07/20/2012 10:43 am ET | Updated Sep 19, 2012

Yes, Obama Is at War Over Capitalism

Truth is, the world has just been through a century of war that was fought over capitalism. That century of wars was not fought for or against capitalism; it was fought over which socialist system was best to replace capitalism, as unbridled capitalism was by then so widely reviled as inhumane that no nation even advocated it as a socioeconomic system.

What might have turned the world so vehemently against capitalism was that it appeared to be the ghost of authoritarian monarchy. It was a monarchy of money that had begun filling the autocratic void left when the world outgrew monarchy. After all, money and power were the practical definition of monarchy and the divine right of kings was just a thin window dressing.

At the turn of the 20th century, back when Democrats were for states' rights and Republicans were for a strong federal government, both sides of the political equation abhorred the power of money to corrupt government. The Sherman Antitrust Act was passed in 1890. Teddy Roosevelt enforced it. But money and power still accrued to the world's new plutocratic class of businessmen whose vast wealth defied efforts to blunt their influence. Understanding of the power of money in politics was in its infancy in 1900 and was like trying to dam a river with a broom.

It took a watershed of new socioeconomic thinking at the level of government to provide the intellectual tools to both recognize and deal with the problems that unbridled capitalism and the concentration of government rivaling wealth could bring. No current advocate of free market capitalism knows of what they speak as no living person has ever seen it in action. Free market capitalism has not been economic policy in the world for 70 of the last 80 years. We have all been lulled by the effectiveness of obscure but surgically precise legal protections wrought of the hardest economic times this country has ever faced. Those hard times were made hard by and for the pleasure of plutocratic levels of wealth. Those protections between us and predation on us by the wealthy were overturned by the GOP and Third Way politicians in 1999 -2000.

The result has been a return to the economic boom and bust cycles that preceded economic regulations put in place in 1933, punctuated by this Great Recession. For nearly 80 years this country's cycles of expansion and recession had been moderated by banking and commodities regulation. It was very, very effective. The frequency of recessions was cut in half and the depth of deflation during recession was cut by orders of magnitude.

This chart from Bureau of Labor and Statistics data shows periods of inflation (expansion) and deflation (recession/contraction) in the U.S. economy since 1870. (Unfortunately the author fails to recognize that the effect he has charted is not entirely a result of FDR banning the private ownership of gold bullion, but it's still a great chart.) The New Deal finance reforms beginning 1933 can clearly be seen to have been coincident with positive changes in the economic cycle. Positive unless you prefer double-digit inflation one year and double-digit deflation the next. Personally, that kind of fluctuation in my asset valuations makes me nervous and irritable.

FDR won WWII militarily and won the hearts and minds of the world with his economic policy. That economic policy was for government to curb the most greedy and risky impulses of Wall Street and master of the universe wannabe twits in business that can't see that if they cut down all the forests or kill all the buffalos today, there won't be any trees or buffalos to cut down or kill tomorrow. FDR waged war on capitalism while waging war, hot and cold, on the more doctrinaire forms of socialism, communism and fascism. His way is the way the world has been run for your entire lifetime, the most economically stable and prosperous period for any nation in history and setting the economic platform of the Democratic party in stone for 66 years.

FDR's flag of victory and prosperity has been dropped, though. The flag that led us through the world's most costly war and led us out of the Great Depression was dropped by Bill Clinton when he signed the Gramm-Leach-Bliley Act in 1999 which effectively repealed the Glass-Steagall Act of 1933. Clinton then sealed our fate with the Commodities Futures Modernization Act of 2000. Between the two acts, finance was effectively deregulated to form too big to fail banks and to create unregulated over the counter derivatives trading which, together, produced the triggers if not the cause of the Great Recession of 2007-?.

Now, in 2012, Obama is faced with economic and political conditions not faced by any candidate of any party since 1932. No Democratic or Republican candidate for president has run on the express policy of deregulating giant banks and corporations since 1932, because FDR was so completely, surgically, right about how to make capitalism work for the public. And because of that ongoing success, the public seems lulled into believing that no politician who says he will cut Social Security and Medicare in order to give tax breaks and total deregulation to the rich would actually do that in office. No politician for 80 years has ever done that. Right?

Obama must fight an inexplicable resurgence of free market capitalism that the world spent a century subduing. He must do so while trying to repair the obvious disaster that free market capitalism has wrought in its just doing what free market capitalism does, create an as many busts as booms treadmill. Obama is at war with what the CEO of JPMorgan should be allowed to do to make money. He's also at war with an ideology that is so poorly understood by its adherents that they think the world has never tried free market capitalism before. We have, and communism follows it. Obama is at war over what kind of capitalism is productive and not destructive in order to save it, just as FDR was.

A friend of mine of Chinese descent once told me that the Chinese are patient. They will try a philosophy for 200 years or so to see if it works. We are coming up to about 140 years of industrial capitalism. Resetting the clock to 1870 will not help capitalism survive the will of the people.