osewalrus (osewalrus) wrote,

Is There Something Wrong With The Economy?

I hear many Republicans in DC complaining that the American people don't get it. Why don't they realize how greta the economy is doing? We have low unemployment, relatively high national productivity. More people become millionaires in the United States every day than anywhere else in the world. As one lobbyist of my acquaintance said "I just want to grab the American people and shake them and ask 'what do you expect?' Get real!"

This isn't cold blooded calculation or "let them eat cake" cluelessness. It is a fundamental disagreement about what a functioning economic system looks like.

The Republican vision is a vision where you can maximize your potential earning power. Regulation and taxes are bad because they interfere with maximizing this potential. Yes, inevitably some folks will fail and others succeed. That is not a bug, that's a feature.

The vision of the New Deal and the Great Society was different. We had institutions in place to ensure greater collective financial security for all. Yes, that put a cap on reaching the highest potential. That compromised on profitability by translating that into wage increases. But we supported it because we believed that (a) "a rising tide lifts all boats," even the welathiest benefit from living in a society with a higher overall standard of living; (b) as a matter of our social compact with one another, we do not allow our fellow American to starve; and (c) the old system got so out of whack that failure to adopt changes threatened far more radical redistribution schemes based on my favorite traditional political check and balance -- the angry mobs with torches and pitch forks.

Beginning in 1980, the Republican vision began to enjoy an enormous run. For one thing, Americans are an optomisitc people. (As I believe Weber observed: The American Working Class does not despise the oppressor class, they aspire to become it.) Americans also don't have agood sense of benchmarking. When asked, 20% of people believe they are in the top 1% of income earners. Another 20% believe that they will be in that top 1%.

Also, by the 1970s, some real problems with the old system were creating strains. The economy was in the middle of a transition from an industrial-based economy to a service based (and, in the 1990s, tech based) economy. In addition, the adminsitrative systems designed to regulate industry were subject to manipulation by the industries they supposedly regulated (a phenomena referred to as "agency capture"). Unions, once the vanguard of progressivism, had developed their own internal power structures and issues that corrupted both their purpose and effectiveness.

It is hardly surprising then that an appeal to traditional American ideals of individualism proved attractive, especially when coupled with a careful strategy of cultivating resentment against ideas and institutions that conflicted with the vision of maximizing personal gain and profitability by maximizing freedom of action. Why not convince white men that it was "affirmative action" keeping them down, or "unions" that drive up prices and keep you from bargaining for salary and perks that you want? Why do we need all these stupid regulations anyway? They clearly and demonstrably impose cost. Why shouldn't people have to pay for their own healthcare? I should have to pay for obese smokers? Now add that the economic arguments around this things are often complex, and deregulation is not always wrong (in many cases, I believe maximizing individual autonomy and earning power are the right result. I just don't confuse "deregulated market" with "competitive market").

But no one seems to have explained to folks the price if they do not make it. We have systemically removed the vast majority of New Deal and Great Society programs designed to share costs and spread financial risk collectively. And we have built a system in accordance with that vision. Profitability has never been higher. We have more millionares produced per day than anywhere else in the world produces in a year. Nothing in law restrains you from clawing your way to the top and becoming another Bill Gates or Warren Buffet or Bob Johnson (of BET). From a Republican perspective, by and large, the system is working as it should.

Hence the puzzlement I mentioned at the beginning. It is genuine. My lobbyist acquaintance, with is $300K/yr job and stock options and health insurance genuinely believes he lives in the land of opportunity. And he does. But the flip side is that more people fail. They do not succeed and achieve success. Because the only way to maximize individual potential has to include the possibility of failure and that, when you fail, there is no one there to catch you.

In the long run, as I have suggested before, the situation is unsustainable becase too much of the modern US economy relies on consumer spending. To return to the economic world of the Gilded Age, where the Supreme Court overturned minimum wage laws to defend the right of individuals to contract for lower wages and where "social security" meant an extended, personal network of friends and family, means to return to the "boom/bust" cycle that culminated in the Great Depression (and one should recall that, even in the midst of the Depression, we had many more millionaires than anywhere else in the world and vast fortunes were being built in radio and other "new economy" industries). But again, this is not a bug, it is a necessary consequence of chosing a system that maximizes individual potential rather than imposing some collective cost to provide a cushion.

There is nothing irrational about chosing one system over another, as long as you are prepared for the possibility you may lose. But most Americans who believe in the "free market" either never really understood that it could be them without health insurance and working unpaid overtime. If they thought about it at all, they assumed the losers would be those "others" who only have their jobs because of government programs like affirmative action or featherbedding labor unions or because all my hard-earned tax money is going to pay welfare to unwed teenage hispanic welfare queens on the wrong side of town. It's not like I'm ever going to need government hand outs. And if I do, it's only for a little while, until I can find another job and get back on my feet. Because I'm going to make it.

But it is impossible for everyone to make it. And more and more people aren't. Because one of the consequences of shifting everything the individual is that once you start sliding downward, it becomes real hard to stop sliding, let alone climb back up. It can be done. Many do. But a lot more don't.

Which is why we are starting to see people dusting off some rusty pitchforks and wondering where they put the matches and the map to the castle, while the Republicans are shaking their head in astonishment wondering what the problem is. AFter all. The system works.

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