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american prosperity

F.A .Hayek

Following the Second World War, Hayek tried in vain to warn Western capitalists that they had set themselves on the “road to serfdom” at the very moment when the West stood on the threshold of unprecedented economic affluence, which would have been impossible without the intervention of government. At the turn of the twentieth century, the financier J. P. Morgan had quipped that those concerned about the price of a yacht couldn’t afford one. Decades before I went to work in the steel mill during the late 1970s, steelworkers, like truck drivers, plumbers, electricians, and other workingmen, could afford speed boats and fishing vessels, if not yachts, second and even third vehicles, summer homes, and Caribbean vacations for their wives and daughters, during which time many lavished expensive attention on their mistresses, all pleasures reserved for the well-to-do in a bygone era. Karl Marx got it wrong, but so, too, did Friedrich von Hayek. Marx predicted that as capitalism advanced, the number of poor would grow and the number of rich diminish, inflicting ever more cruel torment on the masses. In the twentieth century, even before the Great War, the opposite was happening. Increased wealth, much of which finding its way into the hands of workers, helped to dissolve class barriers and to make possible upward social mobility.

When prosperity returned to the United States during the 1950s, it seemed widespread, enduring, even permanent. It wasn’t. An important point of contention in the presidential campaign was whether Barak Obama or Mitt Romney had the best plan to revive the economy. The concerns were, and remain, serious and the efforts of both candidates were no doubt sincere, but the debate as it was conducted was irrelevant, for it neglected a more basic condition: the fable of American prosperity.

The most significant development in the lives of many Americans, to say nothing of hundreds of millions around the world, during the second half of the twentieth century was the advent of mass consumption. This phenomenon had its origins not chiefly in the surge of real wages but rather in the expansion of credit from which even former communists are no longer immune. According to the Reuters News Agency, the Sparkasse Bank in Chemnitz (formerly that bastion of East German socialism, Karl-Marx-Stadt) recently issued a MasterCard adorned with the hoary visage of Marx himself. You can use it when you’re short of Kapital or are in the Red. “There is a spectre haunting Europe–the spectre of high interest rates. . . . Debtors of all countries unite! You have nothing to lose but your irksome monthly payments and a good credit score to win!”

As perplexing as is the existence of a Karl Marx MasterCard for those of us who wish the world to make sense, it highlights a more troubling reality in a global consumer economy dependent on credit. Already by the 1960s, Americans were experiencing discontent amid their plenitude, though few of them knew how to articulate these feelings. Permit me to suggest that such unhappiness emerged because the consumption of goods had become more vital than the ownership of property. The dominance of consumption engendered a sense of the pervasive impermanence of things, since the act of consuming involves the disappearance of matter. We thus live not in an “acquisitive,” or an “affluent,” or even a “materialist” society, for none of these adjectives describes the millions of consumers who now discard things as rapidly as they buy them.

At the same time, poverty is still with us–the old-fashioned poverty in which people don’t have enough money to spend or enough food to eat. Statistics from the Census Bureau released in July, 2012 disclose that poverty is approaching the levels of the 1960s and predict that the poverty rate will reach 15.7 percent by the end of the year. The waning interest in durable possessions and the mounting frustration with consumption, meanwhile, have bred a new poverty that is not material, but social, psychological, and spiritual. Against that predicament Romney’s devotion to the free market, President Obama’s faith in the administrative state, and all the Karl Marx MasterCards in the world will be of little use. Even once prosperity returns, restlessness, disillusionment, and anxiety will linger.

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10 replies to this post
  1. "…a MasterCard adorned with the hoary visage of Marx himself. You can use it when you’re short of Kapital or are in the Red." O bliss! Welcome to this writer!

    This may define conservatives versus a classical liberal, utilitarian or libertarian who trusts people on balance to do what is best for them. It is not just "How You Gonna Keep 'Em Down on the Farm (After They've Seen Paree)" but simply will people eat broccoli and go to bed on time!

  2. Welcome to the Imaginative Conservative! We are honored to have you here. Love the MasterCard with Marx! I remember talking to a young woman from East Germany shortly after the Berlin Wall opened up — in fact she may have been from Chemnitz — who said this: "We knew that Marxism was a false god, but we don't want to worship the golden calf of the West either!" I wonder how many of her countrymen share that conviction today. My guess is, not many. The communist countries traded one materialist system for another, which is precisely why Solzhenitsyn warned us not to be too self-congratulatory. The West was already sick then, with the ailment you have diagnosed so eloquently.

