Louis XV
In a front page article, "Spain Recoils as its Hungry Forage Trash Bins for a Next Meal," Suzanne Daly describes the increasingly desperate efforts of the Spanish government to meet the budget targets imposed by E.U. regulators. She observes that, despite having introduced one austerity measure after another, including cutting public sector jobs, salaries, pensions and other benefits, the economy has continued to implode.
Ms. Daly cites a report by a Catholic charity,
Caritas, that states it fed almost one million Spaniards in 2010, a
figure that had doubled since 2007, and that in 2011 the number rose
again by an additional 65,000 persons. Caritas also stated that 22% of
Spanish households were now in poverty and that approximately 600,000
Spaniards had no income whatsoever.
Daly also reports
that, with an unemployment rate of over 50% among young people and
increasing numbers of households where the adults have no jobs, many
Spaniards are now forced to forage in tash bins for their food. She
quotes an official in the town of Girona, Eduardo Berloso, who
complained that "It's against the dignity of these people to have to
look for food in this manner." In response, Mr. Berloso sponsored an
ordinance that required supermarkets in that town to padlock their trash
bins.
Here in the United States, similarly ill-advised demands for
austerity have prompted severe cutbacks at the federal, state and local
levels that have prolonged and exacerbated the Great Recession,
destroyed the lives of millions of Americans and widened economic
inequality. Joe Nocera, in his
column today, "Romney and the Forbes 400," noted that "Thirty years
ago, when Forbes published its first Forbes 400, a net worth of $75
million would get you on that list. Today, it takes $1.1 billion. In the
last year alone, the cumulative net worth of the wealthiest 400 people,
by Forbes calculation, rose by $200 billion. That compares with a 4
percent drop in median household income last year, according to the
Census Bureau."
Last year, Forbes magazine
reported that, as of November, 2011, the four hundred richest Americans
enjoyed a combined worth of $1.53 trillion, which figure had increased
from $1.37 trillion over the previous year. Their combined wealth was
thus approximately equivalent to the GDP of Canada.
In
October of last year, the Internal Revenue Service and the Congressional
Budget Office released findings which showed that the top 1% of the
American population continued to receive a disproportionate share of the
country's wealth. In 2009, the 1.4 million who belong to the top 1%
made an average of $1 million dollars in 2009. Further, since 1979, the
share of U.S. Income enjoyed by the top 1% has increased from 9.18% to
17.9% as of 2009, or more than the entire bottom half of the U.S.
population.
The U.S. Census Bureau announced in 2011 that
the real median household income in the United States had declined to
$49,995, or 2.3% from 2009 , while the nation's poverty rate had
increased to 43.569 million people, or 15.1 % of the total population,
and the number of people without health care insurance had grown to 49.9
million.
A study by Harvard University Medical School in 2009 attributed
that the lack of medical insurance to about 45,000 deaths per year in
the U.S. Further, researchers for the U.S. Department of Agriculture in
2010 reported that 17.2 million households - or 14.5 % of all
households in the United States - were "food insecure" and that in
one-third of those households "normal eating patterns were disrupted."
In 3.9 million of those households, children went hungry.
As the real unemployment rate climbed to approximately 20 million
Americans in 2011, another 2.6 million Americans, according to the
Census Bureau, descended into poverty. Almost simultaneously, the World
Bank observed that the United States had a higher level of income
inequality than Canada, South Korean or any country in Europe with
exception Turkey.
A study by the Central Intelligence
Agency reports that the U.S. ranks 50 out of 221 countries surveyed for
life expectancy. The average life expectancy of 78.37 years places the
U.S. below all Western European countries and is only slightly higher
than Cyprus, Panama and Costa Rica.
Finally, research by a
Boston-based consultancy group, Forrester, estimated that 400,000
service jobs had been lost to off-shoring since 2000 and that this trend
had then accelerated to between 20,000 and 40,000 a month. The number
of jobs lost was over and above the 2 million manufacturing jobs that
were estimated to have moved offshore since 1983. By 2015, Forrester
predicted, approximately 3.3 million service jobs will have moved
offshore, including 1.7 million "back office" jobs such as payroll
processing and accounting, and 473,000 jobs in the information and
technology industry.
All of the empirical evidence suggests
that out-sourcing, deregulation and a commitment to the myth of
"free-trade" have been major contributing factors to the loss of
manufacturing, stagnating wages and the growing impoverishment of the
former middle class.
