We Just Don't Get It: Reflections on Our Current Economic Crisis

     Before I begin let me make one thing clear.  I am not an economist.  I have no training in economics.  I suppose you could argue that I therefore should not be saying anything about the underlying economics of America’s current economic crisis.  Yet some things about our current economic crisis seem so obvious to me, and those things seem to be so overlooked and ignored in the current debate about budget deficits and spending cuts, that I am going to speak out despite my lack of economic training.  I actually don’t think you have to be a trained economic observer to see what is there before our eyes to be seen.  We don’t see it because we don’t look.  We don’t look because we don’t want to see.

     The current economic debate in our country, which is of course inseparable from the current political debate and is largely driven by it, is between those who say that the budget deficit is the problem and that the only appropriate way to deal with it is to cut domestic spending (basically the Republican approach), and those who say that the problem is unemployment and a lack of consumer demand and that the way to deal with it is a massive governmental jobs program something like the New Deal of the 1930s financed perhaps with some “revenues,” our current euphemism for tax increases, and more borrowing,  This is the position of some progressive Democrats and of some leading economists, notable Paul Krugman and Robert Reich among others.  As I read a recent opinion piece by Robert Reich on The Huffington Post (August 10, 2011) in which he was making the increase government spending on jobs programs argument something became clearer to me than it ever has been before.  Both of these approaches are wrong.  The Republican approach is more wrong than the Democratic approach because, more than the Democratic approach, it harms ordinary people and the poor and perpetuates the growing and ultimately destabilizing gap between the immense wealth of the few and the increasing poverty (expressed primarily in unemployment figures) of the many.  But they are both wrong.  They are both wrong because they both seek to perpetuate an economy whose day has passed and that has become unsustainable in today’s world.

     Here’s one underlying fact that both approaches ignore.  The United States represents something less than 5% of the world’s population, but we consume something like 25% of the world’s resources.  The disparity between the standard of living of most Americans, even in these times of relative economic hardship by recent American standards, and the standard of living of people in much of the rest of the world, particularly in South America, Africa, and much of Asia, is radically unjust.  More significantly perhaps for most Americans, in the long run it is unsustainable.  We are the primary beneficiaries of a profoundly unjust global economic system, and if history teaches us anything it is that when disparity in wealth between the haves and the have-nots becomes too great revolutions happen.  Martin Luther King, Jr., famously said that the arc of history bends toward justice.  It does that very slowly of course as King recognized, but it does it; and that arc is bending in the direction of a radical correction in the distribution of wealth in the world.  We see it in the rise of China and India and in the decline of the United States to the status of a debtor nation that can’t, or more correctly won’t, pay its bills. 

     Even more importantly, the earth cannot long sustain the consumption of natural resources at the rate the United States has established as the model the rest of the world seeks to emulate.  The end of the age of oil is already in sight, but so many other natural resources are called non-renewable because that is precisely what they are.  There are only so many minerals in the makeup of the earth.  When all the iron and copper have been mined there will be no more to be taken from the earth.  The same is true of everything that can’t be grown or recycled.  The US models unsustainability for the rest of the world.  That model has dire long-term consequences for the entire world, but first it has them for us.

     Virtually all of the voices in our public debate over economic policy today have as their goal sustaining the American economic model that has prevailed at least since the 1930s.  At least, that’s what the voices say that don’t want us to go back to the 1890s like the so-called Tea Party Republicans do.  That model depends on constant growth.  The economists say it requires grown of over 1% just to keep up with population growth, and it requires more than that to keep unemployment down and middle class incomes up.  Virtually no one seems to grasp the simple and obvious fact that growth can’t continue forever.  The earth simply won’t sustain it.  It seems obvious that any economic model for the US that the earth can sustain in the long run has to be a model that does not require constant growth and that indeed encompasses and accommodates economic retrenchment. 

