Stiglitz - Neoliberalism has Gutted the Middle Class

Nobel laureate and former World Bank chief economist, Joe Stiglitz, contends we urgently need to replace neoliberalism with progressive capitalism.

Three years ago, President Donald Trump’s election and the United Kingdom’s Brexit referendum confirmed what those of us who have long studied income statistics already knew: in most advanced countries, the market economy has been failing large swaths of society. 

Nowhere is this truer than in the United States. Long regarded as a poster child for the promise of free-market individualism, America today has higher inequality and less upward social mobility than most other developed countries.

After rising for a century, average life expectancy in the U.S. is now declining. And for those in the bottom 90% of the income distribution, real (inflation-adjusted) wages have stagnated: the income of a typical male worker today is around where it was 40 years ago. 

Meanwhile, many European countries have sought to emulate America, and those that succeeded, particularly the U.K., are now suffering similar political and social consequences.

Contrary to what many in the financial sector would like to think, the problem was not too much state involvement in the economy, but too little. Both crises were the direct result of an under-regulated financial sector.

Now, the middle class is being hollowed out on both sides of the Atlantic. 

...Reversing this malaise requires that we figure out what went wrong and chart a new course forward, by embracing progressive capitalism, which, while acknowledging the virtues of the market, also recognizes its limitations and ensures that the economy works for the benefit of everyone. 

We cannot simply return to the golden age of Western capitalism in the decades after World War II, when a middle-class lifestyle seemed within reach of a majority of citizens. Nor would we necessarily want to. After all, the “American dream” during this period was mostly reserved for a privileged minority: white males. 

We can thank former President Ronald Reagan and former British Prime Minister Margaret Thatcher for our current state of affairs. The neoliberal reforms of the 1980s were based on the idea that unfettered markets would bring shared prosperity through a mystical trickle-down process.

...We were told that lowering tax rates on the rich, financialization, and globalization would result in higher standards of living for everybody. 

Instead, the U.S. growth rate fell to around two-thirds of its level in the post-war era — a period of tight financial regulations and a top marginal tax rate consistently above 70% — and a greater share of the wealth and income from this limited growth was funneled to the top 1%. 

Instead of the promised prosperity, we got deindustrialization, polarization, and a shrinking middle class. Unless we change the script, these patterns will continue — or worsen. 

Fortunately, there is an alternative to market fundamentalism. 

Through a pragmatic rebalancing of power between government, markets, and civil society, we can move toward a freer, fairer, and more productive system. Progressive capitalism means forging a new social contract between voters and elected officials, workers and corporations, rich and poor.

Stiglitz spared Mulroney, as much a champion of the "new economy" as Thatcher or Reagan.  Those three genuinely did drink the KoolAid of von Mises, Hayek and Friedman. They drove us into the ditch and none of their successors has had the vision, the courage and the strength to pull us back out.

Today we have Team Trudeau/Morneau and they're avowed disciples of market fundamentalism. Neither has shown the inclination much less the vision to pry us loose from neoliberalism's grip. After all, that's been the source of their considerable riches.

Joe Stiglitz Channels Teddy Roosevelt, Calls for a Renewal of Progressive Capitalism.

Capitalism sucks. The neoliberal order, to which all of our mainstream parties subscribe, has lost sight of how capitalism is supposed to work in a progressive democracy. That was never more horrifically clear than when Trudeau's finance minister, Morneau, told Canadians they would have to get used to a future of "job churn." That Morneau wasn't fired on the spot confirmed a lot of what I had suspected about Justin Trudeau.

Those who read this blog will be aware of how frequently I draw upon Theodore Roosevelt's "Square Deal" speech delivered at Osawatomie, Kansas in the summer of 1910.  I read it at least twice a year when I need to recalibrate my political compass.

Then today I stumbled across Joe Stiglitz op-ed in The New York Times discussing "progressive capitalism." It was as though the Nobel laureate and former World Bank chief economist was channeling Mr. Roosevelt. What follows are excerpts from Stiglitz' op-ed interspersed, in quotation marks and italics, with selected passages from Theodore Roosevelt's Square Deal speech.

Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society.

...This is where we’ve descended to, but not where we have to stay. A progressive capitalism based on an understanding of what gives rise to growth and societal well-being gives us a way out of this quagmire and a way up for our living standards. 

...There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens. 

America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people. One can get rich either by adding to the nation’s economic pie or by grabbing a larger share of the pie by exploiting others — abusing, for instance, market power or informational advantages. We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking), and too many of our talented young people followed the siren call of getting rich quickly.

