Finding Path to Greater Equality

 

Popular Economics Weekly

Finding the Path to Greater Equality

CenterforEquitableGrowth

 Economic theory is finally catching up to political theory in showing policymakers how to right the record income inequality—worst in the developed world—that has plagued working Americans since the 1970s.

It is about time when we have just witnessed one of the consequences of that inequality—the storming of the US Capital by extreme-right terrorists bent on overthrowing our duly-elected government that was in the midst of verifying the electoral victory of President-elect Joe Biden and Vice president-elect Kamala Harris.

Economists are modernizing New Deal Keynesian economics that brought us out of the Great Depression and World War II, the economics that says government must be part of the solution to today’s problems, including the protection of workers’ rights, the environment, and keeping America strong and prosperous for all Americans, not just the 1 percent.

For instance, a recent MIT research project confirmed that Four decades ago, for most U.S. workers, “…the trajectory of productivity growth diverged from the trajectory of wage growth. This decoupling had baleful economic and social consequences: low-paid, insecure jobs held by non-college workers; low participation rates in the labor force; weak upward mobility across generations; and festering earnings and employment disparities among races that have not substantially improved in decades.”

Much of that divergence was caused by trickle-down economics, a political theory from the Reagan era that rationalized making the wealthy wealthier with the teaser that some of that wealth might trickle down to the 80 percent, which are wage and salary earners that power most economic activity.

While new technologies have contributed to these poor results that promote labor-saving AI and robotics, researchers are now saying these outcomes were not an inevitable consequence of technological change, nor of globalization, nor of market forces. Similar pressures from digitalization and globalization affected most industrialized countries, and yet their labor markets fared better.

It was, “…the decay of unions and collective bargaining, the explicit hardening of business (by the Business Roundtable formed in the 1970s), the popularity of right-to-work laws (mainly in conservative red states), and the fact that the wage lag seems to have begun at about the same time as the Reagan presidency all pointing he same direction: the share of wages in national value added may have fallen because social bargaining power of labor has diminished,” said the MIT study.

And therein lies the solution that only government policymakers and legislators can enact by expanding government healthcare, raising the minimum wage, more progressive taxation, making college education more affordable, and expanding workers’ collective bargaining rights that red state right-to-worker laws have drastically curtailed.

This list of economic can-dos has been obvious to any professional economist that has not been defending the one percent’s right to most of the wealth created by working Americans.  Free market ideologies have held sway for the past 40 years—not based on empirical research—that advocated unfettered economic growth by any means, and enshrined maximized profits as the greatest good, while ignoring business ethics and a morality that promotes caring for our brothers and sisters.

The economic disparities are growing due to the pandemic, as I reported earlier. In April, nearly 12 million low-wage workers were laid off, while some 6 million workers who were earning between $18 to $29 an hour were laid off. By November, all but 400,000 of those workers earning $18 to $29 an hour had returned to work, Raj Chetty, a Harvard economics professor, has said. Meanwhile, some 6 million workers who earned less than $13 an hour have yet to return to work.

Now the coronavirus pandemic has reinforced the need for an economic science that recognizes we are all in this together.  As many have said before now, we are poorer if we ignore the plight of the poorest.

Harlan Green © 2020

 Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen 

What Happened to Honest Abe?

Popular Economics Weekly

Wikipedia

What happened to honesty in personal behavior and in politics is a good theme to discuss on this Presidents Day that commemorates our two Presidents most touted for their honesty—Washington and Lincoln? They were celebrated for their honesty, whereas today we have a President and his subservient political party that not only tolerates, but enables the most dishonest president in history.

We are not just talking about President Trump’s 16,000 plus documented lies—many of them done for mostly propaganda purposes; but the dishonesty manifested during the impeachment hearings and trial, when Republicans parroted Russian propaganda tropes that Ukraine opposed the Trump election, and was behind the Democratic Party hackings rather than Putin’s Russia.

Why didn’t Republicans question whether Trump’s call for Ukraine and China to aid in his reelection by digging up dirt on his political opponents was somehow ethical and allowable for a President seeking reelection?

