The Time for Wealth Redistribution Is Now

Robert Reich’s Blog / By Robert Reich, posted on Alternet,org,  December 6, 2013  |

The President’s speech yesterday on inequality avoided the “R” word. No politician wants to mention “redistribution” because it conjures up images of worthy “makers” forced to hand over hard-earned income to undeserving “takers.”

But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else, and often at more than one job.

Yet they’re still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing—while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).

Better education and training for those on the losing end is critically important, as will several of the other proposals the President listed. But they will only go so far.

The number of losers is growing so quickly, and so much of the economies’ winnings are going to a small group at the top—since the recovery began, 95 percent of the gains have gone to the richest 1 percent [2]—that some direct redistribution of the gains is necessary.

Without some redistribution, the losers are likely to react in ways that could hurt the economy. They’ll demand protection from global markets they believe are taking away good jobs, and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England’s 19th-century Luddites, they’ll seek regulations that preserve the old jobs).

Without some redistribution, our ever-increasing number of low-wage workers won’t have enough money to keep the economy going. (This is one reason why the current recovery has been so anemic.)

And without some redistribution, America’s growing army of low-wage workers may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.

One way we already redistribute is through the Earned Income Tax Credit [3], a wage subsidy for the working poor, which, at about $60 billion a year, is the nation’s largest anti-poverty program. It’s like a reverse income tax—larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000).

The EITC subsidy should be enlarged and extended further up the wage scale before tapering off.

How to pay for this? By cutting subsidies and special tax breaks for the oil and gas industries, big agribusiness, military contractors, hedge-fund and private-equity partners, and Wall Street banks. And by capping individual tax deductions (deductions are the economic equivalent of government subsidies) for gold-plated health care plans, lavish business junkets and interest on giant mortgages.

In other words, we can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.

See more stories tagged with:

redistribution [4],

economy [5],

poverty [6],

low-wage workers [7],

Earned Income Tax Credit [8]


Source URL: http://www.alternet.org/economy/time-wealth-redistribution-now

Links:
[1] http://www.alternet.org/authors/robert-reich-0
[2] http://economix.blogs.nytimes.com/2013/09/10/the-rich-get-richer-through-the-recovery/
[3] http://economix.blogs.nytimes.com/2012/02/13/expanding-a-safety-net-program/
[4] http://www.alternet.org/tags/redistribution-0
[5] http://www.alternet.org/tags/economy-0
[6] http://www.alternet.org/tags/poverty-0
[7] http://www.alternet.org/tags/low-wage-workers
[8] http://www.alternet.org/tags/earned-income-tax-credit
[9] http://www.alternet.org/%2Bnew_src%2B

 

Guess What? Fewer Americans Call Themselves Economic Conservatives

By Lynn Stuart ParramoreAlterNetMay 30, 2013  |

2013 has not exactly been an inspiring year on the economic front so far: Between the news of banks too big to prosecute, consumer protection stalled, financial reform thwarted, corporate taxes dodged, privatization pushed, and Social Security attacked, it has been hard to find something to smile about. But then, suddenly, out comes a little ray of sunshine from behind the clouds.

A new Gallup survey [3] shows significant changes in the way we Americans see ourselves. The big news? We don’t like to call ourselves economic conservatives as much as we used to; in fact, that number is at a five-year low. On top of that, more of us say we’re social liberals.

What’s going on? How did something good happen when everything feels so bad?

After the shattering experience of WWI, Freud wrote about the pervasive discontent and unease with society, and he examined how humans tend to react to these feelings. In facing misery, would we throw in the towel? Would we become more aggressive? Or could we embrace the opportunity to improve our reality and transform our thinking? Freud, it must be said, was not overly optimistic about the answers to these questions.

Today, there’s a widespread feeling of skepticism about the form of capitalism we’re saddled with, which works well for a few and causes the rest of us various kinds of misery. Many Americans are beyond sick and tired of bankers, financiers and political hucksters. We see that crony capitalism is destroying our communities, our democracy, our economic well-being, and the natural world.

But will anything ever change it? I have been writing about economic matters since the Great Recession hit, trying to foster different ways of thinking. Honestly, most days it seemed like what I was trying to say was falling on deaf ears – that smart regulation was vital, that jobs must be our primary focus, that austerity was a foolish and deadly policy, and that, at a fundamental level, we need an economy that will serve society rather than the other way around.

Meanwhile, monopolies flourished, financial fraud ran rampant, deficit hawks commanded the scene in Washington, economic quacks were treated as oracles in the mainstream media, the rich got richer, and the poor got poorer.

Republicans won big-time in the 2010 midterm election, seizing control of the House and many state legislatures, including my home state of North Carolina, where they are bent on turning one of the most progressive states in the South into Mid-Atlantic Mississippi. Polls in 2010 showed that the number of Americans labeling themselves conservative, especially on the economy, jumped. Things looked pretty bleak.

Relinquishing old ways of thinking is a painful process, and more often not, a slow journey fraught with setbacks and reversals. It’s not easy to examine old assumptions about how we work, view money and allocate power. Older generations were also challenged to change the way they thought about the economy.  The Great Depression etched itself deeply into America’s collective memory: The idea that the government had to step in with jobs programs, education, housing, transportation, and research investments in order to save the economy from Wall Street-driven ruin impressed itself on our grandparents. That view held sway until Ronald Reagan came along and convinced everyone that government was the problem, not the solution, and recommended that the wild horses of capitalism be set free.

America became more “economically conservative.” The idea that economic conservatism equals prudence is an old association, dating all the way back to 18th-century thinker Edmund Burke, and it’s one that proponents of reckless free-market fundamentalism took full advantage of. They vigorously repeated the lie that markets can regulate themselves, that they are resistant to fraud, and that things would be fine if the government would just let the capitalists alone. They claimed, ad nauseum, that liberals were financially naive and irresponsible spendthrifts. They more or less got away with this package of deceit until the financial crash, which happened on the watch of a free-marketeer, and one who, by the way, had the worst record on job creation in modern history [4]. That was a serious blow to their mythology.

Gradually it become harder to argue that government should be shrunk to the size where it could be drowned in a bathtub because it grew obvious that government intervention and things like unemployment benefits (what economists call “automatic stabilizers”) kept us from plunging into a Great Depression. Slowly, painfully, Americans have begun to see that focusing on austerity and debt reduction is a road to nowhere, and that the economists whose work is frequently cited by proponents of this view doesn’t hold up to scrutiny [5]. We’re gradually getting the message that economic prudence means government making long-term commitments to investing in the kind of robust education, research and infrastructure that our future well-being depends on.

The new Gallup poll reveals that only 41 percent of Americans now characterize their economic views as “conservative,” or “very conservative,” the lowest since President Barack Obama was elected, and substantially lower than the 50 percent who labeled themselves that way in 2010. Thirty-seven percent of Americans now call themselves “economically moderate,” up from 32 percent last year. The percentage identifying themselves as economic liberals has stayed put since 2001, when Gallup started its annual Values and Beliefs poll. But part of this may be semantics – the association of the word “conservative” with “prudence” or “care” in economic matters is hard to shake. Yet the polls suggest that a shift may finally be happening. “Moderate,” at least, is a start. We may see a new notion of fiscal responsibility emerge that doesn’t involve casting people into unemployment and allowing our schools and roads to crumble.

Even conservatives are beginning to rethink what it means to be an economic conservative. They have begun to focus on breaking up the big banks, and a few, as Ryan Cooper reports in the Washington Monthly [6], are going even further and bringing out their closeted inner Keynesians. It remains to be seen whether or not they can get anywhere with their recalcitrant party, but there is dissent in the ranks.

