I just had a thought. We all know that you can’t have a capitalism in which one person owns everything. Capitalism depends upon people selling things to each other. So I’ve always thought this means that inequality can only get so bad — eventually, something has to give. Traditionally, there has been an oscillation between the rich and the rest having power. The rich had power during the Guided Age and they have power now. And the rest had more power in the 1940s and 1950s. It’s interesting, isn’t it, that when the middle class has power everyone does well; when the rich have power, things get really unstable. But I’ll leave that for you to think about for extra credit.

The Reagan presidency is really when things turned around in a big way for the capitalists. In fact, they turned around so well that by the late 1990s, the economy was out of kilter. The middle class just wasn’t able to buy all the crap that the capitalists wanted to sell. The normal thing to do in this case would be to allow incomes to become more equitable. But as we all know, power concedes nothing without a demand. The rich were not going to let go of any of their power, so they had to find a way for the economy to continue on without losing any money.

But even if the rich are not smart, they have enough money to hire smart people. They came up with a great idea. It wasn’t necessary to pay workers more. The rich could just loan the workers money. This was done explicitly as well as implicitly by allowing workers to think that their houses were worth far more than they really were. This had the great byproduct of eventually leading many of those workers to lose even the houses themselves. My but the rich played that well!

The question is what we are going to do now. This gets back into the whole question of secular stagnation. It is possible that a really crummy economy with high levels of unemployment is the new normal. Now if that were all, it might be fine. I mean, as long as the rich were getting their ton of flesh, what politician is going to care? But even with almost all of the recovery going to the people who least need it, this is not a situation they are going to accept. I’m sure people are working on the issue even as you read this. There must be a way to set up a situation where the rich can get ever richer off the backs of the rest without the rest actually benefiting.

I think I have found the solution! And the truth is that I’m amazed that I didn’t think about it before. It’s so simple: slavery. That’s effectively what the financial system has turned most of America into anyway. I’m not suggesting total slavery of course. We would still need a small middle class that would support slavery in terms of enforcement. Think of it as the liberal class as discussed in Chris Hedges’ book, Death of the Liberal Class. But otherwise, it is slavery for all!

And we are already prepared for it. After all, haven’t conservatives been telling us for years that government assistance is worse than slavery? Obamacare is worse than slavery? Social Security is worse than slavery? Do you know what’s not worse than slavery? Slavery! This is simple Aristotelian logic: something as bad as slavery is better than something worse than slavery. A = A! (Note clever “Ayn Rand never understood Aristotle” reference!)

I am aware that some might think most Americans would make rather bad slaves. We might resent being slaves, even though we were already suffering a much worse fate with government programs like the mortgage interest deduction. But that’s what’s so great about slavery. As Edward Baptist explained in The Half Has Never Been Told, the rich can just torture us if we don’t constantly increase productivity — just like they did to slaves in the good ol’ days of the 19th century when America was still free. I don’t know about you, but I am very innovative when I know if I’m not, I’m going to be whipped. And what options would I have anyway? I wouldn’t want to go back to my old state of paying progressive income taxes, which is worse than slavery.

How we will get from our current state of government programs that make our lives worse than slavery and actually being the chattel of the rich, I cannot say. But it does seem the next logical step in the evolution of capitalism. I just hope they don’t make me change my name.

Anatole Kaletsky wrote a really good article over at Reuters, The Takeaway From Six Years of Economic Troubles? Keynes Was Right. His argument is that since the financial crisis, we have seen that fiscal stimulus has greatly out-performed monetary stimulus. And the reason for this is that interest rates are already at zero. Monetary stimulus works really well when the economy is performing reasonably. But in the kind of depression we are now in, fiscal stimulus is king. This really shouldn’t be controversial to anyone who has taken Econ 101. But sadly, the field of economics has become so ideological that the basics of the science get lost, as the theory is twisted into knots to justify preexisting conclusions.

This got me thinking about monetary policy in a more general sense. I’ve long been an advocate for a higher inflation target. Our obsession with low inflation is simply a reflection of the fact that we care far more about the owners of capital than we do about workers. Allowing more inflation would encourage spending and thus create jobs. But there is more to it than that.