Ultimately, the entire process is
self-defeating and creates a negative-sum game: As entrepreneurs seek to
maximize their profits by paying the lowest possible costs for labor
and materials, the middle class is hollowed out. As the income of the
middle class contracts, aggregate demand is reduced. As domestic
spending contracts, the purchase of goods and service contracts. Without
the intervention of the government into market economies, the buyers
and sellers of goods and services become locked in mutually destructive
death throes.
The model of the market economy, because of
these practices, is no longer responsive to the liberal democratic
political systems that were responsible for creating and nurturing
capitalism and has been an unmitigated disaster for middle class
families throughout the Western world.
Left to their own
devices, entrepreneurs and corporations inevitably engage in practices
that have harmful consequences to the public, notwithstanding the fact
that their activities are heavily subsidized by taxpayer money - e.g.
roads, trains, airports, and intangible infrastructure such as employee
training and R&D, favorable tax policies, legal standing, and the
protection of trade secrets and intellectual property. Entrepreneurs and
corporations know that if they are unable to escape the ultimate
consequences of their poor decisions, if all else fails, they can always
enter into bankruptcy and re-emerge as a new corporate persona. Their
sole goal is to maximize profits to please their shareholders. Given a
mind set that sincerely believes that the pursuit of self-interest is
somehow a public good, they remain oblivious to the adverse effects of
poverty, lack of health care, pollution, climate change and to basic
principles of social justice.
There are no easy solutions to
the present economic malaise, but the purported "laws of economics" are
not to be confused with the laws of physics. Economic systems do not
operate in a vacuum and there is nothing inevitable about the operation
of economic trends. Economic systems and political systems are the
products of human imagination and ideology as they are shaped by
historical forces.
Economic theory itself is the step-child
of political theory. Capitalism as an economic system emerged only
slowly as result of the disintegration of the feudal, agrarian economic
system and the development of trade and banking in the late Middle Ages
and Renaissance. The development and justification for market capitalism
as a model was provided by the political ideas of John Locke, David
Hume, Adam Smith and David Ricardo.
Because there is nothing inevitable
about economic trends and developments, they can be countered by
intelligent and carefully crafted monetary and fiscal policies, and
intelligent legislation. In extremis, even the "laws of
economics" - as articulated by the proponents of classical, orthodox
liberal economic theory - can be suspended by operation of law, as was
required during World Wars I and II.
The critical need is to
restore the proper balance between the pursuit of wealth as a purely
private activity and the public interest. In a democracy, citizens have
the ability and the right to imagine and to create new political,
economic and social structures and arrangements that are rooted in a
shared commitment to social justice and in a recognition of the mutual
obligations that we owe to one another as members of a political
community. By law, policies can designed and imposed to protect the
rights of workers to join unions, to create an industrial policy, to
re-impose selective tariffs (as the Chinese now do), to enact a tax code
that punishes out-sourcing and domestic dis-investment and to provide
incentives for job-creation and domestic re-investment.
The newly released documentary film Detropia
graphically illustrates the price that this country and the children of
the middle class are now paying because we have permitted, in the name
of free enterprise, our manufacturing base to be dismantled, unions to
be crushed, and jobs to be out-sourced in return for an unrestrained
flood of cheap, often subsidized imported goods and products. As a
consequence, we have allowed ourselves to become a virtual colony of
China and other exported-driven countries.
In that movie,
George McGregor, an official from the United Auto Workers, desperately
tries to protect his members from extreme pay cuts demanded by companies
such as American Axle. Its management, before it moved all of its
manufacturing jobs to Mexico, informed McGregor in negotiations that it
didn't care whether or not his UAW members enjoyed a living-wage.
Tommy Stephens, a bar owner and former teacher who is the film's most
notable person, laments the demise of the middle class Detroit in which
he grew up. He ruminates about the loss of hope and opportunity as the
middle class descends into poverty. At the end, he observes that the
middle class has played an indispensable role in the development of
capitalism: it has served as a buffer that protected the wealthy elite
and their possessions from the vengeance of the poor. Without that
buffer of hope and opportunity, Stephens predicts that people will be
left with no other option but to revolt.
It has been said that Marx's predictions about the inevitability of
revolution were wrong because he did not anticipate the emergence and
expansion of the middle class. But Marx understood, better than many of
his critics, that the model of market capitalism that he challenged - based upon Social Darwinism and laissez-faire - could not
survive. Now those ugly doctrines have been recycled and become, for
many of the current elite, the controlling model for how market
economies should function, Marx may yet be proven right.
As
the middle class has now been beaten down and forced into retreat by
the 1%, one wonders whether that elite is now too deaf to heed the
warning attributed to King Loius XV, Après moi, le déluge.