The link between self-identification and voting is tricky. If you think about it, the fact that the number of Americans calling themselves economically conservative in 2010 increased in the polls might not have been so much a sincere expression of ideology as an expression of discontent with the political and economic status quo, whatever it happened to be. After the election, political scientist Thomas Ferguson noted [7] in an interview that in periods of turmoil, the prevailing sentiment is usually “throw the bums out.”

“What the election really shows,” Ferguson said, “is not that the parties can’t agree — Democrats and most of the GOP leadership finally agreed on the bank bailouts, for example — but that the American people will not accept the policies that leaders in both parties prefer.”

The Gallup poll also shows that the percentage of Americans describing their social views as “liberal” or “very liberal” has reached an all-time high: 30 percent. That’s considerably higher than the 22 percent who identified that way in 2010. (Thirty-five percent of Americans say they are conservative or very conservative on social issues, while 32 percent call themselves socially moderate.)

Maybe, just maybe, more people will realize that being socially liberal and economically liberal are really the same thing. That wanting gay people to have the right to marry and women to have the right to decide what to do with their bodies are intimately connected with economic equality and the influence of money in politics.

Until then, the idea that Americans are at least trying out new political identifications is a promising trend. It’s up to us on the left to make sure that “economically liberal” has a clear, positive meaning that a wider swath of people can get behind.

See more stories tagged with:

america [8],

barack obama [9],

Conservatism in the United States [10],

democratic party [11],

Edmund Burke [12],

mississippi [13],

north carolina [14],

north [15],

Person Career [16],

president [17],

Quotation [18],

republican party [19],

ronald reagan [20],

Ryan Cooper [21],

thomas ferguson [22],

washington [23],

bank bailouts [24],

mainstream media [25],

Political scientist [26],

the Washington Monthly [27],

transportation [28]


Source URL: http://www.alternet.org/news-amp-politics/guess-what-fewer-americans-call-themselves-economic-conservatives

Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/lynn-stuart-parramore
[3] http://www.gallup.com/poll/162746/fewer-americans-identify-economic-conservatives-2013.aspx
[4] http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/
[5] http://www.alternet.org/economy/meet-28-year-old-student-who-exposed-two-harvard-professors-whose-shoddy-research-drove
[6] http://www.washingtonmonthly.com/magazine/may_june_2013/features/reformish_conservatives044510.php
[7] http://www.huffingtonpost.com/lynn-parramore/money-and-the-midterms-ar_b_782660.html
[8] http://www.alternet.org/tags/america
[9] http://www.alternet.org/tags/barack-obama
[10] http://www.alternet.org/tags/conservatism-united-states
[11] http://www.alternet.org/tags/democratic-party
[12] http://www.alternet.org/tags/edmund-burke
[13] http://www.alternet.org/tags/mississippi-0
[14] http://www.alternet.org/tags/north-carolina
[15] http://www.alternet.org/tags/north
[16] http://www.alternet.org/tags/person-career
[17] http://www.alternet.org/tags/president-0
[18] http://www.alternet.org/tags/quotation
[19] http://www.alternet.org/tags/republican-party
[20] http://www.alternet.org/tags/ronald-reagan
[21] http://www.alternet.org/tags/ryan-cooper
[22] http://www.alternet.org/tags/thomas-ferguson
[23] http://www.alternet.org/tags/washington-0
[24] http://www.alternet.org/tags/bank-bailouts
[25] http://www.alternet.org/tags/mainstream-media
[26] http://www.alternet.org/tags/political-scientist
[27] http://www.alternet.org/tags/washington-monthly
[28] http://www.alternet.org/tags/transportation
[29] http://www.alternet.org/%2Bnew_src%2B

Bye, Bye American Dream! U.S. Economic Inequality Is Permanent, Study Finds

AlterNet [1] / By Steven Rosenfeld, March 22, 2013  |

Excerpt

A new study [3] by a team of economists in academia and the government has concluded that economic inequality is a permanent—not temporary—feature in the United States…“The reason the permanent/transitory distinction matters is that lifetime earnings are much more important than a single year’s earnings. It’s lifetime earnings that decide how you live in general, what sort of house you can afford, whether you can send a kid to college, whether you can retire comfortably.”… this study suggests that there are irreconcilable gaps in income, lifetime wealth, consumption and the resulting health between the haves and have-nots in America…That means federal safety nets are more needed than ever—despite the GOP’s ideological crusade to cut spending on them.

Full study

A new study [3] by a team of economists in academia and the government has concluded that economic inequality is a permanent—not temporary—feature in the United States, based on an analysis of 350,000 federal income tax returns between 1987 and 2009.

“For household income, both before and after taxes, the increase in inequality over this period was predominantly, although not entirely, permanent,” the highly technical report concluded. “We also find evidence that the U.S. federal tax system helped reduce the increase in household income inequality; but this attenuating effect was insufficient to significantly alter the broad trend toward rising inequality.”

The study by economists at two state universities, the Federal Reserve and U.S. Treasury Department, also found, not surprisingly, that the wealthiest Americans consume more than less well-off people, and that disparity causes poorer Americans to suffer as a result.

“Our findings, along with economic theory, suggest that the increase in income inequality observed in roughly the last two decades should translate into increases in consumption inequality, and is therefore likely to be welfare-reducing, at least according to most social welfare functions,” the report said. “Although measurement problems with household consumption data in the U.S. have made it difficult to convincingly measure the degree of the increase in consumption inequality, some recent studies… suggest that the increase in consumption inequality was indeed substantial.”

Simply put, the study confirms what Vermont’s U.S. Sen. Bernard Sanders has been saying for years, “The rich are getting richer and the poor are getting poorer.”

“The takeaway here is rough,” the Washington Post’s Ezra Klein wrote [4] in his Wonkblog column. “The reason the permanent/transitory distinction matters is that lifetime earnings are much more important than a single year’s earnings. It’s lifetime earnings that decide how you live in general, what sort of house you can afford, whether you can send a kid to college, whether you can retire comfortably.”

Better-off Americans often opine that those below them on the economic ladder should just work a little harder. But this study suggests that there are irreconcilable gaps in income, lifetime wealth, consumption and the resulting health between the haves and have-nots in America. It also suggests progressive taxation can buffer those inequalities a bit, but not make up for the gaps.

It will be curious to see if this study will be cited in Washington’s ongoing debate about ‘reforming’ entitlement programs—namely Medicare and Social Security. It suggests, if anything, that growing slices of American society are heading to less financially secure futures, especially in old age. That means federal safety nets are more needed than ever—despite the GOP’s ideological crusade to cut spending on them.

Source URL: http://www.alternet.org/economy/bye-bye-american-dream-us-economic-inequality-permanent-study-finds

Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/steven-rosenfeld
[3] http://www.brookings.edu/~/media/Projects/BPEA/Spring%202013/2013a_panousi.pdf
[4] http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/22/good-news-for-people-who-like-bad-news-about-inequality/
[5] http://www.alternet.org/tags/economic-inequality
[6] http://www.alternet.org/tags/progressive-taxation
[7] http://www.alternet.org/tags/entitlement-reform
[8] http://www.alternet.org/%2Bnew_src%2B

 

Global Austerity ‘An Unethical Experimentation On Human Beings’ – Paul Krugman

The Huffington Post  |  By Bonnie Kavoussi Posted: 02/08/2013

Paul Krugman doesn’t just think austerity is bad economic policy; the Nobel Prize-winning economist says it’s just plain wrong.