     There is a way that we can embrace and accommodate economic retrenchment in the direction of a more sustainable economy without seriously harming most Americans.  That way is so obvious that it is amazing how few people among us advocate it.  It is the way of reducing the enormous disparity in wealth between the super rich in this country and the rest of us.  It is the way of income redistribution from the top down.  Ever since the 1980s at least a process has been at work that has accumulated unprecedented wealth in the hands of a very few Americans.  The top 2% of wealthy in this country control more of the nation’s wealth than the bottom 90%.  The income disparity between corporate executives and working men and woman has reached an unprecedented level.  According to one source average CEO compensation is 142 times that of average employees in this country.  In Britain it is 69 times that of workers, and in a more egalitarian nation like Sweden it is only 34 times that of employees.[i]  Even at that level of 34 times the average wage of workers if an average worker’s compensation is $30,000 the average CEO compensation is over one million dollars, hardly a paltry sum.  Our problem is not that we don’t have enough wealth to pay our bills and provide a decent living for our people.  Our problem is that our distribution of the wealth that we have is so profoundly unjust as to be the source of our problems and be unsustainable in the long run.

     Income redistribution is one key to solving our economic problems in the direction of sustainability and justice.  The other is changing what we spend our money on.  The United States spends almost as much on its military as all the other nations of the world combined spend on theirs.  In the last ten years we have spent over a trillion dollars on two foreign wars,[ii] one of which was illegal and immoral from the start (Iraq) and the other of which had some geopolitical justification[iii] in the beginning but has since become an unwinnable quagmire from which we should just withdraw as soon as possible (Afghanistan).  Radically reducing our spending on the military and converting our military to a truly defensive force rather than the tool for projecting American imperial power around the world that it is to today will go a long way toward solving our economic problems in the direction of sustainability and justice.  It won’t be a simple process, for reducing the military and the defense industries that it supports will displace significant numbers of people who will have to be retrained and accommodated in the civilian economy; but that restructuring is absolutely essential if we are ever to have a more just and sustainable economic system.

     Our current debate over economic and political policy almost never gets to the fundamental level.  It stays superficial, and so in the long run it stays irrelevant to our real problems.  Until we have the wisdom and the political will to address the underlying structural issues in our economy, the issues of over consumption, unjust distribution, and overspending on the military, all of our talk, whatever its political bent, will be idle.  So far, we just don’t get it.

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[i] http://www.huff ingtonpost.com/2011/08/04/ceos-warned-mind-the-pay-gap_n_918059.html

[ii] http://costofwar.com/en/

[iii] But no moral justification, for while the use of force may be rationalized in geopolitical terms it is in this author’s opinion, and more importantly in Jesus’ opinion, never truly moral.

Banana Republic USA

I am appalled.  I am disgusted.  I despair for my country.  The forces of economic ignorance, the forces of privilege for the wealthy, the forces of indifference to the plight of people in need and to the hopes and aspirations of most Americans have carried the day.  My national government has enacted a law that will harm millions of people, and it has done so only so that wealthy Americans will not have to pay taxes at a fair rate, a rate that they have paid in the past, a rate that reflects their ability to pay and the benefits and advantages that they have received from the American economic system, a level that would still represent one of the lowest levels of taxation of the wealthy in any so-called developed country.  I refer of course to the credit limit/budget deficit legislation that became law on August 2, 2011.  President Obama botched the whole issue in his naïve belief that the Republicans want to work with him and the Congressional Democrats in a constructive way.  He is the President, and his party controls the Senate; but he let a radical minority of the Republicans in the House of Representatives hold the entire nation hostage to their destructive ideology of small government and low taxes, an ideology that benefits not the American people as a whole, certainly not those in need among us, but only those who need no help from the government, those who need no tax breaks, those whose wealth keeps them above the vicissitudes of the economy, who are insulated in a way that assures that they will prosper no matter what the economy or the government does.  

