In U.S., Economic, Social Problems Intensify

Each economic order, each political era, each epoch is characterized by a paradigm.

Political scientists and other academics like to call it a paradigm, which is a fancy academic term for framework popularized by the great scholar Thomas Kuhn. Further, the paradigm for the modern and now early postmodern era is corporate capitalism.

True, this does not mean that corporate capitalism prevails in all nations the way it does in the United States -- clearly it does not -- Finland's economic system differs from France's which differs from Argentina's, but know that the paradigm of the last half of the 20th century and start of the 21st is corporate capitalism.

Corporate Capitalism: The Best Economic System

Moreover, the view from here argues that corporate capitalism offers the most benefits for a society -- with wealth creation, job creation, innovation, rising median incomes, increased productivity, reward for initiative, and resource utilization efficiency being chief among these.

But investors/readers should also know that the paradigm favored is a corporate capitalism with an adequate social safety net, or social welfare state -- something yours truly believes the U.S. never had, does not have today, but someday might.

Corporate capitalism with an adequate safety net offers the benefits of both freedom and protection for the vulnerable. If one had to cite a model/ideal example, it would be contemporary France, with a few modifications.

Further, President Obama, if he's successful with most of his initiatives -- universal health care being a big one -- and with getting the U.S. economy growing at a rapid rate again to create enough jobs, has a good chance to usher in a good, effective social safety net. Don't misunderstand: it won't be as good a safety net as France's, but Obama's programs can quite literally usher in a new, progressive era in American society and life. With a public approval rating that's hovering around 42 per cent, according to the latest Gallup Poll -- a level that makes it harder to persuade Congress to enact your top initiatives (the jobs bill being one) -- Obama will need some good fortune (and perhaps a continued decline in oil prices), to create the 150,000 to 200,000 new jobs per month (at minimum) the nation needs to help usher in that new era.

Reform: Essential for Systemic Health

But let's return for a moment, from an investor standpoint, to this notion of reform, or rather the critical role that reform plays. Simply, economic reform enables the stakeholders to remain the decision makers that broadly structure change. That is an enormous advantage to both the stakeholders and the society at large. This is because history is replete with instances where just a minor amount of reform would have maintained the current stakeholders and saved the existing system...but, regrettably, it didn't occur. Two major examples, of course, are the French Revolution (1789-1799), and Bolshevik Revolution in Russia (1917).

In 18th century France, minor land reforms earlier would have prevented the rise of the radical Jacobins. None occurred, and the result was Robespierre and the Reign of Terror.

In the early 20th century, near the end of World War I, minor reforms by Czarist Imperial Russia -- again, so inconsequential when viewed in retrospect -- would have quelled dissent in Russia.

But none occurred. And the result was the rise of Lenin, the Bolsheviks, and the rule of the Communists. And Russia was filled with blood. Later, Joseph Stalin would nearly destroy Russia -- destroy his own nation -- with his murderous mass purges -- the Red Terror -- and spread his brutality and Russia's errors throughout the world, filling the world with blood, for decades.

U.S.: Major Economic, Social Problems

Now, no one is suggesting that level of tumult in the U.S. But it is important to remember that so long as the stakeholders remain in control, they do shape the type of reform, to a considerable degree.

In other words, if the American system reforms now it is highly likely that it will remain corporate capitalist, and that's a good outcome for both U.S. investors and society.

Moreover, with the birth and rise this autumn of the Occupy Wall Street movement seeking economic and fiscal reform provides yet another data point regarding the need for stakeholder-initiated systemic reform. No political scientist, historian, or sociologist worth his or her salt would dare to predict where the Occupy Wall Street movement will be in a year or even six months from now; there are too many unknown variables that can greatly affect the coalition's status, one way of the other.

Occupy Wall Street has not formulated a list of demands yet -- and the group, as part of a calculated strategy, may never do so -- and that's one reason why it's hard to predict the movement's status in the future. But what can be said with certainty at this juncture it that Occupy has shifted the political discourse back to the public interest and to the U.S.'s longstanding social compact, and away from the ideology that favors the privatisation of every federal program, including Medicare.

Reform: It Almost Always is Preferable

Further, it's equally critical important to point out, as the French and Russian case studies demonstrate, that once turmoil starts absent reform, it's virtually impossible to predict how much harm will be done, what will occur, what system will rise, and where it will all end. Moreover, it is safe to say that those stakeholders in 18th Century France and in post-World War I Russia didn't begin to contemplate what was unleashed on their societies as a result of a failure to reform the existing system.

Some in the U.S., including many Tea Party faction members, economic conservatives and Republicans, say that despite growing social problems from unemployment, underemployment, and widespread deprivation, that the U.S. doesn't have to worry about such social upheavals; that for a myriad of reasons, the U.S. is different, immune and/or better. These observers also fail to see that, should Obama's reforms not stand, and the economic/social problems persist, another reformer who would propose changes far more society-altering than Obama, is likely to emerge.

Is Occupy Wall Street the precursor to that big economic and social change?

In that sense, these mostly conservative observers -- casually dismissing the Occupy Wall Street movement as not connecting with working-class and middle-America's plight -- are saying, it can't happen here or a better safety net isn't needed.

That may well be the case, but it represents an enormous risk -- a risk conservatives and other Republicans perhaps don't fully comprehend. No one knows how those who have not benefited and/or have been left out and left behind in the American system of corporate capitalism will respond this time -- in the era of unprecedented wealth, material abundance, opulence, conspicuous consumption and technological advance -- if the unemployment rate keeps rising.

Further, given the enormity of what occurred in France and Russia, the balance of risks directs one toward not taking that chance. And that will always be the main reason forwarded here to back President Obama's much-needed economic reforms.