“We’ve basically had an unethical experimentation on human beings going on across the world right now,” Krugman told HuffPost Live on Friday. “All these countries are pursuing austerity policies, and in doing so, they are giving us evidence on what actually happens when you do those policies.”

Several European countries — including Great Britain, Greece, Spain and Italy — have slashed their budgets in recent years. Those countries have seen high unemployment rates and stagnant economies.

“It’s been a disaster,” Krugman said of austerity in Great Britain. “They have gone back into recession.”

The U.S. has also pursued austerity, albeit to a smaller extent. The U.S. government has cut 719,000 jobs since President Barack Obama took office. And the unemployment rate still is far higher than before the recession.

You can watch the whole segment here.

http://www.huffingtonpost.com/2013/02/08/paul-krugman-austerity_n_2648039.html

Reclaiming Our Imaginations from ‘There Is No Alternative’

by Andrea Brower, Friday, January 25, 2013 by Common Dreams

Excerpt

We live in a time of heavy fog. A time when, though many of us dissent and resist, humanity seems committed to a course of collective suicide in the name of preserving an economic system that generates scarcity no matter how much is actually produced. To demand that all have enough to eat on a planet that grows enough food, that absurd numbers of people do not die from preventable disease, that utter human deprivation amongst plenty is not tolerated, or that we put the natural laws of the biosphere above socially constructed economic “laws” — is presented as unrealistic, as the fantasy of idealists or those who are naive to the “complexity” of the world’s problems. If we create and recreate the world everyday, then how has it become so supposedly absurd to believe we might actually create a world that is honestly making the possibilities of egalitarianism, justice and democracy?

Capitalism — the logic of subordinating every aspect of life to the accumulation of profit (i.e. the “rules of the market”) — has become today’s “common sense.” It has become almost unthinkable to imagine coherent alternatives to this logic, even when considering the most basic of human needs — food, water, healthcare, education. Though many have an understanding of capitalism’s failings, there is a resignation towards its inevitability…

What sustains the tragic myth that There Is No Alternative? Those committed to building a more just future must begin re-thinking and revealing the taken-for-granted assumptions that make capitalism “common sense,” and bring these into the realm of mainstream public debate in order to widen horizons of possibility…

Full text

We live in a time of heavy fog. A time when, though many of us dissent and resist, humanity seems committed to a course of collective suicide in the name of preserving an economic system that generates scarcity no matter how much is actually produced. To demand that all have enough to eat on a planet that grows enough food, that absurd numbers of people do not die from preventable disease, that utter human deprivation amongst plenty is not tolerated, or that we put the natural laws of the biosphere above socially constructed economic “laws — is presented as unrealistic, as the fantasy of idealists or those who are naive to the “complexity” of the world’s problems. If we create and recreate the world everyday, then how has it become so supposedly absurd to believe we might actually create a world that is honestly making the possibilities of egalitarianism, justice and democracy?

Capitalism — the logic of subordinating every aspect of life to the accumulation of profit (i.e. the “rules of the market”) — has become today’s “common sense.” It has become almost unthinkable to imagine coherent alternatives to this logic, even when considering the most basic of human needs — food, water, healthcare, education. Though many have an understanding of capitalism’s failings, there is a resignation towards its inevitability. Margaret Thatcher’s famous words, “There Is No Alternative,” no longer need to be spoken, they are simply accepted as normal, non-ideological, neutral.

What sustains the tragic myth that There Is No Alternative? Those committed to building a more just future must begin re-thinking and revealing the taken-for-granted assumptions that make capitalism “common sense,” and bring these into the realm of mainstream public debate in order to widen horizons of possibility. We can’t leave this task to the pages of peer-reviewed journals and classrooms of social theory — these conversations must enter also into the family dining rooms and TV screens. Here are some thoughts on conversation starters:

Alternatives could never work. Does capitalism “work”? Even by its own indicators, as we’ve become more capitalist (i.e. neoliberalism), economic growth and productivity has actually declined.

Today’s globalized world is too complex to organize things any differently. Of course the world is complex — each of us is a bundle of contradictions and we need look no further than the dynamics of a single relationship to make a case for social complexity. But things are also quite simple — we live in a world where one billion people go hungry while we literally dump half of all food produced. Can we not come up with a productive socio-economic system that also meets people’s most basic needs? The gift of today is that we have the ability to reflect and draw-upon many forms, past and present, of non-capitalist social organization, and to creatively experiment with blending the best of these possibilities. The fact that we are more connected than ever before and have advanced so far technologically gives us more possibilities, not less.

Because of our “human nature,” we can only create economic systems based on competition, greed and self-interest. This is not only utterly pessimistic, but plain wrong. Again, we can start by remembering all sorts of societies that have existed through history. Then just look around and ask the question, what motivates you and the people you know? Fields as diverse as neuroscience and anthropology have mounted evidence showing humans’ incredible capacity for cooperation and sensitivity to fairness. We are actually all quite capable of anything; but it is up to us to decide how to use our capabilities, and of course that will be dictated by what our social systems encourage and teach us to value. If there is one thing that can be said about “human nature,” it is that we construct ourselves from within our societies and we are incredibly malleable.

Freedom is only realizable through a free-market. Attaching our values of freedom to the market is not only de-humanizing, but it also fails to recognize how one person’s “freedom” to economic choice is another’s imprisonment in a life of exploitation and deprivation. There is no possibility for freedom and emancipation until we are all free, and this will only come through a much richer and deeper conception of human freedom than one that is premised upon going to a grocery store and “choosing” between 5,000 variations of processed corn.

Capitalism is the only system that encourages innovation and progress. Progress towards what? And how does enclosing common knowledge through intellectual property rights, or excluding most of the world from quality education, or depriving half of humanity from the basic life-sustaining goods needed to function healthily, lead to greater innovation? Just begin to imagine the innovative possibilities of a world where all people had access to everything they needed to live, to think, and to contribute to the common good.

Things could be worse. Of course they could, but they could also be better. Does the fact that we’ve lived through bloody dictatorships mean that we should settle for a representative democracy where the main thing being represented is money?

Things are getting better. Can we really say that things are getting better as we head towards the annihilation of our own species? Sure, we may have our first black president and be making small gains in LGBT rights or in women’s representation in the workforce; but let’s not neglect the fact that capital is more concentrated and centralized than it has ever been and that its logic now penetrates into the most basic building blocks of life. I think we should give ourselves more credit than to settle for this “better.”

Change is slow. Slow is not in the vocabulary of the corporations who are stealing our common genetic heritage, or their buddies who are getting rich playing virtual money games that legally rob us all. The enclosure of our commons and the concentration of capital is not happening slowly. Whether we acknowledge it or not, change is happening — what is up for grabs is the direction of that change.

The best we can hope for is “green” and “ethical” capitalism. The logic of this belief is fundamentally flawed because it assumes that within capitalism, businesses can prioritize anything above the bottom-line. In actuality, businesses that commit themselves first and foremost to being truly and fully ethical and green will find it very difficult to stay in business. Of course there are great models of ethical business — worker-owned organic farms, for instance — but these cannot thrive and become the dominant norm when they are functioning within an economic structure that concentrates wealth and power in the hands of Monsanto. And while we should support these alternatives that exist within capitalism, we need to recognize that it’s way too little, way too late — structural change must (and will) happen, one way or another.

Getting rid of capitalism means abandoning markets as a tool of social organization. This is not necessarily true, although perhaps we would do best without markets anyways. Societies have existed that have used markets but restrained oligopoly capitalism, and many brilliant thinkers have envisioned a transition to a society structured by norms of equality and sharing where markets do play a role. I’m not advocating for or against any specific proposals here, but the point is that this assumption is historically inaccurate and we have barely begun to give serious thought to other possibilities.