With the current 2% inflation target of the Federal Reserve, we are already more or less at zero inflation. This is what Alan Greenspan thought. He assumed that the official inflation numbers overstated the level of actual inflation and that a 2% inflation target would cause actual inflation to be roughly zero. This is the level at which half of all products are going down in price and half are going up. This is a very bad situation that encourages people to spend less and makes getting out of debt much harder.

When the economy tanks, it is normally because too many people are trying to pay down their debt. This normally goes along with low inflation — making the debt burden even worse. And the Federal Reserve is largely impotent, because money is already cheap. It can’t get any more cheap. This is why the Fed has been forced to do things like quantitative easing. But even that will only be done for the bare minimum amount of time required. Meanwhile, we can’t use fiscal stimulus because much of the world has decided that the most obvious way to help a struggling economy — the way that has helped economies for decades — is simply unacceptable.

We really do live in a conservative world now. The direct solutions to problems cannot even be discussed. When we wanted to reform our healthcare system, we couldn’t just nationalize the insurance industry; we had to come up with a neoliberal monstrosity where the government feeds billions of dollars through the “free” market. We can’t just give poor people money; we have to provide tax credits. And we can’t just stimulate the economy directly by, for example, hiring more teachers. No, we have to take the indirect approach and offer free money to the rich to encourage them to invest. It’s all madness.

This is sadly not the fault of the Republicans. They are who they are. All this neoliberal policy is the default because the Democratic Party has given up on liberal policy. It is now only interested in economic policy that its funders find acceptable. Hence: Obamacare, EITC, and the sequester! But none of that matters because the Democratic Party has been on the following edge of same sex marriage. All of us Democrats are so proud.

Looking at the polls, it is hard not to get depressed. Right now, it looks like the Democrats are as likely to hold 47 Senate seats as 48. And if the polls are off in the Democrats’ favor, this could be a chilling election from a liberal point of view. Of particular interest is Georgia, where Michelle Nunn is now trailing and David Perdue may win outright. This is not because she’s doing poorly. Support for the libertarian candidate has cratered. And like I always say: libertarians are just embarrassed conservatives. When push comes to shove, they are reliable Republican voters.

All hope is not lost, but most is. What bugs me is that our entire political system is subverted by these off-year elections when only the most conservative voters bother to show up. It isn’t just that we have to deal with oscillating power structures. The bigger problem is the effect that it has on the Democratic Party. It provides a reason for it to remain its usual economically conservative self. I still hear liberals claim that we have to be “moderate” in order to win elections. But this is madness. The truth is that during presidential election years, people are eager to vote for actual liberal policy. And during off-year elections, no amount of “moderation” is going to make the conservative electorate vote for the Democrats.

If I were set up for the rest of my life, I would be inclined toward a philosophical position, “The people don’t care about our republic, so what are you going to do?” But I am not set up for the rest of my life, and so I see the lack of interest in the simple act of voting as evil. I’m reminded of young Carey Wedler who thought that all she had to do was vote for Obama and he would fix all our problems. Who thinks it is enough to vote for president and then ignore politics the rest of the time? Such people don’t even deserve a president as good as Obama.

Of course, the problem isn’t just with the young and other liberals who can’t be bothered to vote. The bigger problem is that roughly half of the citizens of this country continue to support the Republican Party that has clearly gone off the rails. Thomas Frank wrote about this over at Salon this morning, Righteous Rage, Impotent Fury. In the article, he returns to Kansas to see what is going on. I suspect when he set out to write the article, he was planning to write a positive piece about how the people of Kansas were finally throwing off their knee-jerk acceptance of any candidate who had an “R” after his name. But the polls have gotten tighter. The Kansas Senator Pat Roberts could very well win this election. And the truly disastrous governor Sam Brownback could win in the polls are a little off. Regardless, Daily Kos gives Brownback 49% of the vote. This is after he brought in Art Laffer to justify an enormous push of resources from the poor and middle classes to the rich, bankrupting the state and most especially its educational system.

Frank is more colorful in describing what is going on. He references rotten boroughs, where low population allowed the seats to be effectively bought. This is more or less what we have in the Senate with states like Wyoming. But now the seats don’t even have to be bought. The people willingly vote for officials who actively harm them.

So we liberals will tough it out through this election and look forward to 2016 when Democrats are likely to do better. But the Democrats on offer will be the usual moderates. If we are very lucky, two years from now, there will be a “not quite as bad as the Republicans” wave. Hooray.