"In every wise struggle for human betterment one of the main objects, and often the only object, has been to achieve in large measure equality of opportunity. In the struggle for this great end, nations rise from barbarism to civilization, and through it people press forward from one stage of enlightenment to the next. One of the chief factors in progress is the destruction of special privilege. The essence of any struggle for healthy liberty has always been, and must always be, to take from some one man or class of men the right to enjoy power, or wealth, or position, or immunity, which has not been earned by service to his or their fellows."

...The result is an economy with more exploitation — whether it’s abusive practices in the financial sector or the technology sector using our own data to take advantage of us at the cost of our privacy. The weakening of antitrust enforcement, and the failure of regulation to keep up with changes in our economy and the innovations in creating and leveraging market power, meant that markets became more concentrated and less competitive. 

Politics has played a big role in the increase in corporate rent-seeking and the accompanying inequality. Markets don’t exist in a vacuum; they have to be structured by rules and regulations, and those rules and regulations must be enforced. Deregulation of the financial sector allowed bankers to engage in both excessively risky activities and more exploitive ones. Many economists understood that trade with developing countries would drive down American wages, especially for those with limited skills, and destroy jobs. We could and should have provided more assistance to affected workers (just as we should provide assistance to workers who lose their jobs as a result of technological change), but corporate interests opposed it. A weaker labor market conveniently meant lower labor costs at home to complement the cheap labor businesses employed abroad. 

The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society. We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it.

"At many stages in the advance of humanity, this conflict between the men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress. In our day it appears as the struggle of freemen to gain and hold the right of self-government as against the special interests, who twist the methods of free government into machinery for defeating the popular will. At every stage, and under all circumstances, the essence of the struggle is to equalize opportunity, destroy privilege, and give to the life and citizenship of every individual the highest possible value both to himself and to the commonwealth."

In the 1980s, Ronald Reagan’s regulatory “reforms,” which reduced the ability of government to curb the excesses of the market, were sold as great energizers of the economy. But just the opposite happened: Growth slowed, and weirder still, this happened in the innovation capital of the world.

We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.

"Practical equality of opportunity for all citizens, when we achieve it, will have two great results. First, every man will have a fair chance to make of himself all that in him lies; to reach the highest point to which his capacities, unassisted by special privilege of his own and unhampered by the special privilege of others, can carry him, and to get for himself and his family substantially what he has earned. Second, equality of opportunity means that the commonwealth will get from every citizen the highest service of which he is capable. No man who carries the burden of the special privileges of another can give to the commonwealth that service to which it is fairly entitled."

If we had curbed exploitation in all of its forms and encouraged wealth creation, we would have had a more dynamic economy with less inequality. We might have curbed the opioid crisis and avoided the 2008 financial crisis. If we had done more to blunt the power of oligopolies and strengthen the power of workers, and if we had held our banks accountable, the sense of powerlessness might not be so pervasive and Americans might have greater trust in our institutions.

...There are many other areas in which government action is required. Markets on their own won’t provide insurance against some of the most important risks we face, such as unemployment and disability. They won’t efficiently provide pensions with low administrative costs and insurance against inflation. And they won’t provide an adequate infrastructure or a decent education for everyone or engage in sufficient basic research. 

Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed. 

Part of this new social contract is an expanded public option for many programs now provided by private entities or not at all. It was a mistake not to include the public option in Obamacare: It would have enriched choice and enhanced competition, lowering prices. But one can design public options in other arenas as well, for instance for retirement and mortgages. This new social contract will enable most Americans to once again have a middle-class life. 

As an economist, I am always asked: Can we afford to provide this middle-class life for most, let alone all, Americans? Somehow, we did when we were a much poorer country in the years after World War II. In our politics, in our labor-market participation, and in our health we are already paying the price for our failures. 

The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest. It is as fatally flawed as the notion after the fall of the Iron Curtain that we were seeing “the end of history” and that we would all soon be liberal democracies with capitalist economies. 

Most important, our exploitive capitalism has shaped who we are as individuals and as a society. The rampant dishonesty we’ve seen from Wells Fargo and Volkswagen or from members of the Sackler family as they promoted drugs they knew were addictive — this is what is to be expected in a society that lauds the pursuit of profits as leading, to quote Adam Smith, “as if by an invisible hand,” to the well-being of society, with no regard to whether those profits derive from exploitation or wealth creation.