People don’t care. People may be distracted by consumerism, may only have enough energy to struggle to pay their bills, may be fearful, may lack access to good information… but none of these things mean that they don’t care. Show anybody an image of a starving child who works in the cacao fields but can’t afford to eat (much less taste chocolate), and they will feel disgust. The charity industry is thriving precisely because so many people do feel implicated in the revolting manifestations of capitalism. But people’s sense of outrage has been channeled away from collective political action and towards ethical buying and holiday-time charitable donations. Without an honest and sophisticated society-wide conversation about the structural issues we are facing, people’s care is reduced to individual guilt and disempowerment.

People won’t stop consuming, plus all the poor people want what the rich people have. Of course they do! Doing away with capitalism doesn’t mean resorting to primitivism, or abandoning all of our washing machines, or leaving the poor destitute. While of course there are limits to the earth’s resources (fossil-fuels in particular), this doesn’t mean that we can’t organize a productive, equitable and sustainable social order that includes many of the comforts of modern life and excitements of technology. We need not abandon desire with capitalism. In fact, getting rid of capitalism gives us the best chance of having time to organize a sustainable system of consumption before it is too late — staying hooked into capitalism may actually be the quickest route to primitivism.

Capital’s enclosure of our commons — our common resources, genes and even intellect — has been accompanied by an enclosure of our imaginations. We need to re-claim and re-orient what it is to be “realistic” from the falsehoods of There Is No Alternative. This is not a call for pure imaginations of some future utopia. It is not a fantastic plea for a sudden and complete dissolving of all the social structures that currently pattern our lives. Instead, it is a call to take what is already going on all around us, all the time — cooperation, sharing, empathy — and let these aspects of our humanity that we most cherish guide our future. To begin to re-direct and re-structure our social systems towards the things we most desire and value — caring for and cooperating with one another, true participation and democracy, human freedom and free time, peace and co-existence — and in doing so, to watch these things begin to flourish.

If it is naive to believe that we can structure society to reward goodness instead of greed and prioritize people instead of profit, then I’m fighting until the bitter end to maintain my naiveté! Things become possible when we believe they are possible; so let’s start believing.

Andrea Brower is a PhD candidate in the Department of Sociology at the University of Auckland. She has been very active in alternative food and global social justice movements, and spent several years co-directing the non-profit Malama Kauai in Hawaii, where she is originally from.

Article printed from www.CommonDreams.org

Source URL: http://www.commondreams.org/view/2013/01/25-2

The Non Zero-Sum Society: How the Rich Are Destroying the US Economy

by Robert Reich Published on Tuesday, January 29, 2013 by RobertReich.org

Excerpt

And why Walmart, McDonald’s and every hospital in the country should be unionized – As President Obama said in his inaugural address last week, America “cannot succeed when a shrinking few do very well and a growing many barely make it.” Yet that continues to be the direction we’re heading in…the super-rich have done well in the economic recovery while almost everyone else has done badly…Not even the very wealthy can continue to succeed without a broader-based prosperity. That’s because 70 percent of economic activity in America is consumer spending..Almost a quarter of all jobs in America now pay wages below the poverty line for a family of four…It’s not a zero-sum game. Wealthy Americans would do better with smaller shares of a rapidly-growing economy than with the large shares they now possess of an economy that’s barely moving…If they [the wealthy] were rational they’d even support labor unions – which have proven the best means of giving working people a fair share in the nation’s prosperity. But labor unions are almost extinct. The decline of labor unions in America tracks exactly the decline in the bottom 90 percent’s share of total earnings, and shrinkage of the middle class…What’s to blame? Partly globalization and technological change. Globalization sent many unionized manufacturing plants abroad…Unions are almost extinct in America because we’ve chosen to make them extinct…Republicans, in particular, have set out to kill off unions…Don’t blame globalization and technological change for why employees at Walmart, America’s largest employer, still don’t have a union…

Full text

And why Walmart, McDonald’s and every hospital in the country should be unionized

As President Obama said in his inaugural address last week, America “cannot succeed when a shrinking few do very well and a growing many barely make it.”

Yet that continues to be the direction we’re heading in.

A newly-released analysis by the Economic Policy Institute shows that the super-rich have done well in the economic recovery while almost everyone else has done badly. The top 1 percent of earners’ real wages grew 8.2 percent from 2009 to 2011, yet the real annual wages of Americans in the bottom 90 percent have continued to decline in the recovery, eroding by 1.2 percent between 2009 and 2011.

In other words, we’re back to the widening inequality we had before the debt bubble burst in 2008 and the economy crashed.

But the President is exactly right. Not even the very wealthy can continue to succeed without a broader-based prosperity. That’s because 70 percent of economic activity in America is consumer spending. If the bottom 90 percent of Americans are becoming poorer, they’re less able to spend. Without their spending, the economy can’t get out of first gear.

That’s a big reason why the recovery continues to be anemic, and why the International Monetary Fund just lowered its estimate for U.S. growth in 2013 to just 2 percent.

Almost a quarter of all jobs in America now pay wages below the poverty line for a family of four. The Bureau of Labor Statistics estimates 7 out of 10 growth occupations over the next decade will be low-wage — like serving customers at big-box retailers and fast-food chains.

It’s not a zero-sum game. Wealthy Americans would do better with smaller shares of a rapidly-growing economy than with the large shares they now possess of an economy that’s barely moving.

At this rate, who’s going to buy all the goods and services America is capable of producing? We can’t return to the kind of debt-financed consumption that caused the bubble in the first place.

Get it? It’s not a zero-sum game. Wealthy Americans would do better with smaller shares of a rapidly-growing economy than with the large shares they now possess of an economy that’s barely moving.

If they were rational, the wealthy would support public investments in education and job-training, a world-class infrastructure (transportation, water and sewage, energy, internet), and basic research – all of which would make the American workforce more productive.

If they were rational they’d even support labor unions – which have proven the best means of giving working people a fair share in the nation’s prosperity.

But labor unions are almost extinct.

The decline of labor unions in America tracks exactly the decline in the bottom 90 percent’s share of total earnings, and shrinkage of the middle class.

In the 1950s, when the U.S. economy was growing faster than 3 percent a year, more than a third of all working people belonged to a union. That gave them enough bargaining clout to get wages that allowed them to buy what the economy was capable of producing.

Since the late 1970s, unions have eroded – as has the purchasing power of most Americans, and not coincidentally, the average annual growth of the economy.

Last week the Bureau of Labor Statistics  reported that as of 2012 only 6.6 percent of workers in the private sector were unionized. (That’s down from 6.9 percent in 2011.) That’s the lowest rate of unionization in almost a century.

What’s to blame? Partly globalization and technological change. Globalization sent many unionized manufacturing plants abroad.

Manufacturing is starting to return to America but it’s returning without many jobs. The old assembly line has been replaced by robotics and numerically-controlled machine tools.

Technologies have also replaced many formerly unionized workers in telecommunications (remember telephone operators?) and clerical jobs.

But wait. Other nations subject to the same forces have far higher levels of unionization than America. 28 percent of Canada’s workforce is unionized, as is more than 25 percent of Britain’s, and almost 20 percent of Germany’s.

Unions are almost extinct in America because we’ve chosen to make them extinct.

Unlike other rich nations, our labor laws allow employers to replace striking workers. We’ve also made it exceedingly difficult for workers to organize, and we barely penalized companies that violate labor laws. (A worker who’s illegally fired for trying to organize a union may, if lucky, get the job back along with back pay – after years of legal haggling.)

