My Thoughts on Capitalism and The Great Depression
All of the great civilizations since the dawn of man were built on slave labor. And if you look back over time, our own industrial revolution actually started right after the Civil War. That is the opposite of the way the world worked previous to the Civil War. So how could we as a country advance faster than before the Civil War if the new rules of engagement had put us at a loss? Let me tell you how this change in methodology advanced us. Once the Civil War was over, the plantation owners of the South had to acquire a new labor force to work their farms.
Their use of slave laborers to work their farms was the cheapest method since the dawn of time up until then. But soon, a cheaper method would arrive: sharecropping. When implemented, it worked like a dream for them. They actually paid the workers less than the food and shelter that they had been providing before, and the workers had to work harder because they now needed more money to pay for their own food and shelter. And so a new method of paying workers was born. The Industrial Revolution was upon us. It spread to all industries in all parts of the world. If we pay the workers less, they will have to work more hours, and our company will become more productive with fewer workers, thereby making us ungodly profits. Capitalism was reborn.
Let us not forget that it was the Republican Party that “freed” the slaves. The same Republican Party that today are the keepers of all things “Capitalist” in the world. The forced labor for food and shelter model is exactly why communism didn’t work. I mean, why work hard when everyone has a job and gets paid the same amount of money? No incentive there, right? It may have worked if they could beat their workers into submission like the slaves were beaten, but then it wouldn’t be “communism;” it would once again be “slavery,” a filthy word in anyone’s vernacular. And it progressed from there, as wealthy people schemed and manipulated to increase their wealth at the workers’ expense.
Once they realized that they could no longer pay workers any less, they went after smaller businesses. Did anyone ever stop and think, “some businesses charge too much for their products?” Of course they have. But long ago, smart businessmen realized that they would need extra money in their businesses for two reasons: so that their businesses would have money to expand their market share and make even more ungodly profits and so they could undercut their competitors and put them out of business, thereby creating, or trying to create, a monopoly.
Companies would go public and offer shares of stock in their companies. And to attract all possible investors, even people with just a little more money than regular folk, they allowed these investors to purchase these stocks “on the margin,” as it was referred to, with 10 percent down and the other 90 percent financed by a mortgage broker, who generally was a businessman or relative in cahoots with the specific company offering the stock or the local bank, which was probably owned by one of these “businesses” relatives. Kind of like an “in-house loan officer.” And businesses now made even more ungodly profits.
Then a third reason was formulated: The ability to survive in the event of an economic downturn, or a “depression / recession.” You have just witnessed the birth of a notion. So it went. Businesses had IPOs. The company owners and officers would start a selloff of their stock, thereby causing the stock price to plummet, and then the mortgage broker (a relative of the company owners) would ask for a margin call on the small investors’ loans for the other 90 percent of the stock purchase, and then the little guy, as well as the speculative investors (see day traders) losing their shirts, and so on and so forth. And then the company principles would start buying back their stock. Companies got huge, and people lost money.
Remember, the basic tenant of capitalism is that for someone to win, someone has to lose. That’s why the current batch of Republicans/rich people/Capitalists don’t like the phrase “redistribute the wealth.” You see, money is a finite resource, and remember, for someone to win, someone has to lose. And spaced out over time, these business upturns and downturns, money grabs if you will, didn’t really attract too much attention until the Sherman Antitrust Act of 1890 was passed by Congress. You see, just like today, there were actually honest businessmen back then, and they got tired of the tactics of these greedy Capitalists, had them declared illegal, and hoped for the best. But Congress didn’t really enforce these laws much, probably because they were being bribed by agents of these types of businesses, or “Lobbyists” as we call them today. All things old are new again, huh.
This created a clamor from other honest businessmen who felt that the status quo had to change. Finally, Teddy Roosevelt was elected President. He wanted to see the break-up of Standard Oil, the biggest monopoly of all time. In 1909, the Justice Department filed suit to make it happen. In the end, it did happen, and Standard Oil was broken up into 34 separate companies, most of which have either bought each other out, merged, or gone out of business. And up and up it went. And stocks were way overpriced. Then some of these greedy businessmen wanted to take this enormous profit before it was lost to deflation (the opposite of inflation), so in an effort to stave off a depression, these extremely intelligent businessmen started a selloff, creating exactly what they had hoped to prevent, and it wasn’t entirely their fault.
When other businessmen saw what was happening, they too did the same thing, and once it got rolling, it couldn’t be stopped. And then all hell broke loose on Friday October 25, 1929, Black Friday. On Saturday, October 26, 1929, some of these intelligent businessmen tried to right the ship they had wronged by injecting money into the equation. Well, it worked a little bit, but for it to work completely, they would have had to give too much of their precious profits back, which they were not willing to do. They would have been better off trying to lower interest rates to adjust for inflation, as we do today, or trying to devalue the dollar, as China does to their money nowadays. However, there were no central regulations by the government in place then like there are today.
And just think, Republicans want less government, less regulation, and less intrusion into their lives. I wonder why. It was because a lot of people made a ton of money in the depression, and most of these people were the people making all the money before the depression, like Capitalists. They really didn’t want it to happen but realized afterward that it was the best thing that could have happened for them.
You see, just like a business charging too much for their product in an effort to build a war chest in the event of an economic downturn, wealthy people had enough resources to make it through the depression, all the while buying up assets at pennies on the dollar, and getting richer by the minute. And this is why I believe that the Great Depression of 1929 and the Great Recession of 2008 were planned from the start by the very people who stood to gain the most from it, the only ones who could manipulate the system and the only ones with enough money to bribe the politicians to make it happen: the Capitalists. And to get enough money in place to fund this asset taking in the 30s, these same people may have even created Prohibition so they could make lots of money to buy those available assets in the 30s. Wonderful, isn’t it?
I love being an American. I do, really; because anybody in America can grow up and do these types of things, or more appropriately, something similar, that might actually be legal and moral. That’s the American Dream. And it’s not readily obtainable anywhere else in the world, only in America, the land of milk and honey. But the difference between these two events is, in the depression, the stock crash came first and the housing crash second. This time, they let the housing crash come first, which lead to the government bailouts of the companies holding the notes on all these foreclosed properties, all “too big to fail.” So their companies never lost assets like in the depression. They got the government to pay off this bad debt, and they got to keep the foreclosed properties and then sell those properties and make more ungodly profits, or something like that. And so it goes. More on this subject next week.