"The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power. The prime need to is to change the conditions which enable these men to accumulate power which it is not for the general welfare that they should hold or exercise. We grudge no man a fortune which represents his own power and sagacity, when exercised with entire regard to the welfare of his fellows.  ...We grudge no man a fortune in civil life if it is honorably obtained and well used. It is not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community. This, I know, implies a policy of a far more active governmental interference with social and economic conditions in this country than we have yet had, but I think we have got to face the fact that such an increase in governmental control is now necessary."

"No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar’s worth of service rendered — not gambling in stocks, but service rendered. The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective — a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate."

P.S.


This post, while long, was a rushed effort. Eventually I hope to re-edit it with additional passages from Roosevelt's 1910 speech.

When I launched this blog a dozen years ago I dedicated it to "the restoration of progressive democracy." My thinking has always been that, if we restore progressive democracy, we will restore progressivism to the economy. Stiglitz seeks the same result in the other direction, through economic reform or what he calls "progressive capitalism." Roosevelt shows us that the two - progressive democracy and a progressive economy - are simply two sides of one coin. And, being two sides of one coin, both were sent packing when Reagan, Thatcher and Mulroney implemented the neoliberal order.

Stiglitz Throws Down the Gauntlet to America's President-Elect

Donald Trump has promised to "make America great again." That was his whole shtick and he rode it to an upset win over the odds-on favourite, Hillary Clinton.

Unfortunately Trump was feeding his Gullibillies a diet rich in horseshit. Now that they're used to the taste he has to deliver. How to make America great again, how?

Former World Bank chief economist and Nobel laureate, Joe Stiglitz, has the answers - if Trump is interested (hint: he's not).

Over the past third of a century, the rules of America’s economic system have been rewritten in ways that serve a few at the top, while harming the economy as a whole, and especially the bottom 80%. The irony of Trump’s victory is that it was the Republican party he now leads that pushed for extreme globalisation and against the policy frameworks that would have mitigated the trauma associated with it. But history matters: China and India are now integrated into the global economy. Besides, technology has been advancing so fast that the number of jobs globally in manufacturing is declining.

Trump's Great "Jobs Scam"

The implication is that there is no way Trump can bring a significant number of well-paying manufacturing jobs back to the US. He can bring manufacturing back, through advanced manufacturing, but there will be few jobs. And he can bring jobs back, but they will be low-wage jobs, not the high-paying ones of the 1950s.

If Trump is serious about tackling inequality, he must rewrite the rules yet again, in a way that serves all of society, not just people like him.
The first order of business is to bolster investment, thereby restoring robust long-term growth. Specifically, Trump should emphasise spending on infrastructure and research. Shockingly for a country whose economic success is based on technological innovation, the GDP share of investment in basic research is lower today than it was a half-century ago.

Trump the Inequality Slayer - (Giggle)

...A comprehensive approach is also needed to improve America’s income distribution, which is one of the worst among advanced economies. While Trump has promised to raise the minimum wage, he is unlikely to undertake other critical changes, such as strengthening workers’ collective bargaining rights and negotiating power, and restraining CEO compensation and financialisation.

Regulatory reform must move beyond limiting the damage that the financial sector can do and ensure that the sector genuinely serves society.

Trust Busting, Teddy Roosevelt Style

In April, President Barack Obama’s council of economic advisers released a brief showing increasing market concentration in many sectors(pdf). That means less competition and higher prices – as sure a way to lower real incomes as lowering wages directly. The US needs to tackle these concentrations of market power, including the newest manifestations in the so-called sharing economy.

Dismantling America's Home Grown Tax Havens - For the Rich

...An obvious target should be to eliminate the special treatment of capital gains and dividends. Another is to ensure that companies pay taxes – perhaps by lowering the corporate-tax rate for companies that invest and create jobs in America, and raising it for those that do not. As a major beneficiary of this system, however, Trump’s pledges to pursue policies that benefit ordinary Americans are not credible; as usual with Republicans, tax changes will largely benefit the rich.

...Much has changed since President Ronald Reagan began hollowing out the middle-class and skewing the benefits of growth to those at the top, and US policies and institutions have not kept pace. From the role of women in the workforce to the rise of the internet to increasing cultural diversity, 21st-century America is fundamentally different from the America of the 1980s.

...The agenda I have just sketched is not only about the economy, it is about nurturing a dynamic, open, and just society that fulfils the promise of Americans’ most cherished values. But while it is, in some ways, somewhat consistent with Trump’s campaign promises, in many other ways, it is the antithesis of them.

My very cloudy crystal ball shows a rewriting of the rules, but not to correct the grave mistakes of the Reagan revolution, a milestone on the sordid journey that left so many behind. Rather, the new rules will make the situation worse, excluding even more people from the American dream.