Republicans, in particular, have set out to kill off unions. Union membership dropped 13 percent last year in Wisconsin, which in 2011 curbed the collective bargaining rights of many public employees. And it fell 18 percent last year in Indiana, which last February enacted a right-to-work law (allowing employees at unionized workplaces to get all the benefits of unionization without paying for them). Last month Michigan enacted a similar law.

Don’t blame globalization and technological change for why employees at Walmart, America’s largest employer, still don’t have a union.

Don’t blame globalization and technological change for why employees at Walmart, America’s largest employer, still don’t have a union. They’re not in global competition and their jobs aren’t directly threatened by technology.

The average pay of a Walmart worker is $8.81 an hour. A third of Walmart’s employees work less than 28 hours per week and don’t qualify for benefits.

Walmart is a microcosm of the American economy. It has brazenly fought off unions. But it could easily afford to pay its workers more. It earned $16 billion last year. Much of that sum went to Walmart’s shareholders, including the family of its founder, Sam Walton.

The wealth of the Walton family now exceeds the wealth of the bottom 40 percent of American families combined, according to an analysis by the Economic Policy Institute.

But how can Walmart expect to continue to show fat profits when most of its customers are on a downward economic escalator?

Walmart should be unionized. So should McDonalds. So should every major big-box retailer and fast-food outlet in the nation. So should every hospital in America.

That way, more Americans would have enough money in their pockets to get the economy moving. And everyone – even the very rich – would benefit.

As Obama said, America cannot succeed when a shrinking few do very well and a growing many barely make it.

This work is licensed under a Creative Commons License

Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.

Article printed from www.CommonDreams.org

Source URL: http://www.commondreams.org/view/2013/01/29-2

Four Deformations of the Apocalypse

By DAVID STOCKMAN, New York Times, July 31, 2010

IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.

More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.

This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.

The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. Now, since we have lived beyond our means as a nation for nearly 40 years, our cumulative current-account deficit — the combined shortfall on our trade in goods, services and income — has reached nearly $8 trillion. That’s borrowed prosperity on an epic scale.

It is also an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves. Just let the free market set currency exchange rates, he said, and trade deficits will self-correct.

It may be true that governments, because they intervene in foreign exchange markets, have never completely allowed their currencies to float freely. But that does not absolve Friedman’s $8 trillion error. Once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors.

In fact, since chronic current-account deficits result from a nation spending more than it earns, stringent domestic belt-tightening is the only cure. When the dollar was tied to fixed exchange rates, politicians were willing to administer the needed castor oil, because the alternative was to make up for the trade shortfall by paying out reserves, and this would cause immediate economic pain — from high interest rates, for example. But now there is no discipline, only global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve.

The second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40 percent of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970. This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.

In 1981, traditional Republicans supported tax cuts, matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration’s hastily prepared fiscal blueprint, however, was no match for the primordial forces — the welfare state and the warfare state — that drive the federal spending machine.

Soon, the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget — entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans’ fiscal religion.

Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.

By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too — signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy.

The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. Here, Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. As a result, the combined assets of conventional banks and the so-called shadow banking system (including investment banks and finance companies) grew from a mere $500 billion in 1970 to $30 trillion by September 2008.

But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. They could never have survived, much less thrived, if their deposits had not been government-guaranteed and if they hadn’t been able to obtain virtually free money from the Fed’s discount window to cover their bad bets.

The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore. In the past decade, the number of high-value jobs in goods production and in service categories like trade, transportation, information technology and the professions has shrunk by 12 percent, to 68 million from 77 million. The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes.

It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street’s shrinking economy — got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.

The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing — as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach — balanced budgets, sound money and financial discipline — is needed more than ever.

David Stockman, a director of the Office of Management and Budget under President Ronald Reagan, is working on a book about the financial crisis.

http://www.nytimes.com/2010/08/01/opinion/01stockman.html?_r=3&th&emc=th&

The Biggest Engine of Economic Growth? 8 Ways Taxpayers and the Government Are Necessary to Capitalism

AlterNet [1] / By Colin Greer [2]  March 13, 2012

Excerpt

…conservatives have constantly attacked government. The drumbeat repeats the notion that the private sector can do everything better. “Privatize everything” is the mantra. It’s hard to imagine anything more destructive to our economy… spreading the big lie that government is too big, corrupt and wasteful without understanding just what government provides the economy and society…

the U.S. government has been the key engine of economic growth since the earliest days of the Republic— and it is now, but very few people realize that. Why? Because we don’t explain how government spending is woven into much of corporate success. We don’t counter that the government is constantly in an active, co-venture model with the for-profit sector in providing vast elements of infrastructure and directly creating technologies that the economy is dependent on, and corporations profit from…

Most everything the American capitalist system needs is provided by taxpayer dollars and government action. Here are eight examples.

1. Public Trust and Economic Infrastructure

2. Education and Social Knowledge

3. Relief in Crisis, Catastrophe, or Everyday Life

4. Regulation and the Public Good

5.  Massive Purchasing That Supports Businesses

6.  The Infrastructure in Which Everything Operates

7. The Labor Pool: Preparing Employees for the Private Sector

8.  Stimulus for Just About Everything

9. Direct Investment in the Creation of Key Innovations ing to produce natural gas.

10.  The New Phase of Social Welfare Financial Transfers

Conclusion

The view that the private sector is the independent engine of economic growth is obviously false. It’s time for an articulated economic framework which describes how the modern state has worked in an active co-venture with the for-profit sector…

Elizabeth Warren has clarified how the social web and the physical infrastructure that government supports is essential to market function, growth and wealth creation.  It makes sense to go a step further and clarify how government action and public dollars serve as a direct partner with the private sector in advancing growth and wealth. Then, it would not be so easy to take the money and run.

Full text

Dating back to Ronald Reagan, and even before, conservatives have constantly attacked government. The drumbeat repeats the notion that the private sector can do everything better. “Privatize everything” is the mantra. It’s hard to imagine anything more destructive to our economy. 

This presidential season, GOP candidates have revved up the maligning of government, and even liberals and Democrats join in the chorus, spreading the big lie that government is too big, corrupt and wasteful without understanding just what government provides the economy and society. 

A big part of the message is that the private sector is responsible for the progress and innovation that drive economic growth. Conservatives crow that private venture capital is what makes America great. Mega-millionaire Mitt Romney is the loudest on this point  — a man who made his money at Bain Capital, a venture operation known for buying companies, laying off workers and selling them off for big profits.

Yet the persistent view that the private sector is chiefly responsible for economic growth is false. Those who claim the superiority of private capital and insist that government is not effective as an inventor or venture capitalist should consider the history of the jet engine and the computer, to name just two inventions have been essential to progress and technology growth. They were both developed with public money. The Internet, too, was invented in a government laboratory in the late ’60s , and its early applications were heavily underwritten by the federal government.

Private Sector Corruption

We’ve all had our frustrating experiences with the government, from the local DMV to the IRS. But what about the aggravation and heartaches caused by many private sector operations? Are you really satisfied with cable TV, telephone companies, banks and the credit card industry? In their zeal to squeeze every cent from their customers, they seem to want to drive us insane. Where the private sector meets bureaucracy, there is waste and tons of corruption.

For example, recently JPMorgan Chase, whose CEO Jamie Dimon is both a media darling and for a while President Obama’s favorite banker, agreed to pay $110 million to settle a class-action suit for gouging its customers on overdraft transactions. JPMorgan Chase, like many banks, artificially re-ordered transactions to clear from highest to lowest in order to trigger many more overdrafts payments, basically cheating customers. To the public (those who heard about the settlement), $110 million seems like a lot of money. But it is only a lot if it cut greatly into the profits that were made with the overdraft bonanza.

