Why is economic growth so wonderful if it benefits so few? (Robert Reich)

via The Economist's View

The American Model

Wednesday, June 14, 2006
The American Model
Robert Reich

Why, tell me, is economic growth so wonderful if it's being enjoyed by such a small proportion of the people of this country -- and if the burdens of growth (in terms of growing job insecurity, loss of corporate health-care benefits, lack of health insurance altogether, wage declines for the majority of hourly workers, loss of local communities and local retailers (look at the devastation created by Wal-Mart --are being borne by so many?

Yesterday I found myself in yet another debate with some right-wingers who claimed (as they always do) that Europeans and the Japanese have it far worse than us. Growth is slower in these countries, they say over and over again, and unemployment is higher. The "American system," with our highly-flexible labor market (meaning anyone can be fired for any or no reason, and can lose large portion of salary and benefits any time)is far more efficient. Well, these right-wingers certainly are correct that growth is slower and unemployment is higher there than here. But people have more job security there. They also have health care. If they're unemployed, they have far better benefits than unemployed workers here. And inequality is far less in these countries than it is in the United States.

In other words, there's something of a tradeoff. The "American system" is at the extreme end of a set of social choices that other people in many other post-industrial nations are making differently than we are. All other things equal, it's great to have a growing economy. But, as I've noted before, during the past five years, although productivity gains in the United States have been impressive (24 percent), real wages are going nowhere. The real median wage is still around $35,000, which is where it was in 2001. (One respondent to this blog continues to tell me that, if you measure compensation slightly differently, you'll see that the real median wage is slightly up. I think his methodology is flawed, but that's not the point. If the whole economy is 24 percent more productive than it was five years ago, we could afford MUCH higher median wages and benefits. The lion's share of the gains of these productivity increases have gone, however, only to people at the very top of the heap.)

. . .

If those at the top gain all the benefits, then why should everyone else put in the extra effort to make it happen? Why should they endure the insecurities? And won't most people who don't enjoy the gains feel comparatively less well off than they were before? Feelings of well-being are, to some extent, relative. We used to talk about the poor as "disadvantaged." That is, disadvantaged relative to the rest of society.

"If those at the top gain all the benefits, then why should everyone else put in the extra effort to make it happen? Why should they endure the insecurities?"

Exactly. Why bust my buns, when the corps/boss doesn't care, won't pay me more, and is just as likely to let me go as not. Then others have the nerve to talk about lack of work ethic. Hummmph. The Soviet workers had a wonderful saying: "I pretend to work, and they pretend to pay me."

I've always wondered why so many people are quick to rush to the defense of corporations and the rich when just about nothing is given back in return for the labor that keeps them rich and elite. My feeling is that if the system doesn't provide for the basic needs of everyone contributing, then the system needs to be destroyed and rebuilt.


If given the choice between slow growth with health care and a support system that works for all members of society, and the schizophrenic, winner take all chaos of the American economy, I'll take slow growth EVERY time.

The very notion that GDP is a good measure of prosperity is BUNK. Every time there is a hurricane and houses have to be re-roofed, it boosts the GDP. When you get sick and spend 50K on hospital bills, it boosts the GDP. And unemployment only measures those getting benefits. It should measure the number of people who want jobs, but can't find them.

“By the curious standard of the GDP, the nation's economic hero is a terminal cancer patient who is going through a costly divorce. The happiest event is an earthquake or a hurricane. The most desirable habitat is a multibillion-dollar Superfund site. All these add to the GDP, because they cause money to change hands. It is as if a business kept a balance sheet by merely adding up all "transactions," without distinguishing between income and expenses, or between assets and liabilities.”

“If the GDP is Up, Why is America Down?”
(Article originally published in Atlantic Monthly)

Reich-wingers :evilgrin:

To Mr. Reich :yourock:

of major corporations.

He has such a clear vision.

he were appointed Secretary of Labor, or some type of Domestic Policy Advisor for the upcoming Democratic President. Really SMART guy and funny too, if you've listened to some of his speeches. I'm gonna say it, though i don't really believe it... he's too short to get elected President. :(

This isn't anything new really, its building over decades, and its especially been accelerating since the Reagen years. Most of the economic prosperity under Reagen vanished into the hands a few wealthy.

This is all short term grab and run, but whats more important, the Bush admin has added a very destructive component to the equation. They are using a kind of wicked burned-earth strategy of grab-what-you-can-and-run. But in the long run, this is a highly unstable economic system, and consequently when one of the driving forces is losing its strength, the whole carthouse is comming to crash down hard. And when that happens, no telling what damage will be done to the country, not to mention the people.