What Stiglitz recommends all makes sense - to anyone setting out to implement Trump's "make America great again" promises. Trump, however, isn't of those ranks and neither are the Republican establishment leaders moving in to control him. Don't worry. He won't be held captive and waterboarded into concessions. All his handlers will do is to put in political language what already lurks deep inside Trump's guts.

But what of the poor Gullibillies? What will happen when they find out they've been had? The first thing is they really won't want to admit they've been conned by such an obvious blowhard. They'll settle and nothing works better than scapegoating. This could get ugly fast.

We're All Neoliberals Now. Let's Change That.

One thing that struck home during our extended election campaign was how our mainstream political parties have become deeply invested in neoliberalism. While it has several descriptions, reflective of its insidious vagueness, neoliberalism is the merger of political and economic ideology most often called "free market fundamentalism." It is a sort of merger of political and commercial/corporate powers usually born out of the surrender of incidents of political sovereignty through multi-national financial and trade agreements.

It's a process akin to the tactics of a boa constrictor whose victims often fail to realize the severity of their predicament until its too late. That's an apt analogy for how we have, for decades, been conditioned to our role as prey.

Neoliberals have been very successful in conditioning a large segment of the electorate to see themselves as 'taxpayers' rather than 'citizens,' a feat that isolates them from public debate beyond how government impacts their wallets and readies them to accept 'transactional democracy,' where money dictates policy for the powerful often at the expense of everyone else.

Nobel laureate economist, Joe Stiglitz, explores legislated inequality in his book, "The Price of Inequality." Modern inequality, he explains, is neither market nor merit-based to any significant degree. It is legislated and comes in a plethora of forms from tax treatment (exemptions, reductions, deferrals), to grants and subsidies, to the transfer of public resources at far less than market value. The 'taxpayer' public is particularly blind to these government giveaway programmes having been groomed to venerate the rich as the "job creators" whose success "trickles down" to the masses. In reality cooperative lawmakers ensure that the nation's wealth actually "trickles up" to those who least deserve it. It is a malignancy known as "rent-seeking."

Another triumph of neoliberalism has been in conditioning working class Canadians, white and blue collar, to support capital over labour and acquiesce to the decline of unionism. For all the legitimate criticisms of the union movement, it has been freely demonized by the neoliberals and their political minions as regressive and an economic scourge. We've lost sight of the role unions play as the cornerstone of a healthy, robust middle class, the ladder of social mobility, and a vehicle to maintain the balance between labour and capital without which inequality flourishes.

We have been conditioned, groomed, to be submissive to neoliberalism, powerless, incapable even of rallying to our own defence. Harnessed to the myths and scourges of neoliberal ideology, we are clearing the path for increasing inequality and the corrosion of social cohesion and it's a road that leads to illiberal democracy and a gradual rise of economic feudalism.

The legacy of Stephen Harper will be how well he moved us down this path during his decade in power. It's a legacy he shared with his collaborators, Layton, Mulcair and Ignatieff.

It's time we charted a new path while that option is still open to us.



I strongly urge you to watch this Days of Revolt interview.

A Couple of Thoughts About the Precariat.

We should all read Brian Stewart's essay yesterday on "the rise of the precariat." Everything he reports has been thoroughly analyzed and disclosed over the past few years.

Most of us with 30-something children know the losing struggle that many of them face - lousy jobs, lousy pay, dubious benefits, little if any security.  They remain in a precarious state of financial insecurity.

I believe it was Citibank that coined the term "precariat" and former US Federal Reserve chairman Alan Greenspan who actually endorsed it as good for the American economy.  Greenspan's thinking, which he quickly retreated from when outed, was that people who are economically insecure are willing to work more, work harder, and demand ever less.  Welcome to Red State America.

Here's the thing.  If you don't want your kids to endure life in the precariat you have to turn to the people who made it possible.  You know them.  You elected them.  It was all legislated by governments worldwide who chose corporate interests instead of the welfare of their people.

They made it.  They can clean it up.  But if you want that cleaned up, if you want the sort of healthy, robust middle class we knew in the postwar decades, you're going to have to force their hand.

That's not going to be easy.  What had been the Left in Canada has closed up shop and moved to a seemingly more advantageous perch in the center.  They've signed on to the neoliberal, market fundamentalist, corporatist agenda.  If you want change, you're going to have to knock them off that perch.

Look at what's happened in the States and realize that's where we're headed too if we continue to lay on these tracks waiting for the train.