Fortunately, journalist Jeff Horwitz of American Banker discovered that the bank generated $500 million a year in post-tax income from high-to-low re-sequencing, according to Chase’s own analysis. Thus, Chase’s settlement is very favorable to the bank, given that the $110 million offered is just 22 percent of its alleged earnings from wrongful overdraft fees. As the Huffington Post adds [3]: “When compared with the billions of dollars big banks have rung up in overdraft fees over the last decade, recent settlements with customers over unfair overdraft charges have amounted to little more than a slap on the wrist.”  

Now imagine the uproar from conservatives if the government had perpetrated this kind of fraud on U.S citizens. But do we hear calls for the end of private enterprise because of corruption and waste? Hardly.

Though we pay obeisance to the late Steve Jobs for the iPhone, researchers Michael Shellenberger and Ted Nordhaus have noted that all of its core technologies, from the microchips to GPS to the voice-control application, Siri, depended on years of Department of Defense funding. In fact, the U.S. government has been the key engine of economic growth since the earliest days of the Republic— and it is now, but very few people realize that. Why? Because we don’t explain how government spending is woven into much of corporate success. We don’t counter that the government is constantly in an active, co-venture model with the for-profit sector in providing vast elements of infrastructure and directly creating technologies that the economy is dependent on, and corporations profit from.

In addition to the constant propaganda attacking government, there is even research trying to claim that public funding of innovation has not been a key source of revenue and growth. But those studies are off for one major reason: they don’t look back far enough to where the innovations were funded.

In the San Francisco Chronicle Magazine [4], Shellenberger and Nordhaus lay out the most obvious examples of the government priming the pump of innovation. They remind us that the Air Force, and later NASA in the 1950s and 1960s, contracted with companies to make microchips — and loaned them money to build factories. It wasn’t until the ‘80s that personal computers took off, and increases in labor productivity didn’t translate into economic growth until the ‘90s. But it accounted for much of the post-1990s economic boom.

Another myth of the market capitalism narrative is that innovation comes out of market competition. But that notion, too, is tossed on its head. As Schellenberger and Nordhaus write, “Today’s relatively inexpensive jet travel began with Pentagon procurement and R&D for jet turbines in the 1940s and ’50s. But it took many decades before jet travel became accessible to the average American, and much of the rest of the world.”

Most everything the American capitalist system needs is provided by taxpayer dollars and government action. Here are eight examples.

1. Public Trust and Economic Infrastructure

The economic system would not function without the overall infrastructure that allows commerce to operate, including guaranteeing sovereign credit worthiness and currency protection. The economy also depends on the system of law and order that enforces contracts, copyright and trade agreements.

2. Education and Social Knowledge

Public schools, public universities, not-for-profit institutions of learning and research are all paid via government grants, tax exemptions and general tax revenues. Enormous amounts of government funds go to research in private universities, which then move out to private industries via technological innovation and production. This happens with food technology, drug development, medical discoveries and health solutions. In the 19th century, Land Grant colleges and farm extension programs built U.S. agriculture. The National Defense and Education Act (1958) put science in our schools and seeded generations of technology innovators and skilled workers.

3. Relief in Crisis, Catastrophe, or Everyday Life 

How do we spell relief? Try government. The human and social costs of economic and technological growth are borne by government— from unemployment insurance to emergency room hospital care for individuals. From food stamps and income tax credits to disaster relief and community development investment. Order and stability are maintained by the relief triggers pioneered by Bismark in the 19th century and Roosevelt in the 20th which were advanced in order “to save capitalism from itself.”

At the same time, social programs like Medicare, Medicaid and food stamps send government dollars to small businesses and retail and service providers across the country. Critics of the Affordable Health Care Act worry some about another open-ended entitlement. It is worth noting that the “open end” is at least as much about no price controls on drugs companies, cost of equipment by manufactures and hospitals, and the continued pressure for private insurance profits as it is about uncontrolled demand for service.

4. Regulation and the Public Good

The government protects food, air and water for the public good. It also shapes the successful operations of commerce via global trade agreements, tort and trust law, land use (which has long favored large property owners) builders and agricultural enterprises. New York City’s skyline of skyscrapers, including the World Trade Center, was created and recreated in the 1930s and the 1960s primarily through government spending. Rockefeller Center is most noteworthy as the first large Manhattan large-scale project to be entirely funded by private capital— but still with tax subsidies. In a parallel fashion, agricultural land-use, pesticides, farm loans and tax benefits have built agri-business’s monopoly on US food production.

5.  Massive Purchasing That Supports Businesses

Massive amounts of military and government purchasing account for a significant component of large and small business in production and service sectors. This happens at all levels — from federal to local, from schools to fire departments. For example, Starbucks is a significant recipient of military contracts. Such purchasing is the very essence of “pork barrel” economy.

6.  The Infrastructure in Which Everything Operates

At least since Alexander Hamilton’s plan for the Erie Canal, government has been key to the creation of national infrastructure. This is true for rail, road, sea and air travel. National electric power, too, is the result of government’s role via coal and gas subsidies, dam design and construction. Through such investment, government actually created commercial markets that didn’t otherwise exist. This huge order of spending virtually built whole states (e.g. Texas) where public investment and planning triggered modern growth.

7. The Labor Pool: Preparing Employees for the Private Sector

Labor rules are designed for the generation of an effective workforce. So are laws enacted to directly shape the character and timing of workforce availability. The GI Bill following WWII and including both Korea and Vietnam wars re-integrated some 3-4 million workers into the economy. Through subsidized university tuition payments and mortgages, both the real estate and higher education sectors grew exponentially as part of the socio-economy. Similarly, through both foreign and domestic trade policies: e.g. NAFTA, immigration law and foreign aid, government expenditures all directly impact private sector annual and seasonal labor flow, capital markets, and profits.

8.  Stimulus for Just About Everything

Government provides stimulus to for-profit enterprise via tax codes, tax subsidies exemptions and the application and/or release of fiscal and monetary controls. Government loan guarantees for deposit bank accounts are central to American fiscal health; the FDIC insurance program has freed banks to invest with the public as the creditor of last result. Currently, tax abatements are used to entice business and to attract it to particular locations. The film industry receives major abatements for bringing filmmaking to particular states. In some instances, the value of this allowance reaches 42 percent of the overall production costs of a movie. The rationale for these tax credits is that jobs will be developed locally.

9. Direct Investment in the Creation of Key Innovations 

This is perhaps the most unseen of government’s functions. As a silent partner, government brought massive capital investment to the advancement of technological research and development with no return on investment beyond tax revenue growth to capture it. Phone, radio, TV, computers, the satellite system, nylon (invented in place of silk as war with Japan loomed), Velcro, and breakthrough drugs were all the result of intense public investment in university and corporate research and development.

R +D is a key aspect from this sphere of activity. Most recently and quite typical is the long-term government investment in drilling technologies, 3-D imagining and geological mapping. All have now been given over to the private profit through fracking to produce natural gas.

So government, then and now, serves as a venture capitalist. But the government does not get a return on investment or equity stake—the very conditions Warren Buffet required for his “bail out” investment in Goldman Sachs. (TARP is actually the first government investment to return any interest on investment at all; but of course, with no equity stake.) Further, public debt itself, while a mind-boggling size, actually adds enormous profit to the lenders— many of whom also benefit in the current crisis climate from Federal Reserve no interest loans, which were used for relending at a profit.

