type self regulation in the trucking industry which created ridiculous inefficiencies due to gateways and back haul restrictions, empowered a corrupt union, and wasted enormous amounts of fossil fuels, 3. rescued the railroads from a deepening cycle of bankruptcies and abandonments, 4. opened up air travel to the lower middle class, 5. simplified the tax code, 6. opened telecommunications to competition, 7. led to a wave of innovation and economic growth, and 8. eliminated a regime of absurd oil and gas price control which led to overconsumption and dependence on imports from questionable sources.
Phil, Thanks for this thoughtful comment. You’ve highlighted some vital nuances that will help me strengthen the framework for what I'm calling 'real capitalism.'
On your first point regarding unions: we are in furious agreement! You mentioned that the idea of unions being necessary for healthy capitalism 'sounds wrong but maybe it is right.' I argue it is absolutely right. In a "real capitalist" system, labor markets must be competitive. When employers gain too much market power (monopsony), they suppress wages below what a competitive market would dictate. As I noted in the essay, robust labor standards and the right to collective bargaining aren't anti-market—they are institutional mechanisms required to prevent rent extraction and ensure workers can retain the surplus they help produce.
On your second point about the 'messiness' of capitalism: you are totally correct that using leverage to build a business is a feature, not a bug, of capitalism. But we have to distinguish between strategic dissaving (an entrepreneur borrowing to buy equipment or scale a business) and structural dissaving (a working-class family borrowing at 20% interest just to pay rent and medical premiums). The former is building capital; the latter is having your future income extracted. Also, I have to push back gently on the idea that households are like global trade, where one's surplus requires another's deficit. As I showed in a later post, "Capitalism’s Empirical Test: The US Fails, Czech Republic Passes?", (https://mystack.wyman.us/p/capitalisms-empirical-test-the-us ), the Czech Republic shows positive average propensity to save (APS) across all income levels, so, it is empirically possible for an economy to maintain a positive APS across every single income quintile!
Your third point is your strongest, and it is presents a required caveat to my critique of neoliberalism. You are right to point out the successes of deregulation in trucking, airlines, and telecom. Under the framework I'm proposing, those specific deregulations were proper because they destroyed economic rents. Prior to the 1970s, the airline and trucking industries operated essentially as state-backed cartels ('crony capitalism') that extracted rents from consumers. Deregulating them introduced competition and broke up entrenched privilege. I don't argue just that we need "more" regulation, rather that we need "better" regulation. I think that we must distinguish between two types of deregulation: Deregulation that breaks up monopolies, cartels, and price controls is pro-capitalist, but deregulation that guts labor standards, allows financial predation, or permits massive corporate consolidation actually moves us away from real capitalism and toward the oligarchic rent-extraction I critique.
Thanks again for reading my screeds (you're one of the only ones who do!) and for taking the time to comment. Your comment helps clarify exactly the kind of institutional design we should be debating.
A few things. One big difference between the 45-75 time period in the US and the present as well as the present US vs. the Nordic countries is the prevalence of labor unions. The decline of private sector unions in the US has been enormous and has affected both the economy and politics - it has led to the decline of defined benefit pensions as well as comprehensive health care coverage and job security. I am not sure whether one might conclude that strong private sector unions may be a necessary component of a healthy capitalist system - that sounds wrong but maybe it is right.
Secondly, free market capitalism is messy. There are entrepreneurs who are negative savers but get money from wealthy investors or friends and family or ELOCs and go on to build very successful businesses without ever having "saved" a dime. Networks of savers, investors, speculators, etc. are very important. Leverage is heavily used in the early stages of many businesses. There are businesses with negative balance sheets which turn out to be successful. Just as not every country can run a trade surplus; so too every household cannot be a net saver. And the data is messy - the second quintile includes single individuals living in low living cost areas who are perfectly capable of saving part of their income as well as families of 7 living in San Francisco on public assistance.
Neoliberalism is the ideology everyone suddenly loves to hate but it 1. gave us low tariffs and free trade which are starting to look pretty good, 2. eliminated feudal type self regulation in the trucking industry which created ridiculous inefficiencies due to gateways and back haul restrictions, empowered a corrupt union, and wasted enormous amounts of fossil fuels, 3. rescued the railroads from a deepening cycle of bankruptcies and abandonments, 4. opened up air travel to the lower middle class, 5. simplified the tax code, 6. opened telecommunications to competition, 7. led to a wave of innovation and economic growth, and 8. eliminated a regime of absurd oil and gas price control which led to overconsumption and dependence on imports from questionable sources.
Phil, Thanks for this thoughtful comment. You’ve highlighted some vital nuances that will help me strengthen the framework for what I'm calling 'real capitalism.'
On your first point regarding unions: we are in furious agreement! You mentioned that the idea of unions being necessary for healthy capitalism 'sounds wrong but maybe it is right.' I argue it is absolutely right. In a "real capitalist" system, labor markets must be competitive. When employers gain too much market power (monopsony), they suppress wages below what a competitive market would dictate. As I noted in the essay, robust labor standards and the right to collective bargaining aren't anti-market—they are institutional mechanisms required to prevent rent extraction and ensure workers can retain the surplus they help produce.
On your second point about the 'messiness' of capitalism: you are totally correct that using leverage to build a business is a feature, not a bug, of capitalism. But we have to distinguish between strategic dissaving (an entrepreneur borrowing to buy equipment or scale a business) and structural dissaving (a working-class family borrowing at 20% interest just to pay rent and medical premiums). The former is building capital; the latter is having your future income extracted. Also, I have to push back gently on the idea that households are like global trade, where one's surplus requires another's deficit. As I showed in a later post, "Capitalism’s Empirical Test: The US Fails, Czech Republic Passes?", (https://mystack.wyman.us/p/capitalisms-empirical-test-the-us ), the Czech Republic shows positive average propensity to save (APS) across all income levels, so, it is empirically possible for an economy to maintain a positive APS across every single income quintile!
Your third point is your strongest, and it is presents a required caveat to my critique of neoliberalism. You are right to point out the successes of deregulation in trucking, airlines, and telecom. Under the framework I'm proposing, those specific deregulations were proper because they destroyed economic rents. Prior to the 1970s, the airline and trucking industries operated essentially as state-backed cartels ('crony capitalism') that extracted rents from consumers. Deregulating them introduced competition and broke up entrenched privilege. I don't argue just that we need "more" regulation, rather that we need "better" regulation. I think that we must distinguish between two types of deregulation: Deregulation that breaks up monopolies, cartels, and price controls is pro-capitalist, but deregulation that guts labor standards, allows financial predation, or permits massive corporate consolidation actually moves us away from real capitalism and toward the oligarchic rent-extraction I critique.
Thanks again for reading my screeds (you're one of the only ones who do!) and for taking the time to comment. Your comment helps clarify exactly the kind of institutional design we should be debating.