If you want to get up off those tracks, you had better do it soon.  What do you really know about the Trans-Pacific Partnership, TPP?  Personally I don't know that much about it but I know someone who does, Nobel laureate economist Joseph Stiglitz, and he's written a dandy warning for all of us in The New York Times.

Read his warning.  Then read his book, "The Price of Inequality."  Learn what we're up against, what awaits us and our kids, and who is really responsible for making servitude our reality.  Then, when you've had your fill, go to your stooge of choice - Tommy Boy or Junior - and ask them how they're going to undo this national headache before it becomes a full blown and permanent migraine.

If they won't act, don't vote for them.  If you do, don't complain about what you've got coming.

Weak Economy? 'They' Wouldn't Have It Any Other Way.

Take it from Joe.  Nobel laureate economist Joe Stiglitz to be precise.

The near-global stagnation witnessed in 2014 is man-made. It is the result of politics and policies in several major economies -- politics and policies that choked off demand. In the absence of demand, investment and jobs will fail to materialize. It is that simple.

Nowhere is this clearer than in the Eurozone, which has officially adopted a policy of austerity -- cuts in government spending that augment weaknesses in private spending. The Eurozone's structure is partly to blame for impeding adjustment to the shock generated by the crisis; in the absence of a banking union, it was no surprise that money fled the hardest hit countries, weakening their financial systems and constraining lending and investment.

In Japan, one of the three "arrows" of Prime Minister Shinzo Abe's program for economic revival was launched in the wrong direction. The fall in GDP that followed the increase in the consumption tax in April provided further evidence in support of Keynesian economics -- as if there was not enough already.

...For the past six years, the West has believed that monetary policy can save the day. The crisis led to huge budget deficits and rising debt, and the need for de-leveraging, the thinking goes, means that fiscal policy must be shunted aside.

The problem is that low interest rates will not motivate firms to invest if there is no demand for their products. Nor will low rates inspire individuals to borrow to consume if they are anxious about their future (which they should be). What monetary policy can do is create asset-price bubbles. It might even prop up the price of government bonds in Europe, thereby forestalling a sovereign-debt crisis. But it is important to be clear: the likelihood that loose monetary policies will restore global prosperity is nil.

This brings us back to politics and policies. Demand is what the world needs most. The private sector -- even with the generous support of monetary authorities -- will not supply it. But fiscal policy can. We have an ample choice of public investments that would yield high returns -- far higher than the real cost of capital -- and that would strengthen the balance sheets of the countries undertaking them.

The big problem facing the world in 2015 is not economic. We know how to escape our current malaise. The problem is our stupid politics.

In other words, just like that other great economic plague, inequality, is the bastard child of our political elite, so too is the global stagnation besetting every nation's economy.  It's the waste product of neoliberal ideology in practice.  If only a change of government would free Canada of that curse.

Stiglitz Casts the Bones and Reads the Entrails of Detroit,

Nobel laureate economist Joe Stiglitz argues that it's vital not to get misled about the real significance of the bankruptcy of Detroit.

Detroit’s most serious problems are confined to the city limits. Elsewhere in the metropolitan area, there is ample economic activity. In suburbs like Bloomfield Hills, Mich., the median household income is more than $125,000. A 45-minute drive from Detroit is Ann Arbor, home of the University of Michigan, one of the world’s pre-eminent hubs of research and knowledge production.

Detroit’s travails arise in part from a distinctive aspect of America’s divided economy and society. As the sociologists Sean F. Reardon and Kendra Bischoff have pointed out, [America] is becoming vastly more economically segregated, which can be even more pernicious than being racially segregated. Detroit is the example par excellence of the seclusion of affluent (and mostly white) elites in suburban enclaves. There is a rationale for battening down the hatches: the rich thus ensure that they don’t have to pay any share of the local public goods and services of their less well-off neighbors, and that their children don’t have to mix with those of lower socioeconomic status.
The trend toward self-reinforcing inequality is especially apparent in education, an ever shrinking ladder for upward mobility. Schools in poorer districts get worse, parents with means move out to richer districts, and the divisions between the haves and the have-nots — not only in this generation, but also in the next — grow ever larger.
Residential segregation along economic lines amplifies inequality for adults, too. The poor have to somehow manage to get from their neighborhoods to part-time, low-paying and increasingly scarce jobs at distant work sites. Combine this urban sprawl with inadequate public transportation systems and you have a blueprint for transforming working-class communities into depopulated ghettos.
Adding to the problems that would inevitably arise from such poorly designed urban agglomerations is the fact that the Detroit metropolitan area is divided into separate political jurisdictions. The poor are thus not only geographically isolated, but politically ghettoized as well. The result is a separate, poorer inner city with a dearth of resources, made even worse because the industrial plants that had provided the core of the tax base are shut down.