10.  The New Phase of Social Welfare Financial Transfers

This is the newest area of commercial profit-taking from government investment. It results from the recognition that the goods and services that are provided by the public sector are an area of enormous spending that can generate great returns for private providers. That’s why we see robust campaigns for private school vouchers, for-profit charter schools, and pecuniary on-line learning through all the grades. Despite the rhetoric that disdains public services, the “social welfare services” established over several decades for public benefit are being transferred to private enterprise. Notwithstanding claims to the contrary, this form of profit-based delivery is not less costly, nor more effective. But it is highly profitable. On both the criteria of effectiveness and profit, witness the current expenditures and results in prisons and in privatized schools and collegiate education.

In this same vein, the new national health care individual mandate is a direct partnership with private insurers that will inure to their great profit. Furthermore, the Republican idea of privatizing Social Security and Medicare would be a boon to the denizens of private wealth creation. Boom and bust cycles will likely massacre the pensions of retired workers, but they will barely dent the long term profitability of investment houses.

The demise of an industrial and manufacturing economy in the U.S. and the periodic declining rate of profit has made public capital a target treasure trove for corporations— which can now take “welfare” as the “persons” the Supreme Court in their egregious decision in Citizens United declared them to be.

Conclusion

The view that the private sector is the independent engine of economic growth is obviously false. It’s time for an articulated economic framework which describes how the modern state has worked in an active co-venture with the for-profit sector.

Who knows what kind of tax system on debt position the nation would be in if we had created  a venture capital bank that explicitly shared in commercial revenues as all venture capitalists do? Put another way, what would a public finance system look like if the public shared the private profit and personal wealth that was made with the help of our money?

Elizabeth Warren has clarified how the social web and the physical infrastructure that government supports is essential to market function, growth and wealth creation.  It makes sense to go a step further and clarify how government action and public dollars serve as a direct partner with the private sector in advancing growth and wealth. Then, it would not be so easy to take the money and run.

Source URL: http://www.alternet.org/story/154538/the_biggest_engine_of_economic_growth_8_ways_taxpayers_and_the_government_are_necessary_to_capitalism

Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/colin-greer-0
[3] http://www.huffingtonpost.com/2012/02/06/overdraft-fees-chase_n_1258938.html
[4] http://bit.ly/zlhDb6
[5] http://www.alternet.org/tags/labor-0
[6] http://www.alternet.org/tags/technology-0
[7] http://www.alternet.org/tags/education-0
[8] http://www.alternet.org/tags/economy-0
[9] http://www.alternet.org/tags/catastrophe
[10] http://www.alternet.org/tags/infrastructure
[11] http://www.alternet.org/tags/taxes-0
[12] http://www.alternet.org/tags/business-0
[13] http://www.alternet.org/tags/innovation
[14] http://www.alternet.org/tags/crisis
[15] http://www.alternet.org/tags/government-0
[16] http://www.alternet.org/tags/investment-0
[17] http://www.alternet.org/tags/public-0
[18] http://www.alternet.org/tags/growth-0
[19] http://www.alternet.org/tags/jobs-0
[20] http://www.alternet.org/tags/tax
[21] http://www.alternet.org/tags/stimulus
[22] http://www.alternet.org/tags/unemployment-0
[23] http://www.alternet.org/tags/market-0
[24] http://www.alternet.org/tags/society-0
[25] http://www.alternet.org/tags/private
[26] http://www.alternet.org/tags/trust
[27] http://www.alternet.org/tags/competition-0
[28] http://www.alternet.org/tags/solutions-0
[29] http://www.alternet.org/tags/public-good
[30] http://www.alternet.org/tags/role
[31] http://www.alternet.org/%2Bnew_src%2B

 

The Big Fail

By PAUL KRUGMAN, New York Times, January 6, 2013

San Diego

It’s that time again: the annual meeting of the American Economic Association and affiliates, a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.’s in search of jobs), books and ideas. And this year, as in past meetings, there is one theme dominating discussion: the ongoing economic crisis.

This isn’t how things were supposed to be. If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now we’d be talking about how the great slump ended, not why it still continues.

So what went wrong? The answer, mainly, is the triumph of bad ideas.

It’s tempting to argue that the economic failures of recent years prove that economists don’t have the answers. But the truth is actually worse: in reality, standard economics offered good answers, but political leaders — and all too many economists — chose to forget or ignore what they should have known.

The story, at this point, is fairly straightforward. The financial crisis led, through several channels, to a sharp fall in private spending: residential investment plunged as the housing bubble burst; consumers began saving more as the illusory wealth created by the bubble vanished, while the mortgage debt remained. And this fall in private spending led, inevitably, to a global recession.

For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar.

So what can be done? A smaller financial shock, like the dot-com bust at the end of the 1990s, can be met by cutting interest rates. But the crisis of 2008 was far bigger, and even cutting rates all the way to zero wasn’t nearly enough.

At that point governments needed to step in, spending to support their economies while the private sector regained its balance. And to some extent that did happen: revenue dropped sharply in the slump, but spending actually rose as programs like unemployment insurance expanded and temporary economic stimulus went into effect. Budget deficits rose, but this was actually a good thing, probably the most important reason we didn’t have a full replay of the Great Depression.

But it all went wrong in 2010. The crisis in Greece was taken, wrongly, as a sign that all governments had better slash spending and deficits right away. Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that “the idea that austerity measures could trigger stagnation is incorrect.”

Well, someone was incorrect, all right.

Of the papers presented at this meeting, probably the biggest flash came from one by Olivier Blanchard and Daniel Leigh of the International Monetary Fund. Formally, the paper represents the views only of the authors; but Mr. Blanchard, the I.M.F.’s chief economist, isn’t an ordinary researcher, and the paper has been widely taken as a sign that the fund has had a major rethinking of economic policy.

For what the paper concludes is not just that austerity has a depressing effect on weak economies, but that the adverse effect is much stronger than previously believed. The premature turn to austerity, it turns out, was a terrible mistake.

I’ve seen some reporting describing the paper as an admission from the I.M.F. that it doesn’t know what it’s doing. That misses the point; the fund was actually less enthusiastic about austerity than other major players. To the extent that it says it was wrong, it’s also saying that everyone else (except those skeptical economists) was even more wrong. And it deserves credit for being willing to rethink its position in the light of evidence.

The really bad news is how few other players are doing the same. European leaders, having created Depression-level suffering in debtor countries without restoring financial confidence, still insist that the answer is even more pain. The current British government, which killed a promising recovery by turning to austerity, completely refuses to consider the possibility that it made a mistake.

And here in America, Republicans insist that they’ll use a confrontation over the debt ceiling — a deeply illegitimate action in itself — to demand spending cuts that would drive us back into recession.

The truth is that we’ve just experienced a colossal failure of economic policy — and far too many of those responsible for that failure both retain power and refuse to learn from experience.

http://www.nytimes.com/2013/01/07/opinion/krugman-the-big-fail.html?nl=todaysheadlines&emc=edit_th_20130107&_r=0

The Deadly Secret About the Fiscal Cliff Charade

Campaign for America’s Future [1] / By Richard (RJ) Eskow [2] Published on Alternet (http://www.alternet.org)  January 4, 2013  |

Imagine a nation with a terrible problem – one its leaders refuse to discuss. The problem will needlessly drain trillions of dollars from its economy in the next ten years.

Now imagine that this problem also robs that nation’s citizens of life itself, draining years from their lifespans while depriving them of large sums of money. Imagine that it sickens and disables countless others, drives many people into bankrupcty, and kills more than two newborn infants out of every thousand born.

Imagine that fixing this problem would make result in a dramatic decline in publicly-held debt. It wouldn’t just “help” the debt problem, mind you – it would cause that debt to plunge [3].

