It took a village of out-of-touch political insiders, an under-regulated financial sector dedicated to the proposition that greed is good, and two bought-and-paid-for political parties. This long article, actually an interview of economist Jeffery Sachs (no relation to Goldman, I don't think), explains how it happened. The interview is well worth reading in its entirety. For those of you who are short on time, I've excerpted the most salient points. Emphasis added in spots.
The question is, where do we go from here.
"The income distribution in this country has gotten out of whack to a historically unprecedented extent and it has come with a very serious derangement of our political processes.
The U.S. is facing a structural crisis that goes beyond the bursting of the financial bubble. The remedies, therefore, must also go beyond what I regard as gimmickry of a stimulus package, or a temporary tax cut – or, for that matter, even less relevant permanent tax cuts.
The main effect of globalization, which is known but somehow weirdly separated from our politics, has been that those who have products, or services, or celebrity, or other things that they can sell to world markets, have found a boon in globalization. But for most of American society, and certainly for the majority of Americans who don’t have a bachelor’s degree, globalization has meant facing much lower-wage workers abroad and increasingly powerful competitive pressures. So our society began to separate between the “haves” and the “have-nots,” really in the early 1980s.
Reagan came to office with a diagnosis, most famously put in his inaugural speech, that government is not the solution, but the problem.(...) Reagan made a big and wrong diagnosis, with extraordinary consequences, and a lot of the country bought it.
He was playing to a lot of powerful interests [the rising Sun Belt, conservative businessmen, etc.], and the dismantling of government began, all in the service of cutting top tax rates as a theory of how to make the economy function properly. It’s a weird idea because there is plenty of evidence that government and markets are complementary parts of a healthy society – it’s not one or the other. The interests at the top benefited from globalization through market forces, tax avoidance and tax havens — and they absolutely grabbed hold of the federal government.
Each of the parties is constantly feeding at the trough of major interest groups. The Democrats, basically, were sold to Wall Street by [Bill] Clinton, and they’ve remained in Wall Street’s hands up until now. And that is one of the greatest failings of the Obama administration: the fact that he couldn’t find his way clear of the major interest group that helped bring him to office, and therefore he really couldn’t undertake deeper changes in the country.
When I was growing up, it was a commonly thought that America needed a mixed economy, that there were spheres of life where the market economy should prevail, and there were spheres of life where the government would be crucial. [The mixed economy] has had great history in all of the high-end democracies and there is a lot of economic reasoning behind it.
Basically, government has to be operating where the profit motive won’t suffice. The profit motive works where you have good economic competition, but if you just need one highway between city A and city B, that’s not going to be a competitive highway, so you’d better involve the government. If you want scientific knowledge in a society, for example, you don’t patent basic theorems, because everybody needs to use them, so you have to find a different way other than the profit motive to get science to develop.
I think Ronald Reagan really had a devastating effect on this. The idea that one would elect a president on the premise of demonizing government rather than making it work properly is really a shocking idea – “I’m here to dismantle the role of government.” No president since then has deviated from that line.
What are our deeper economic objectives? Among these is a sense of well-being, of life satisfaction. Income can play a role in that, but so do things like social trust and honest government – and compassion for other people. This kind of discussion is considered odd and I think that is part of our problem right now. We don’t have effective ways to discuss these things in our society.
Instead, we have people who represent a cult of selfishness, what I would consider Ayn Rand libertarianism. They are political figures who say that the goal of America is to leave [people] alone, and that ideas like compassion and so on are dangerous. What the Republicans have on offer – which is based on this 30-year misdiagnosis – is cruel and deeply wrong, because they express disdain for the idea that people are suffering and they need help.
We’ve arrived at a crossroads about the real meaning of our civilization. I think that we will need to reflect on how to achieve a higher level of happiness in this country — [and think about] issues of social trust, social connectedness, decency, compassion.
This [crisis] isn’t really about hard work and effort. It is about a society in which the options for a lot of people seem to be closed off right now. One of the great visions of America has been that this is a society where if you work hard, you can make it. But today we have the lowest social mobility of any high-income democracy.
There is no quick fix right now. A quick fix would occur if we had hit a bump in the road of a normally functioning economy, but my point is that we had growing rot that was disguised by financial bubbles. Rebuilding the infrastructure, strengthening the scientific base, having an energy system that moves to a sustainable renewables, low-carbon economy, improving educational outcome so that more kids make it all the way through – those are 10-year projects, more or less."
P.
No comments:
Post a Comment