As historians like Thomas J. Sugrue have demonstrated, the disintegration of Detroit precedes the conflicts over social-welfare programs and race relations (including riots in 1967) and reaches back into the postwar decades, a time when the roots of deindustrialization, racial discrimination and geographic isolation were planted. We’ve reaped what we’ve sown.

Lacking regional political unity, there is no overall structure to improve the infrastructure and public services between poorer inner cities and affluent suburbs. So the poor fall back on what means they have, which is not good enough. Cars inevitably break down and buses are late, making workers appear to be “unreliable.” But what is really unreliable is the iniquitous design of the city. No wonder America is becoming the advanced industrial country with the least equality of opportunity.

 The same skewed priorities that have gutted Detroit at the local level are echoed in a void at the level of national policy.

Rather than deal purposefully with this changing economic landscape with useful policies encouraging the growth of other industries, our government spent decades papering over the growing weaknesses by allowing the financial sector to run amok, creating “growth” based on bubbles. We didn’t just let the market run its course. We made an active choice to embrace short-term profits and large-scale inefficiency.

There may be something inevitable about the structural changes that have made American manufacturing less central to our economy, but there is nothing inevitable about the waste, pain and human despair in cities that have accompanied that change. There are policy alternatives that can soften such transitions in ways that preserve wealth and promote equality. Just four hours from Detroit, Pittsburgh, too, grappled with white flight. But it more rapidly shifted its economy from one dependent on steel and coal to one that emphasizes education, health care and legal and financial services.

American workers were sold “free” trade policies on the promise that the winners could compensate the losers. The losers are still waiting.

Of course, the Great Recession and the policies that created it have made this, like so many other things, much worse. The mortgage bankers marched into large sections of some of our cities and found them good subjects for their predatory and discriminatory lending. Once the bubble burst, those cities were abandoned by all but the debt collectors and foreclosure sheriffs. Rather than saving our communities, our politicians focused more on saving the bankers, their shareholders and their bondholders.

Detroit’s bankruptcy is a reminder of how divided our society has become and how much has to be done to heal the wounds. And it provides an important warning to those living in today’s boomtowns: it could happen to you. 

And if you can stand any more of America's fiscal madness, check out Paul Krugman's column on the disappearance of Milton Friedman from the radical (as in modern mainstream) right's discourse.

After the Fiscal Cliff - The Joe Stiglitz Recipe for American Recovery

In a recent op-ed in The Guardian, Nobel laureate economist Joe Stiglitz lays out his recipe for America's economic rehabilitation.

"...here is what Americans should hope for: a strong "jobs" bill – based on investments in education, health care, technology, and infrastructure – that would stimulate the economy, restore growth, reduce unemployment, and generate tax revenues far in excess of its costs, thus improving the country's fiscal position. They might also hope for a housing programme that finally addresses America's foreclosure crisis.

A comprehensive programme to increase economic opportunity and reduce inequality is also needed – its goal being to remove, within the next decade, America's distinction as the advanced country with the highest inequality and the least social mobility. This implies, among other things, a fair tax system that is more progressive and eliminates the distortions and loopholes that allow speculators to pay taxes at a lower effective rate than those who work for a living, and that enable the rich to use the Cayman Islands to avoid paying their fair share.

America – and the world – would also benefit from a US energy policy that reduces reliance on imports not just by increasing domestic production, but also by cutting consumption, and that recognises the risks posed by global warming. Moreover, America's science and technology policy must reflect an understanding that long-term increases in living standards depend upon productivity growth, which reflects technological progress that assumes a solid foundation of basic research.

Finally, the US needs a financial system that serves all of society, rather than operating as if it were an end in itself. That means that the system's focus must shift from speculative and proprietary trading to lending and job creation, which implies reforms of financial-sector regulation, and of anti-trust and corporate-governance laws, together with adequate enforcement to ensure that markets do not become rigged casinos.

Stiglitz has long championed redressing America's staggering inequality crisis.   In his book, The Price of Inequality, which ought to be a must-read for Canadians too, Stiglitz chronicles how most of American inequality is not merit-driven but the creature of a government, "in which the rich have disproportionate influence – and use that influence to entrench themselves."  