  3. I have thought some more and maybe we cannot blame profligacy on working folk alone. Clinton’s people actually threatened US banks did they not offer mortgages to those who could ill afford them, especially minorities. Also, a prudent German ex-banker friend explains that when Central Banks flood the world with liquidity, any bank that does not loosen its lending requirements loses badly and perhaps fatally to its competitors. I am no economist, but one of Austrian proclivities might place a lot of the blame for reckless borrowing on paper money and lax Central Banks. Their degree of laxity runs in parallel, I bet, to ordinary folk borrowing more and more, generation upon generation; it happened to some of my own relatives. It is hard for even the most upright to pass up a freebie, and politicians have reason to start pouring free drinks since they may have retired before the hang-over begins.

    • Both my parents worked all through the 70s. In fact, my mother worked for Bank of America (when it would go by the acronym: BofA), and I remember my folks getting their “BankAmericards”. Those credit cards began in 1958 and went on to become VISA in 1976 ( – granted it’s Wikipedia, but I think the sources are good). Even during the 50s folks were used to revolving credit at individual stores; BofA/VISA simply unified everything into a single card. Basically, I have to disagree with the assertion that revolving credit and single family incomes didn’t begin until the 80s. Both began long before that.

  4. Could you do better than this:

    "When prosperity returned to the United States during the 1950s, it seemed widespread, enduring, even permanent. It wasn’t. "

    or this:

    "At the same time, poverty is still with us–the old-fashioned poverty in which people don’t have enough money to spend or enough food to eat."

    I am reminded of the Malthusians when I read this clap-trap.

    Consider only a few facts from this article:

    I will tell you where there poverty is — it is not in physical things; it is spiritual.

    When we value an innocent human life as nothing more than the cells equal to clipping our toe-nails, we are impoverished.

    We are not impoverished when a person has to choose between unlimited text messaging or unlimited calling minutes; or the 150 cable tv channel option versus the 100 cable option.

    • Nonsense. You can’t look at technologies that didn’t exist in the past, and which have become extremely inexpensive, and say that therefore people are not poor. Look at real property, at durable goods. Look at things like whether or not someone can own a home, at whether or not the mother can stay home with the kids, preserving culture and creating the social ties that hold a community together, or if they are forced to work to keep the family alive, impoverishing the whole society thereby.

  5. Dr. Malvasi is correct in pointing out that the ground of the economic collapse was apparatchiks of the Clinton Administration strong arming banks into making bad loans to people who could never afford the monthly payments. I've always wondered if that, or the massacre at Waco, was Clinton's most egregious act as president?

  6. Please allow me to throw this out for your consideration. I believe is it us that is to blame and allow me to explain. We are and have been an industrious and virtuous nation on the balance. But we have become uncoupled from those bedrock foundations that made us successful. We are no longer tethered to our churches; we have ceeded the classrooms to those that hold our values in contempt; We have seen our family structures smashed and have aloud parents to be usurpt; we seek compromise where we should be resolute and unbending. I think this article misses the mark because Marx was correct for all the reasons that Hayek was warning against. Cronnie capitalism has replaced free enterprise. I am bombarded with questions on why large companies would contribute to the re-election of a President harming thier businesses and interests. It is quite simple. They either agree that free enterprise is bad and cut from the same clothe or they intend to be in a position to benefit from carve outs, lupolds and hand outs for their benefit or the detriment of rivals. Christ told us that the poor would always be with us. Always. Free market capitalism as it used to be practiced allowed for the poor but always allowed for the opportunity to grasp the golden ring. Work hard enough and you will prosper. Only Marx's utopia promised a world where there was no "poor" and everyone would be sustained. It did not work for them as it did not work for the Pilgrims that landed on our fair shores. It nearly desroyed them and is why we have a Thanksgiving Day to celebrate. All of the persons, programs and descisions mentioned by others are the long culmination of the American people being seperated from the virtues and traditions that made as a great land. Whether by intentional deeds by some or the willful neglect or the best and blinded intentions, it matters not. Learn, live and profess the virtues of 200 years ago and we will prosper once more.

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