And now imagine a national “deficit debate” which completely ignores this problem.

Imagine a news media which pretends the problem doesn’t exist. Imagine a corporate-funded “Fix the Debt” movement that refuses to mention it, and yet is treated as an objective source of information. Imagine a political consensus in which the debate isn’t around how to fix this problem, but how to cut service programs that help people cope with it.

Welcome to the United States of America, January 2012.  It’s a land where the population is broke, sick, gypped, and mistreated. But the problem’s fixable – if we can find the political will.

Broke

The problem, of course, is our health care system – although “system” seems like a flattering word for this greed-driven, anarchic three-ring circus. Our health care system – guess we’ll need to call it that for lack of an alternativer – is the worst in the developed world. It costs far more, provides much less, and has worse outcomes than any system that’s even remotely comparable.

How bad is it?

Our health care spending is 17.6 percent of GDP , compared with an average of 9.6 percent for all developed countries. (All figures are from the compendium of health and economic statistics [4] published by the Organization for Economic Cooperation and Development ( OECD ), unless otherwise indicated.)

Total health spending (from all sources, not just insurance-related) averages $7,960 per person in the United States, versus an average of $3,233 for all developed countries.

If we spent the same on health as the average developed country (as a percentage of GDP ) that would inject more than a trillion dollars per year into other parts of the economy. ( 1.14 trillion, by my rough calculation.)

Sick

What are we getting for our money?

  • Life expectancy at birth in the United States is 78.2 years, compared with an OECD average of 79.5 years and Japan’s life expectancy of 83 years.Our expected lifespan is the shortest of any among the countries we normally think of as “developed.” The ones that trail us are newer entrants into the “developed” category — like Mexico, Turkey, Brazil, Indonesia, and the Eastern European countries.
  • Our infant mortality rate is 6.5 deaths per 1,000 live births, as opposed to the OECD average of 4.4 deaths. As with life expectancy, we lag behind all the other long-term “developed” nations.
  • We score even more poorly on another metric, “Premature Mortality,” which measures the number of years someone loses “before their time” (essentially by calculating how many years it would have taken on average to reach the age of 70).

Our high rates of premature mortality are affected by our high rates of accidents and suicide, too, and from a homicide rate for males that’s five times the average. (That’s a figure worth citing in the gun control debate.)

Gypped

The question becomes, Why? Why do we pay so much and get so little for our money?

Part of the answer lies in the fact that, despite the high cost of private-insurance premiums, our health plans don’t provide enough coverage. According to survey data, Americans were unable to meet their medical needs because of cost more often than citizens of ten comparable countries ( OECD , Table 6.1.3).

That statistic applied to lower-income Americans, as might be expected. But interestingly, it was also true for higher-income Americans – those that are most likely to have private health insurance. 39 percent of Americans with higher-than-average income had an unmet medical need due to cost in 2010. For the runner-up, Germany, that figure was 27 percent. (It was 12 percent in Switzlerland and 4 percent in Great Britain.)

Higher-income Americans also led the pack in reporting out-of-pocket expenditures of $1,000 or more per year, along with their lower-income peers, with 45 percent in the higher-earner category spending that much or more per year. The figure was 37 percent for runner-up Switzerland. It was 2 percent in Sweden. And in much-reviled “socialist” Great Britain the figure was effectively zero.

These results reinforce the findings of studies on medical bankruptcies by Prof. Elizabeth Warren, which showed that medical costs were a dominant reason for bankruptcy even for people with health insurance. (She was officially sworn in as Senator Warren today – congratulations!)

Mistreated

Where does all the money go? Much of it goes to profit margins for private insurance companies, of course. (They’re experts at understanding their margins, which are much higher than most observers believe.)  There are also profit margins for a number of health providers, including for-profit hospitals, medical imaging companies, and physician practice management groups.

Underlying much of our explosive cost growth is the phenomenon we described in “Sick Money [5]“: Investors like Bain Capital buy up health care companies, load them up with debt, and demand highly aggressive profit margins. Many of them respond to the problem the way the Bain companies did in our piece: through fraud.

But many other providers overtreat, subjecting the population to a barrage of needless (and sometimes invasive) procedures while other basic health needs go unmet.

Here are two more OECD statistics that illustrate the point:

The United States is second only to technology-crazed Japan in the prevalence of high-cost (and high profit) MRI and CT devices for medical imaging, both in hospitals and in free-standing facilities. Many American facilities were financed by physicians who send their patients there, which poses a significant conflict of interest and which both public and private insurers have been attempting to limit. Many others are owned by sales-driven chains. Unsurprisingly, studies suggest there is significant overuse of this equipment in the United States.

And let’s not forget drugs. When it comes to per-person pharmaceutical costs the United States is off the charts, spending $947 per person on average. That’s nearly twice the OECD average of $487.

And remember: Congress won’t even let Medicare negotiate with the drug companies.

Fixable

Pharmaceutical corporations, for-profit hospital companies, private insurers — our system is sick. The diagnosis: Corporate greed.

Our “sick secret” can be fixed. In our next piece we’ll discuss how to attack it — and what it will take to shift the debate away from a “consensus” plan to adopt the miserly failures of austerity and toward real solutions that can restore our Federal budget – and us – to health.

Source URL: http://www.alternet.org/economy/deadly-secret-about-fiscal-cliff-charade

Links:
[1] http://ourfuture.org
[2] http://www.alternet.org/authors/richard-rj-eskow
[3] http://www.cepr.net/index.php/blogs/cepr-blog/fixing-our-fiscal-health-budget-deficits-and-health-care-costs
[4] http://www.oecd.org/health/healthpoliciesanddata/49105858.pdf
[5] http://www.alternet.org/election-2012/sick-money-how-mitt-romneys-bain-investments-are-exploding-deficit-and-harming-our?paging=off
[6] http://www.alternet.org/tags/bain-capital-0
[7] http://www.alternet.org/tags/brazil-0
[8] http://www.alternet.org/tags/congress-0
[9] http://www.alternet.org/tags/elizabeth-warren-0
[10] http://www.alternet.org/tags/germany-0
[11] http://www.alternet.org/tags/health-care-system
[12] http://www.alternet.org/tags/health-economics
[13] http://www.alternet.org/tags/health-policy
[14] http://www.alternet.org/tags/health-0
[15] http://www.alternet.org/tags/healthcare-canada
[16] http://www.alternet.org/tags/healthcare
[17] http://www.alternet.org/tags/indonesia-0
[18] http://www.alternet.org/tags/japan-korea-relations
[19] http://www.alternet.org/tags/mri
[20] http://www.alternet.org/tags/medicare
[21] http://www.alternet.org/tags/medicine
[22] http://www.alternet.org/tags/mexico-0
[23] http://www.alternet.org/tags/organization-economic-cooperation-and-development
[24] http://www.alternet.org/tags/sweden-0
[25] http://www.alternet.org/tags/switzerland-0
[26] http://www.alternet.org/tags/turkey-0
[27] http://www.alternet.org/tags/usd
[28] http://www.alternet.org/tags/united-kingdom
[29] http://www.alternet.org/tags/united-states
[30] http://www.alternet.org/tags/health-insurance
[31] http://www.alternet.org/tags/insurance-0
[32] http://www.alternet.org/tags/medical-imaging
[33] http://www.alternet.org/tags/news-media-0
[34] http://www.alternet.org/tags/person-pharmaceutical
[35] http://www.alternet.org/tags/physician-practice-management
[36] http://www.alternet.org/tags/physician
[37] http://www.alternet.org/%2Bnew_src%2B