Monday, August 4, 2014

Why the US has a welfare system

Since 1790, the US had had about 50 recessions. Our country really didn't officially track recessions until about 1920 and we didn't start keeping accurate statistics until after World War 2. These recessions include depressions in 1807, 1815-21, the long depression of 1873-79, and the Great Depression of 1920-21.

If you take a big picture view of the US economy. the US has a recession about every 5- 7 years Most of these recessions have been caused by banking institutions. In the past the failure of railroads, life insurance companies, strikes and securities failures have led to to recessions and panics.

Our vaunted free enterprise system in the US has been sputtering along for years, firing on 6 cylinders rather than 8.

This why we have programs like unemployment insurance, food stamps and Temporary Assistance for Needy Families (TANF). These programs are there as band aids to an inconsistent free enterprise system.

Of course, other systems haven't worked much better. Communism collapsed in Russia and socialism in Greece has been a failure. Libertarianism has never gotten off the ground and probably never will.

Most modern economics are a mix of free enterprise and social reforms to capitalism.

Finding the right mix of capitalism and social reform is the trick. Go too far in either direction and a recession may result. The Republicans rescinded the Glass-Stegall act with President Clinton's blessing and Hank Paulson further deregulated the big investment banks which led to the recent sub-prime mortgage crises.

"Further, the U.S. shadow banking system (i.e., non-depository financial institutions such as investment banks) had grown to rival the depository system yet was not subject to the same regulatory oversight, making it vulnerable to a bank run."

If the captains of industry were less greedy and did a better job of sharing the wealth and income, many welfare programs would not be needed. These social welfare programs are a reaction to the the failures of free enterprise. These welfare programs were not created in a vacuum. 

If free enterprise did a better job of managing the private economy, many welfare programs could be curtailed or cut back. Corporate resistance to increasing the minimum wage is a good example of corporate irresponsibility.

Corporations like Wal-mart and McDonald's have taken their greed to an extreme and have developed corporate models that depend on government welfare programs like food stamps, the Supplemental Nutrition Assistance Program (SNAP).

Human beings may well be unable to break free of the dictatorship of greed that spreads like a miasma over the world, but no longer will we be an inarticulate and ignorant humanity, confused by our enslavement to superior cruelty and weaponry. --Alice Walker



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