The U.S. government has sacrificed the poor and working classes, blue and white collar, to the benefit of the very richest, effecting since the Reagan era, the most massive, unearned transfer of wealth in America's history, mainly out of the pockets of the middle class and into the portfolios of the rentiers.   Reversing this societal disease is the key to kickstarting a progressive restoration.

Mitt Romney - Class Warrior

Mitt Romney wouldn't be the first really rich man to enter the White House.   But, as Robert Reich points out, he'd certainly be a lot different.

America has had hugely wealthy presidents before — think of Teddy Roosevelt and his distant cousin, Franklin D. Roosevelt; or John F. Kennedy, beneficiary of father Joe’s fortune.

But here’s the difference. These men were champions of the working class and the poor, and were considered traitors to their own class. Teddy Roosevelt railed against the “malefactors of great wealth,” and he busted up the oil and railroad trusts.

FDR thundered against the “economic royalists,” raised taxes on the wealthy, and gave average working people the right to form unions — along with Social Security, unemployment insurance, a minimum wage, and a 40-hour workweek.

But Mitt Romney is not a traitor to his class. He is a sponsor of his class. He wants to cut their taxes by $3.7 trillion over the next decade, and hasn’t even specified what “loopholes” he’d close to make up for this gigantic giveaway.

And he wants to cut benefits that almost everyone else relies on — Medicare, Medicaid, Social Security, food stamps, unemployment insurance, and housing assistance.

He’s even a warrior for his class, telling his wealthy followers his job isn’t to worry about the “47 percent” of Americans who won’t vote for him, whom he calls “victims” and he berates for not paying federal incomes taxes and taking federal handouts.

...Money means power. Concentrated wealth at the top means extraordinary power at the top. The reason Romney pays a rate of only 14 percent on $13 million of income in 2011 — a lower rate than many in the middle class — is because he exploits a loophole that allows private equity managers to treat their income as capital gains, taxed at only 15 percent.

...So much wealth and power have accumulated at the top of America that our economy and our democracy are seriously threatened. Romney not only represents this problem. He is the living embodiment of it.

It's time Americans busted this myth of the "self-made man" Romney and his clan steadfastly hide behind.   Nobel laureate economist Joe Stiglitz in his recent book, "The Price of Inequality", traces how government policies, not normal market forces, have created the inequality that plagues today's America and has resulted in the undeserved transfer of wealth and power from the middle classes to the richest of the rich.   The government "of the people, by the people, for the people" turned its back on the people, lining its pockets richly in the process.


The frightening thing is that there a great many Americans, especially the prominent and affluent, who don't think this is corrupt.

For Liberals, the Way Forward is the Way Back

If the Liberals are ever coming back, and that's a lot more iffy than many of them want to admit, it will be under a leader determined to reverse the party's corrosive slide to the right.   That would mean a leader willing to take up the cause of malignant inequality - of wealth, of income, of opportunity - and climate change in all its aspects.

Harper's Cons have gone hard right with the NDP in trail to the centre.  If the Libs insist on remaining centre-right they will, and rightly should, be consigned to political irrelevance to await some distant reincarnation.

Why should the Libs veer left right now?   Because that's where Canada needs to shift to face the conditions that will confront us, and the rest of the world, as this century unfolds beginning within just a decade or two.   And to meet those challenges we'll need a healthy, cohesive society of the very sort that Harper is now working hard to undermine.   And an essential (as in sine qua non essential)  key to rehabilitating our society lies in reversing inequality.

One of those annoying economists who just keep getting it right, Nobel laureate Joe Stiglitz, has made the case for fighting inequality in his new book, "The Price of Inequality."

"...we have a world in which there are huge unmet needs—investments to bring the poor out of poverty, to promote development in less developed countries in Africa and other continents around the world, to retrofit the global economy to face the challenges of global warming. At the same time, we have vast underutilized resources—workers and machines that are idle or are not producing up to their potential. Unemployment—the inability of the market to generate jobs for so many citizens—is the worst failure of the market, the greatest source of inefficiency, and a major cause of inequality.

As of March 2012, some 24 million Americans who would have liked a full-time job couldn’t get one.

In the United States, we are throwing millions out of their homes. We have empty homes and homeless people.

...This book is about why our economic system is failing for most Americans, why inequality is growing to the extent it is, and what the consequences are. The underlying thesis is that we are paying a high price for our inequality—an economic system that is less stable and less efficient, with less growth, and a democracy that has been put into peril. But even more is at stake: as our economic system is seen to fail for most citizens, and as our political system seems to be captured by moneyed interests, confidence in our democracy and in our market economy will erode along with our global influence. As the reality sinks in that we are no longer a country of opportunity and that even our long-vaunted rule of law and system of justice have been compromised, even our sense of national identity may be put into jeopardy.

