This is important and one of the major reasons following an unsustainable model got us in such economic trouble.

Having said that, there are lots of shades of gray when you dip your toe into defining a free market economy, but basically we’re talking about supply and demand—you need shoes, I make shoes; you need a car, I make cars. And that worked pretty well for centuries in the American economy, experiencing a little over-supply at times and minor shortages at others, but it generally evened itself out. We had a healthy, productive nation, a solid middle class and our kids went off to school with the assurance there would be a job somewhere in a normal, competitive job market.

That Was Then

Then was roughly up until the seventies and early eighties, just about the time American business got fed up with merely supplying markets that depended on the slow growth of more people actually needing shoes and cars. It began to dawn on the titans of industry that if they could only make people want shoes and cars and those same dudes on the executive floor could provide the financing to turn that want into a need, what had troubled them as a finite market could become infinite.

And by god, they did it. A number of factors helped them do it and thus was born a consumer market that took some three and a half decades to come down around our ears.

• What is now known as the Baby Boomers had just come on to the scene as young marrieds, newly arrived in what was then a hot job market. And they thirsted for stuff, things their depression and war-weary parents hadn’t had. Three-bedroom houses, new cars, television sets, a kitchen full of gadgets and a backyard in which to barbeque.

• Credit cards were invented and flooded the market. If you were a warm body with a job, MasterCard and Visa and American Express wanted to take your pulse. The whole broad horizon of consumer satisfaction had replaced a mere oil company card and individual plastic from the local furniture store. Don’t Leave Home Without It and Visa. All you need became mantras.

• Who needed a bank loan to buy a car? As a new Chevy Impala showed up in your neighbor’s drive, you trotted down to your local Pontiac dealer and he put you behind the wheel of a Trans Am with full-service financing. What’s the monthly payment? was the only question between you and brand new wheels.

• The un-airconditioned two-bedroom house you and your brother grew up in (with one bath upstairs) was history as you inked the mortgage on a new three-bedroom with two full baths in the suburbs. The developer seeded the lawn and popped in three small trees, but what the hell, trees grow and you’d soon add a two-car garage and screened porch. The only question? What’s the monthly mortgage payment. You’d live in it five years, watch the trees grow and trade up. Up was another mantra of the times and the times never seemed to end.

The advertising industry salivated as revenue poured in and they touted a buy now, pay later mentality that promised to fulfill every dream and do it now. Now, sweetheart, we can have it now. Dad and Mom just shook their heads in wonder.

The Music Would Never Stop

There was some fallout, but not enough to worry anyone except those who fell out. Wal-Mart was shuttering a good many small town businesses, as need morphed into need at the lowest cost. Sears and Montgomery Ward were on the ropes, but they were old-timey, they were Mom and Dad’s tired old stores. Family restaurants closed down, as McDonalds and Kentucky Fried Chicken popped up in numerous locations around town and that was a little sad, but wasn’t the Pancake House great?

Meanwhile, back in the corporate boardroom, the lesson was not lost that financing all this new consumer demand was more profitable than actually manufacturing and selling it. Magnavox, Zenith and Motorola were on the ropes as consumers eyed the offerings of Sony. Without so much as a wink, consumer began to creep into every corporate decision—what would the consumer want? So slowly we never even noticed, a guy with a job became a human resource and his value to society was mainly as a consumer. What to do? All the hot companies were growing and we better damn well grow too, or be left in the dust. And the dust, as John Steinbeck so accurately reflected, is not somewhere to be left.

Flogging Profit in the Eighties

There are very few ways to flog profit in consumer driven growth capitalism. Slash costs (difficult in a booming labor market), increase prices (absolutely impossible in a Wal-Mart and Honda fueled marketplace) or find new customers (when the main profit-earner is credit).

Fortunately or unfortunately for America, circumstances came into play in the eighties.

• President Reagan began a national policy of deregulation.

• The Berlin Wall came down

Reagan and his push to deregulate began a race to the bottom among our major airlines, the service sectors of banking and ushered in an era of supply-side economics. You’ll notice that demand was no longer in the equation. Demand was now almost entirely dependent upon the expansion of credit across the economic landscape.

Ominous music should have been playing in the background, but we were too busy with our toys to notice and corporate America was equally busy inventing new toys. Tax rates fell to historic lows among the highest earning executives. China was opening up and so far as manufacturing was concerned, China was cheap. Derivatives, Wall Street’s newest invention to spread (and mask) the downside of securitized debt, opened whole new possibilities for juicing another source of money and opportunity to expand consumer debt.