In his column in the New York Times published August 1, 2011, the day before this unconscionable piece of legislation became law, Nobel Prize winning economist Paul Krugman analyzed the matter brilliantly.  He said that the deal President Obama reached with Congressional Republicans to raise the country’s debt limit

is a disaster, and not just for President Obama and his party.  It will damage an already depressed economy.  It will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

Krugman is clearly correct.  That the measure that became law on August 2, 2011, “will take America a long way down the road to banana-republic status” is a succinct statement of a truth that simply cannot be denied.

To understand that comment we must first understand what “banana republic” means.  The term refers to the governments of Central American countries such as Honduras and Nicaragua during the time when they were dominated by large American corporations, specifically corporations that exploited the resources and the people of those countries by exporting produce, typically bananas.  Those governments were put and kept in power by American corporations.  They served the economic interest of their corporate masters.  They were politically oppressive and brutal.  They would use any means to keep themselves and their corporate overlords in power.  They had no interest in the welfare of the people, only in their own power and their own short-term gain.  The real rulers of the country were the big corporations, and the people had no say in how their land was governed. There was nothing these corporate puppet governments would not do to preserve their power and their privilege.  The phrase “banana republic” is shorthand for a country with a brutal, corrupt, oppressive government that operates in its own interest and in the interest of big corporations and of the wealthy, not in the interests of its own people.

That is what the United States of America is becoming.  Our slide into banana republic status began with the Reagan administration in the 1980s.  That’s when the Republicans began their assault on the few social safety net programs that we have in this country.  That’s when the tax code began to be revised to benefit the wealthy at the expense of the people, a development that reached its nadir under George W. Bush and that the Obama administration and the Congressional Democrats have done nothing to reverse.  That’s when the process of concentrating more and more wealth into the hands of fewer and fewer people began.  Yet the ideology of the Republican Party today makes Ronald Reagan look downright reasonable, and that is a very difficult thing to do.  Even Reagan agreed to some tax increases when they were necessary.  Not today’s Republicans.  Certainly not those Republicans today whom we so quaintly call the Tea Party.  They are hell bent on implementing policies that will destroy this country, and they are having considerable success in doing so.  The current debt limit and deficit reduction bill is their crowning achievement (although even it doesn’t go far enough in the direction of benefiting the wealthy at the expense of the people for some of them). 

Today in America money rules.  It has always ruled to some extent, but in some meaningful ways we are returning to the 1890s, the age of the robber barons, the age when big corporations ran the country and exploited the people for their own gain with no meaningful governmental curbs on their power.  The Supreme Court has declared almost all limitations on the power of money in the electoral process to be unconstitutional.  When we faced an economic crisis unlike any we have seen since the Great Depression of the 1930s the government bailed out Wall Street and did nothing meaningful to help as millions of Americans lost their jobs and lost their homes to foreclosure.  When the crisis in American health care became so obvious and so acute that not even the federal government could ignore it any longer the power of the insurance industry, a power exerted through campaign contributions that the Supreme Court will not let the government limit, forced us to accept half measures that do essentially nothing to address the problem of access to affordable health care for millions of Americans.  Today in America money rules, and ordinary Americans are being harmed in myriad ways because it does.

So many Americans have bought the lies of the conservative ideologues that there seems to be no way out.  Progressive pundits and talk show hosts tell us not to despair.  They tell us not to give up.  They tell us that there is hope of turning the tide.  I wish I believed them.  I want to believe them, but somehow I just can’t.  We may have reached the point where the only thing that will reverse our slide into banana republic status is to let the conservatives have their way.  Let their policies ruin the country.  We don’t seem to be able to stop them in any event.  Many people will suffer in the process, but maybe that is what it will take to put American on a path toward justice for the people, a path away from the control of the wealthy and their big corporations, a path toward common decency and care for one another.  I hope it is not the case that only greater economic and social disaster will turn us around, but I’m having a hard time believing that that is not the case today.  I am appalled.  I am disgusted.  I despair for my country.