...Markets, by themselves, even when they are stable, often lead to high levels of inequality, outcomes that are widely viewed as unfair. Recent research in economics and psychology has shown the importance that individuals attach to fairness. More than anything else, a sense that the economic and political systems were unfair is what motivates the protests around the world. In Tunisia and Egypt and other parts of the Middle East, it wasn’t merely that jobs were hard to come by but that those jobs that were available went to those with connections.

In the United States and Europe, things seemed more fair, but only superficially so. Those who graduated from the best schools with the best grades had a better chance at the good jobs. But the system was stacked because wealthy parents sent their children to the best kindergartens, grade schools, and high schools, and those students had a far better chance of getting into the elite universities.

...One aspect of fairness that is deeply ingrained in American values is opportunity. America has always thought of itself as a land of equal opportunity. Horatio Alger stories, of individuals who made it from the bottom to the top, are part of American folklore. But, increasingly, the American dream that saw the country as a land of opportunity began to seem just that: a dream, a myth reinforced by anecdotes and stories, but not supported by the data. The chances of an American citizen making his way from the bottom to the top are less than those of citizens in other advanced industrial countries.

There is a corresponding myth—rags to riches in three generations—suggesting that those at the top have to work hard to stay there; if they don’t, they (or their descendants) quickly move down. But this too is largely a myth, for the children of those at the top will, more likely than not, remain there.

...For years there was a deal between the top and the rest of our society that went something like this: we will provide you jobs and prosperity, and you will let us walk away with the bonuses. You all get a share, even if we get a bigger share. But now that tacit agreement between the rich and the rest, which was always fragile, has come apart. Those in the 1 percent are walking off with the riches, but in doing so they have provided nothing but anxiety and insecurity to the 99 percent. The majority of Americans have simply not been benefiting from the country’s growth.

...If markets had actually delivered on the promises of improving the standards of living of most citizens, then all of the sins of corporations, all the seeming social injustices, the insults to our environment, the exploitation of the poor, might have been forgiven. But to the young indignados and protestorsmost important of all, the degradation of values to the point where everything is acceptable and no one is accountable.


...Americans, Europeans and people in other democracies around the world take great pride in their democratic institutions. But the protesters have called into question whether there is a real democracy. Real democracy is more than the right to vote once every two or four years. The choices have to be meaningful. The politicians have to listen to the voices of the citizens. But increasingly, and especially in the United States, it seems that the political system is more akin to “one dollar one vote” than to “one person one vote.” Rather than correcting the market’s failures, the political system was reinforcing them.

Politicians give speeches about what is happening to our values and our society, but then they appoint to high office the CEOs and other corporate officials who were at the helm in the financial sector as the system was failing so badly. We shouldn’t have expected the architects of the system that has not been working to rebuild the system to make it work, and especially work for most citizens—and they didn’t.

The failures in politics and economics are related, and they reinforce each other. A political system that amplifies the voice of the wealthy provides ample opportunity for laws and regulations—and the administration of them—to be designed in ways that not only fail to protect the ordinary citizens against the wealthy but also further enrich the wealthy at the expense of the rest of society.

...Given a political system that is so sensitive to moneyed interests, growing economic inequality leads to a growing imbalance of political power, a vicious nexus between politics and economics. And the two together shape, and are shaped by, societal forces—social mores and institutions—that help reinforce this growing inequality.

 ...It is often argued on the right that we could have more equality, but only at the steep price of slower growth and lower GDP. The reality (as I will show) is just the opposite: we have a system that has been working overtime to move money from the bottom and middle to the top, but the system is so inefficient that the gains to the top are far less than the losses to the middle and bottom. We are, in fact, paying a high price for our growing and outsize inequality: not only slower growth and lower GDP but even more instability. 

And this is not to say anything about the other prices we are paying: a weakened democracy, a diminished sense of fairness and justice, and even, as I have suggested, a questioning of our sense of identity."

The Liberal Party's shift to the centre-right was an act of contempt toward the Canadian people.   To me this was made plain when Ignatieff convened his "thinkers' conference" at which CEOs and management consultants dominated the speakers' list.  Iggy left the Liberals sitting atop an elitist perch from which they'll have to openly, visibly step down if they're ever to reconnect with the voting public.   The old sops don't work any more.  Daycare and funding for the arts won't meet the looming challenges of the 21st century.