Lifted from an op ed e-mail from Stormy:
A piece in the Guardian is interesting, dealing with poverty (real poverty) and inequality. I think that Angry Bear should really address what can be done about rising inequality. Here are the last two paragraphs:
The prospect is one of a society such as the one we live in, only more so. Nobody, in the Beveridge sense of the term, is lacking the means of subsistence: nobody is “poor”. But it is a society that is also starting to look uncomfortably feudal, and many economists think it is overwhelmingly likely to be our future. I know, because they’ve told me. But this is a conversation we need to be having out in the open, because keeping quiet about it makes it more likely to happen.
This may sound grim, but I am not pessimistic. Rising inequality is not a law of nature – it’s not even a law of economics. It is a consequence of political and economic arrangements, and those arrangements can be changed. Inequality in the developed world fell for most of the 20th century; we can make it fall for most of the 21st century, too. But it won’t happen without sustained pressure on politicians from electorates. So let’s get on with it. Let’s start to make them hear what we’re saying: it’s about the inequality, stupid.
Instead of celebrating laissez-faire capitalism, we should start talking about how we would change things to lessen inequality. Exactly what political or economic arrangements should be created? Simply asking the rich to share is laughable. If you want to understand Ferguson, ask, “Where are the jobs?”
How about a hefty tax on capital gains? Higher corporate taxes? If American companies want to make their goods cheaply elsewhere and send them for us to buy, how about a tariff on those goods?
And what about those trading rules? Do we want our workers to compete with slave labor in countries that do not have meaningful collective bargaining? I say, “No.” Insist they compete fairly. Either they have collective bargaining or we put a tariff on their goods. In case you have missed what is really happening: American companies, like Apple, use virtual third world slave labor to make goods that they then sell to us. Who gets rich doing this?
But often, because economists choke at the mention of labor unions or collective bargaining, they simple do not see this as an option. I remember a discussion on AngryBear that labor unions are really gangster led. I could not believe that intelligent people could so easily toss away collective bargaining.
Trade? No one discusses that any more. I have described how trade rules could be changed. Big silence. Yet the rise of inequality world-wide is connected to trade imbalances and to foolish trading agreements. My piece, “Trade and the Great Recession” spells out the connecion.
Similarly, blaming loss of jobs on automation is absurd . Manufacturing jobs went to China and third world countries. These countries now have enormous trade surpluses with the U.S. Who wants to claim that these third world countries have such sophisticated automation that they now have a trade advantage in goods?
Most economists bow and scrape before the idea of free trade—a ridiculously foggy idea. Do they mean we cannot insist that our trading partners allow meaningful collective bargaining? Do they mean that we cannot insist that our trading partners rigorously enforce comparable environmental regulations? Ignoring these structures simply increases the growth of inequality world-wide.
Then there is that silliness that all economists protect: exogenous variables. It is absolutely impossible to talk sensibly about the true cost of a thing if we cannot quantify, for example, its effect the environment. Take the case of climate change. Is four or six degrees of global temperature an exogenous variable? Economist should ignore these projections even if they entail the collapse of civilization?
Are the acidification of the oceans and the destruction of its wild life exogenous variables?
Then there is the silliness in talking and modeling a world that simply does not exist! A few days ago, Dan sent me an article from Naked Capitalism discussing the flow of money as a function of imports and exports. Unfortunately, the writers never considered the effect of currency manipulation. Currency manipulation has had an enormous effect on money flow and an enormous effect on trade. But we simply hear nothing of that.
I have repeatedly described how currency manipulation affects trade and corporate profit. I doubt that many could see a connection. If they were real business men, they would see the connection.
These conversations are never had. Watching economists is like watching horses tread a circle with blinders on. The rich have trained them well….they move according to proscribed lines of thought, tightly leashed to some very profitable ideas for the very rich.
Just a thought.