Popular Economics Weekly
President Obama might have found his voice in jumping on the Progressive bandwagon with his Osawatomie, Kansas speech about income inequality. The small farm town of Osawatomie was where Teddy Roosevelt gave his now famous “New Nationalism” speech in 1910 that called upon the three branches of the federal government to put the public welfare before the interests of money and property.
That is what such groups as #OccupyWallStreet are calling for in renewing the cry that we are all in this together. Yet equality is more than a moral issue of what is fair, or even the core American value of everyone’s right to the pursuit of happiness. It is in fact the future.
For in an era where technology is replacing workers making the necessities of life at an ever accelerating rate, more Americans will have more leisure time to pursue their own interests. And more importantly, the ever increasing productivity of those machines will be able to lift all boats—that is, provide more necessities, as well as amenities to improve lives—rather than go only to the profit makers. That is to say, more Americans will be able to live off the fruits of technology.
In giving his Kansas speech, President Obama was going back to a time when Robber Barons ruled, having made enormous wealth from the founding of the railroads, banks, oil and steel industries in the 19th century.
It was still the beginning of the Industrial Revolution, when most of America was rural and Oligarchs ruled government and business. Sound familiar? That has happened once again with the enormous fortunes created via deregulation and the digital revolution. And once again 99 percent of American households are suffering from the excesses of modern oligarchs who want to abolish the safeguards that were established to protect householders from those excesses.
“The American people are right in demanding that new Nationalism without which we cannot hope to deal with new problems,” said Roosevelt. “The new Nationalism puts the National need before sectional or personal advantage. It is impatient of the utter confusion that results from local legislatures attempting to treat National issues as local issues. It is still more impatient of the impotence which springs from over-division of governmental powers, the impotence which makes it possible for local selfishness or for legal cunning, hired by wealthy special interests, to bring National activities to a deadlock. This new Nationalism regards the executive power as the steward of public welfare. It demands of the judiciary that it shall be interested primarily in human welfare rather than in property, just as it demands that the representative.”
President Obama seems to be finally realizing that the common good is as important as the profit motive. In fact, one doesn’t work without the other. One cannot prosper if there are no rules, such as protections against predatory behavior provided by financial regulations. Congress abolished the Glass-Steagall Act that prevented banks from trading against their own clients, which created conflicts of interest. How could banks’ clients now be sure that their investments hadn’t been set up to fail, such as happened with Goldman Sachs and many other banks during the subprime bubble?
Much of the Great Recession and slow recovery is due to widespread ignorance of economic fundamentals that actually depend on social welfare. For no economy can prosper if educational and environmental standards are ignored, which enable good health and social mobility. It is also an ignorance of what is in our national interest. Raising educational and environmental standards, restoring our aging infrastructure, and creating a truly universal health care system make us more competitive globally.
Teddy Roosevelt obviously knew this when he saw the results of too much wealth in too few hands—the monopolies and cartels of his era. That was why the Federal Reserve was created in 1913. It was to protect our currency from too much speculation, just as today we need stronger institutions that protect our stock market from too much risk taking.
Obama’s speech mainly targeted the reasons for so much income equality. The theory of “trickle down economics,” which holds that greater wealth at the top generates jobs and income for the masses below, drew some of Obama’s harshest criticism, according to the Washington Post: “It’s a simple theory — one that speaks to our rugged individualism and healthy skepticism of too much government. It fits well on a bumper sticker. Here’s the problem: It doesn’t work,” Obama said of supply-side economics, drawing extended applause. “It’s never worked.”
It is obvious why it hasn’t worked, because ‘trickle down’ Reaganomics’ believers maintain that because government is the problem, lower taxes are the answer. The problem is that public services suffer which are so necessary in our modern, already overcrowded world. More knowledge—including financial knowledge—is required to live in our complex society, just as we need safeguards against increasing pollution and crime created by increasing populations. And wealth doesn’t really trickle down, anyway. That’s why there has been so much income inequality over the past 30 years.
Don’t take my word for it. Lord John Maynard Keynes saw the consequences of increasing abundance in his famous 1930 essay, Economic Possibilities for our Grandchildren: “Thus for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well. The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.”
Professor Robert Shiller also discusses its consequences in his recent book, “The New Financial Order, Risk in the 21st Century”, in which he lays out what our new information technologies will be able to do. In it, “Shiller describes six fundamental ideas for using modern information technology and advanced financial theory to temper basic risks that have been ignored by risk management institutions--risks to the value of our jobs and our homes, to the vitality of our communities, and to the very stability of national economies”, says the publisher, Princeton University Press.
It will do all this by leveling the playing field in order to create a greater transparency of markets, as financial information in particular will be available to all. Therefore much of the risk in one’s profession, or housing value, or even health, will be able to be insured against unexpected events, such as recessions, or loss of career, or debilitating illnesses because of the new information technologies..
In other words, there is no longer any reason to be ignorant of how the modern world works. It will become more difficult for those who profit from such ignorance to accumulate excessive wealth. Or, as Teddy Roosevelt knew, we will continue to repeat our past mistakes.
Harlan Green © 2011