What has happened to Republicans that abet Trump’s propaganda machine which is based on outright lies, when young American children were brought up on stories of Presidential honesty; whether it was Abraham Lincoln the honest politician, or George Washington’s honesty in confessing to cut down the cherry tree as a six-year old child?

“Honest Abe’ was a nickname Lincoln adopted early in his career as a lawyer. In his “Notes for a Law Lecture” his entire series of notes speaks to honesty, integrity, and to do what is right.  Lincoln wrote, “resolve to be honest at all events; and if in your own judgment you cannot be an honest lawyer, resolve to be honest without being a lawyer.”

The honesty of George Washington has become almost mythical, and a beacon that we all learned as young school children.  The cherry tree tale was probably a children’s tale, but Thomas Jefferson once said of Washington, "his integrity was most pure, his justice the most inflexible I have ever known, no motives of interest or consanguinity or friendship or hatred, being able to bias his decision. He was indeed in every sense of the words, a wise, a good, and a great man."

Why wouldn’t Republicans want to live up to their standards? It is in essence an admittance that Republicans cannot maintain their power and privileges without the aid of outright lies that other authoritarian regimes use to maintain their power with propaganda machines that also suppress truth and promote ‘alternate facts’—because their power and privileges were not always honestly acquired.

It only took America 244 years to go from "Honest Abe" and “I cannot tell a lie” to 16,241 false or misleading claims, said USA Today recently. How can we recover from such blatant dishonesty, unless we keep telling our children at the earliest age that “honesty is the best policy,” and building character the only road to a truly successful life?

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Happened to Main Street—Part II?

Popular Economics Weekly

FRED

Corporate responsibility is back in the air with a vengeance; not only from Senators Elizabeth Warren and Bernie Sanders who constantly remind us on the campaign trail that corporate misbehavior has tilted the “playing field” of economic benefits too much in corporations’ favor.

Now Jamie Gamble, a former corporate attorney, has touched the third rail of corporate behavior—business ethics. He has written an as yet unpublished essay that asserts corporate executives “are legally obligated to act like sociopaths,” according to Andrew Sorkin of the New York Times.

“The corporate entity is obligated to care only about itself and to define what is good as what makes it more money,” Gamble is quoted as saying in his essay. “Pretty close to a textbook case of antisocial personality disorder. And corporate persons are the most powerful people in our world.”

I call it the third rail because it’s a topic that comes up for discussion only when a crisis is brewing, or an election, though economic futurists like Hazel Henderson have been writing about the need to train business executives on higher business ethics for decades in books like, Building a Win-Win World, (Berrett-Koehler, 1996).

“When I published “Should Business Solve Societies' Problems? In the Harvard Business Review in 1968,” said Henderson, “there were few MBA courses on business ethics. By 1995 such courses were standard and often compulsory.”

Ethical behavior leads to what she calls “win-win” corporate behavior, defined as cooperative outcomes that benefit not just corporate executives and their shareholders as happened with the recent Republican tax cuts.

Simply put, such sociopathic behavior benefits just the few with its pre-occupation with maximizing quarterly profits, rather than benefiting the employees and market customers it also services, while adding to the ‘hidden’ public costs of maintaining a clean environment and public infrastructure that it depends on.

These are what are termed the social costs of doing business that Senator Elizabeth Warren intoned in her first campaign to become a Massachusetts Senator:

“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

 “Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

In fact, Jamie Gamble has formulated a list of ethical rules he wants corporation executives and shareholders to adopt, and be liable for if they are not adhered to.  They should include:

· Their “relationship with their employees.”
· With “their communities in which they produce and sell.”
· Their “relationships with customers.”
· Their “effects on the environment.”
· And “effects on future generations.”

It is not surprising that Gamble’s ethical rules also meet the definition of sustainable economic growth, which is growth for the long term that benefits more than the few, because it is the “win-win” path that maintains stronger, lasting economic growth with fewer down cycles and economic crises that have wreaked so much economic and social damage in recent decades.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen