Another View Of The Cold War

In the posting "The Wave Model Of Economics", I explained how America has alternated between a left wave and a right wave, over the past century or so. Today, I would like to point out how the left wave from around the end of the Second World War to 1980 was affected by the Cold War with Communism.

The great economic crash of 1929 happened before Communism was a major world force. In fact, this crash was what made it a major world force. Assembly line manufacturing had been implemented on a vast scale and all kind of products, from cars to radios, continuously flowed from factories. The trouble was that workers were not being paid enough to be able to afford to buy the products that they were producing, and the goods were just piling up in warehouses. Factories began cutting back on production, meaning that workers had even less money, and it spiraled into a devastating economic crash.

When the Cold War came along, we could not have harsh capitalism or that would prove the Communists correct, another such crash would almost certainly mean a Communist victory as capitalism lost credibility. During this time, it is striking how moderate Republican administrations were. Eisenhower, Nixon and, Ford were Republicans, but they were the most economically moderate Republican presidents ever. There was nothing like the harsh capitalism of the 1920s and before, which led to the Crash of 1929.

Nixon actually added to the anti-poverty Great Society programs of his Democrat predecessor. When is the last time you saw a Republican president adding to the Democrat's social programs, instead of cutting or eliminating them? In fact, we clearly went too far left in the late 1970s which brought radical Conservatives back to power in both the U.S and Britain.

Communism began to fade in the late 1980s, and the Cold War began to wind down. There had not been an economic crash, or even a deep recession, in decades. Reagan and Thatcher had to induce the recession of the early 1980s because that was the only way to purge inflation. But no sooner was the Cold War over than the economy crashed in 1987, in the most serious economic downturn since 1929. Reagan moved to the right to purge inflation early in the decade, but then stayed too far right and it brought about the crash.

There was an even more serious crash in 2008. It is no coincidence that all three of these economic crashes have came after two consecutive conservative Republican presidential terms. With no competition from Communism there came the drastic shift to the right, essentially letting those with a lot of wealth set up the system to suit themselves and take more and more money for themselves until the lack of consumer spending by the cash-strapped population brings it all crashing down.

Maybe we should have a certain nostalgia for Communism. Even if we do not really want it here, as long as it was "out there somewhere" the governments of the U.S. and other western countries had to compete with it ideologically and could not afford to have a lot of poor people and certainly could not afford to have another economic crash.

Communism came about as a reaction against the extreme "robber-baron" capitalism of the late Nineteenth Century. Having Communism as an opponent did mean the Korean and Vietnam Wars, but it cannot be denied that it also meant a much better living standard for the average person. It was at the height of the Cold War that the wealth distribution in America was the most balanced.

Now (2013), the wealth balance in the U.S. is the most slanted that it has been since the 1920s, just before the crash. There has been a dramatic improvement in productivity since 1980, but without the competition of Communism it has only gone to make rich people richer. Even with all of the additional wealth, the average American today is worse off than in 1980.

The news around the beginning of 2012 was that half the population of the U.S. was considered as poor or "low-income". More people than ever are millionaires, and many of the millionaires that there were have become billionaires, the trouble is that everything else is broke.

Since the end of the Cold War, and the ideological competition with Communism, we have returned to having it built into the system that the rich get richer while the poor get poorer. Having Obama as president has slowed this process, but has not halted it and certainly has not reversed it.

The end of the Cold War may seem like a good thing, but it is also comparable to the principle of monopoly. Suppose that there are two competing stores in a town, but then one of the stores goes out of business. At first, the employees of the remaining store consider it as a victory for their store. But then they realize that it means that the owners of the store can get away with raising prices so that their customers have to pay more, and doing away with raises so that their employees get paid less. This is simply because the customers in town now have no other store to shop at, and the employees have no other store to work at.

The American middle class is now vanishing. In the book "The Commoner Syndrome", which I wrote in the autumn of 1997, I compared it to the humps on camels. The single hump of the dromedary, or Arabian camel, which represents most people in the middle with a few rich and poor on either end, was being replaced by the two humps of the Bactrian camel, which has two humps. One hump is the rich and very well-off, the other is the poor. This model turned out perfectly with the news at the beginning of 2012 that half the population was now poor or "low-income".

It is thus my conclusion that the middle class was the product of the Cold War.