If only these timely events could be brought together. And, in the spirit of American inventiveness and fortuitous government business deregulation, ways were found and they were powerful ways.

• A flurry of ‘free trade’ agreements were enacted, enabling access to cheap Asian labor and tariff relief importing from Asia.

• Federal Reserve policy consistently lowered interest rates, making corporate borrowing far cheaper, big-ticket items such as homes and cars more loan-worthy and yet didn’t pull the teeth of credit card rates (mostly stalled at 18%).

• A consolidation of media put the control of message across the nation in the hands of corporate interests.

• All of which set the stage for a major move toward off-shore manufacturing and opened global markets for American branded (but not manufactured) consumer goods.

High-fives all around. Ad agencies inked record profits, banks opened branches across the country (and began the heady deregulated game of investment banking), corporate earnings went off the chart, everyone at the top had platinum parachutes, CEOs got a hundred million a year and Michael Jordan got a hundred million just to smile and wear Nikes. To keep it in the sports metaphor, the only team that staggered off the floor was American jobs. But hey, there’s always a place beside some teenager, flipping burgers at McDonalds.

Riding Growth Capitalism Down to the Wire

You certainly didn’t need spurs or a whip, this baby was setting a fast pace on the worldwide track and opening up lengths against the competition. America was a global winner and wore its blanket of roses proudly. Investors from all over the world lined up to pour capital into anything American that smelled even faintly of growth. Wall Street was in the lead, K-Street barely a neck behind and Main Street limping badly, a full furlong behind. But who the hell cared? America loves a winner.

And it wasn’t just America. Ireland was on a tear for the first time in its potato-famine history, Europe was challenging the American dollar, the Iron Curtain countries wallowing in investment, Russia slicing up its resources among aspiring oligarchs, China pulling away from a half century of communist stagnation and even little old Iceland partied. London rivaled New York as the seat of global finance. What could possibly go wrong?

Market capitalism, that moldy old template where nations actually created wealth by making things, was a disproved theory. The new revolution was consumerism, growth was king and third-world countries could handily and eagerly fight each other over dirty old smokestack industries. After all, somebody had to do it and better there than here, where some semblance of environmental law still applied.

Big money owned Congress for the first time since the Industrial Revolution and it was the Roaring Twenties again, without prohibition (anyone out there hear echoes?). No one heard echoes. Alan Greenspan mumbled his way before Congress with soothing murmurs about a new economy and the self regulation of the marketplace, glancing up from time to time with a wan smile behind his Coke bottle glasses and they ate it up. Legislation went hand in hand with growth and if one of those hands was behind a Senator’s back, grabbing a buck here and there, hey, it was happening on both sides of the aisle and a guy’s gotta get re-elected.

Kings were on their thrones and the circle of power kept getting smaller and smaller. Journalists kept their heads down and criticized the rest of the world, mostly China. Let the good times roll.

And roll they did, until they stopped rolling.

And This Is Now

So, we all know what now is like and it’s not comfortable. But it’s interesting (at least to me) to see what our financial and political leaders have in mind as a cure. Incredibly, they offer growth as the antidote to the collapse of growth capitalism. More Kool Aid, that’s what they recommend.

Ben Bernanke, Greenspan’s designated hitter, wound interest rates all the way down to 1/1000^th of one percent. The only reason it’s not a negative number is that the Fed is required by law to charge some kind of interest rate. Additionally and without so much as a raised public or congressional eyebrow, he injected (Printed? Pulled out of a computer?) $16 trillion into American (and some foreign) banks. His excuse is liquidity, although my personal suspicion is that they’re using it to get out from under their gambling debts. In this Julian Assange-deprived nation, we’ll probably never know. An amount equal to our entire national debt will simply disappear into the air. Bernanke says we need growth and sixteen trillion is his answer to priming the pump. The snakes are apparently in charge of the snake oil.

Goldman Sachs, Citigroup and anyone else on Wall Street have the same message. Growth. The cure for the disease is the disease. Possibly it’s true. We’ve never tried that approach, but somehow I doubt the Wall Street solution. They want liquidity. They want another grab at the golden ring of growth. Please God, they pray, just give us another chance to grow our way back into prosperity and this time we promise it will work.

Congress is in love with growth, as are Obama and Romney and they just wish they could find the money to make it happen. But these are tough times and cuts must be made. If these are tough times, who made them tough? If the nation doesn’t have any money, who put it all on black and spun the wheel?

And these morons want another shot at us.