For the noneconomist, which includes this writer, the field of research dedicated to understanding our economy has been a great disappointment in the past few years. Not only were most economists blindsided by the Great Recession, the over emphasize on financial instruments and other nonmaterial elements of our economy helped magnify the economic catastrophe by inflating growth on the stock exchanges at the expense of the real economy. Failing to show leadership and true insight, these experts cannot offer the average person a reasonable response to their failings nor a model that supports a sustainable economy for the general population.
It is my fear that policymakers and researchers cannot foresee an economy capable of supporting a decent middle class lifestyle for the bulk of the human population. In other words, they are settling for an economy that will enrich a handful of individuals in each country, thus creating a sustainable economy for the few that will be composed of the superrich and a global middle class. Although I am certain there are many affluent individuals who want to create a broader economy, they lack the insight to see a way forward whiles others perceive few incentives to consider the needs of the many. It is, therefore, pivotal for the middle and poor classes to take control of their economic destiny. This starts with a clearer understanding of how our economy needs to work. Because the vast majority of individuals struggle to understand economic theory, they are often pushed into supporting policies that actually hurt them. People need a measure that ensures their interests will be addressed and that they can understand; one such measure is leverage. In this day and age, celebrities and CEOs are often able to extort millions of dollar in pay for their services on an annual basis. The average person cannot do this. The reason is that affluent people have greater leverage when they are seeking compensation, i.e. the potential revenue they can make their employers affords them leverage. For most other individuals, education, expertise, union membership, professional affiliation, and a whole host of other factors give them varying degrees of leverage. As one of many bold examples, Wall Street firms in 2008 were able to coerce a large taxpayer bailout, because they wired the economy with a dead man switch to ensure they would thrive no matter the consequences of their actions; whereas, anyone outside of their interests was, and is, considered economically disposable. Furthermore, much of the twentieth century was spent empowering the masses with greater leverage. Some of this was accomplished by government bolstering the leverage of individuals with the force of law, i.e. government as the hand of the People became the norm. This was seen with the passage of laws designed to protect worker rights, customer rights, civil liberties, and the environment. Additionally, the expansion of education afforded more people greater leverage in the economy, until too many acquired college level degrees. In other cases, nongovernment actions, such as the organization of labor unions, allowed individual workers to establish an equal footing against abusive corporations. Although a myriad of policy and ideological shifts secured the American Golden Age, which was marked by a high standard of living enjoyed by an unprecedented number of people, short-sighted, self-serving thinking started to undercut progress. In the 1990’s, the push for accelerated economic globalization forced workers in wealthy western countries to directly compete against those working in under-regulated, under-taxed, far poorer nations. While NAFTA, for example, was sold to the American People as an opportunity to gain access to new markets and cheaper goods, which it did, it more importantly further deleveraged workers in the US, Canada, and Mexico. China’s special trade status was an even bigger assault on individual power due to the size of the Communist country. Further, the formation of the Europe Union helped give the US a stronger economic partner and allowed the Europeans to balance American influence in the global economy. It also created layers of bureaucracy that put distance between the People and their democratically elected leaders, thereby undercutting the democratic authority of individuals. Overall, the over liberalization of international trade undercut the ability of governments to tax, regulate, and protect their national economies, thus neutralizing the leverage governments had once extended to their Peoples. In other words, countries outsourced their economic sovereignty and deleveraged their Peoples. A healthy economy, as a balanced part of a healthy society, depends upon the financial health of the masses. Only when individuals have leverage in a given situation can they, or their advocates, ensure their interests will be met in the present and in the future. As such, it is important to understand a sustainable economy can only be built if the interests of the many can be addressed. When the People lack meaningful leverage, more and more of their interests with go unaddressed. Consequently, economic researchers need to start building economic models that incorporate the issue of leverage. In turn, policymakers must seek to extend greater leverage to individuals in all aspects of society. Moreover, our society needs to do a better job of addressing the negotiating powers afforded to the People when developing our economies.
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A few weeks ago, I was reading a book on contemporary sociology that described Karl Marx’s philosophy on war and social unrest as mainly an inherit conflict between economic classes, the proletariats, i.e. the workers/producers of goods and services, and the capitalists, i.e. the exploiters of workers. Under the context of the sociological argument presented by the author, the faults of Communism are quite clear. That is, supporters of Marx viewed conflict as more or less economic in nature while the Communists believed they could eliminate conflict by eliminating the capitalists, i.e. the wealthy elite. Unfortunately, they neglected to realize they were only creating a more permanent, more powerful privileged class that could more readily abuse power. In other words, they created an oppressive government class that lacked rivalry.
In the West, Americans recognized capitalists do not just exploit workers: they can add to the efficiency of our economy by organizing the distribution of resources and coordinating economic activities. (It is when the demands of the capitalists outweigh their benefits that they become little more than a disposal burden.) Thanks to an underlying philosophy of self-sufficiency and self-determination, Americans are expected to act as both proletariats and capitalists by offering their labor for a negotiated sum of capital, i.e. we are expected to demand a reasonable compensation and ensure our own interests are met, which is the democratic way. As such, Americans did not seek to eliminate the upper classes; we sought to disperse power across a broad range of individuals in a variety of fields. Long before the issue of Communism arose, the American People aspired to build a nation based in equal opportunity. As such, the United States has multiple elite classes that anyone can aspire to. Whether in the economic, political, military, legal, academic, or any other arena, this means we have long believed that any American should have the opportunity to work his, or her, way up to the status of the elite. When small groups of individuals control the elite classes of the different power arenas in our society, and/or the lower classes lose their ability to achieve a higher socioeconomic status, the powerful few have the ability to short-circuit democratic processes. Meanwhile, it is important to realize that our interests can only be addressed when those in power have a perceived interest in addressing our interests. Because minority groups, including the wealthy, are naturally inclined to seek power, as they must to ensure their interests are not neglected by the majority, and the powerful are driven to solidify/legitimize their power, a smaller elite class, which is based more on inheritance rather than true merit, will seek to undermine the interests of the majority when its interests conflict with the interests of the powerful. If rulers of our Nation have thoroughly consolidated, legitimized, and solidified their power, they will have no incentive to respect democracy or address the interests of the majority. The threat to the American way of life is, therefore, a consolidation of the elite classes and the inability of individuals to improve their socioeconomic status, i.e. everyone must have opportunity to pursue their interests. A good quote on the role of government“Our conversations about what to do about our schools should be held at the local level and at the state level. The federal government is there to level the playing field. They're not there to steer the boat.” --Diane Ravitch, former U.S. Assistant Secretary of Education discussing education reform on the PBS Newshour, Tuesday, June 5, 2012
Although I do not agree with every policy stance of Secretary Ravitch, her well-considered attitude with regard to government involvement in key social functions like education is refreshing. In essence, her words are related to the infamous Ronald Regan quote on the role of government: “government is not a solution to our problem; government is the problem." Unfortunately Republicans and right wing leaders often lean far too heavily on the underlying philosophy of these words. I, for one, feel his words are quite unfortunate, because they are now used to force inappropriate privatization of government functions, whether or not doing so is beneficial and/or proper, while they offer elected officials a convenient excuse for not doing their jobs properly. Ravitch’s words do not take government out of the picture; they give it a proper role. |
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April 2020
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