I get the impression the main driving force is the impending sense of danger of depleting cheap oil revenue thats making the oil sheiks grow nervous.

Wether or not the tide can turned before the system builds up enough momentum to prevent it from being stopped, I don't know, but the course to do this is obvious. Enact very strict regulations on the few Megacorporations, stimulate small bussinesses, drastically increase taxes for the rich and lower taxes for the poor, provide free health care and invest heavily into education and create a high tech market.

if the only people you talk with are those that benefit the most.

Just trying to differentiate the text of the article, but I guess Arial italic isn't as easy on some eyes as straight-up Ariel. Or whatever that typeface is.

:)

It's become all funnymoney. By increasingly privatising the public goods, the cost
of living is rising. Public heath is a public good. If your neighbor's kids have
lice, your kids will get lice. A clean water supply is a public good; a transport
system is a public good, and so on.

Do economists deliberately set out to decieve? Or is it just a failure in measurement
theory, that we've assigned numbers to apples, and not oranges, so when we measure
the numbers, apples are worth a lot more than oranges.

Its the system that decieves. The tax system and the US legal system are overcomplex,
and this burden falls across the whole of society like a regressive tax, and
disenfranchising the poorest from capital and opportunity. The banking system is
similarly, a monopolist who despreately needs an asskicking from the regulator to
reform and get efficient. But instead, the monopolist taxes as well across society
a regressive tax, and the poorest are disenfranchised from banking.

Over and over, we see the tools of modern Amerikana, usurped by monopolists that
impose their regressive charges, economically, and in so doing remove the poorest
from the political process. As well, by endemic racism on behalf of the media-monopolist
and this includes financial media, the nonwhite races are denied equal access to
capital that the society stay white.

What a miraculous inheritance the neoliberal economics has been.

The system is set up to screw the poor and to screw black people. It is institutionally
bankrupt already, and now that we are able to observe this fact of its basis, we are
in a position to change it, to fix this failed model by postulating a new one.

I'm sick of these articles that point out the ongoing obvious that has been the
state of affairs of the new monopolism for 100 years. So, what is the economic
failure in specific?

It comes down to 2 areas that MUST be regulated in a modern society by the public good:

1. Mass media - the 4th estate must have a state truth, a judicial center, or there
can be no civil society. The judicial center must have open free speech argument,
and as well allow that argument equal access to all channels. The words Plurality
of ownership, and plurality of editorial views" are core to what must be regulated
in to public media (tv, radio, internet). As stands, M$M are a gross abortion
of this, and this has subverted all civil argument and given the monopolists a
free hand to murder and pursuie imperial crime. This crime is root to the drugs war,
as people are not informed to the truth by a failure in media with a vested interest
in its momentum. News is not reported because it is not popular, and ratins are
based on popularity, but society needs a news media that transcends popularity to
truth... and truth has been lost for the underground.

Countries more modern than the US have state media, like the BBC,.. and a media
regulator more important even, "ofcom". This hidden hand is the public's watchful
eye that media not subvert civil society. And still, the brits wage a stupid
failed drugs war, because the american media monopolists have pushed it around
the planet, and through inter-ownership, have established a hegemony of stupidity.

This financial corruption leads to why point 2:


2. Finance and access to capital - This must be equal opportunity for any sort of
meritocracy and innovative society to develop. As stands, for all the apparent
heroism, the merit is cronyism of lucky insiders who privatize public innovation,
like internet, gps, computers. The financial corruption of an undemocratic
federal reserve system and its "white" open markets committee sits behind the
frontman, point #1. Without addressing this root, no serious reform will be
achieved, and the US economy will do a dinosaur.

Maybe it's because multi-national corporations have customers around the world, and if the US consumer suddenly gets cash poor, they can make it up in other parts of the world?

A free market is one where all parties are "free:"

to organize for the purpose of making money (labor) or providing goods and services, and where the individual has the freedom to choose from more than one source, and the freedom to collect damages if one is sold a bad product or is otherwise harmed by another's careless attempt to make $$$$$

We presently have a black market going on. Most cheap goods are made by slave labor, are often improperly labeled to seem like US made goods; high prices in many areas are artificially fixed and protected by the government( fuel and meds, for example); there is little recourse if the drugs kill you or the banker sells your personal info to his bookie.

My take on the inequality: people are lazy. Corporate CEOs are too lazy to use their assets to make life better for anyone else, the government is too lazy and corrupt to put any checks on corporations, and the average American wants a Big Daddy who will powder his ass for him, think for him, tell him who to hate and then disappear so he can watch NASCAR and scratch his ass.

Lousy jobs. In China.