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Chapter 36: When Economists Become Theologians

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The University of Paris economist Thomas Piketty has marshaled a wealth of impressive data in his book Capital in the 21st Century. From an historical  perspective, the data shows that the market-based economies in the Western World - save for the brief, unique period caused by the economic disruptions of two world wars - have spawned increasing economic inequality.

Piketty also predicts that, without vigorous public intervention in the marketplace - as the rate of return on investments continues to exceed the rate of economic growth - economic inequality will continue to accelerate. Not surprisingly, Piketty has been denounced on the right as a neo-Marxist or a dangerous social democrat because he has had the audacity to suggest, as a basic proposition of democratic governance, that economic policy should be subordinate to political policy.  

Simultaneously, Piketty's colleague and collaborator at the London School of Economics, Gabriel Zucman, has reported in one of his many studies, Tax Evasion on Offshore Profits and Wealth, that U.S. corporations now declare 20% of their profits in tax  havens - a  tenfold increase since the 1980s - and that tax avoidance policies have reduced corporate tax revenues by up to a third.  At the global level, Zucman argues that 8% of the world's personal financial wealth is now being held offshore, costing more than $200 billion to governments annually and that decisions to shift to tax havens and offshore wealth havens are increasing.

  In the current economic debate, Piketty and Zucman - along with a few other prominent exceptions such as Paul Krugman and Joseph Stiglitz - remain the outliers in a profession that is overwhelmingly dominated by defenders of the status quo and conventional economic wisdom.

One such pathetic example of the latter is Tyler Cowan, an economist at George Mason University. Cowan enthusiastically cited a study which noted that, although economic inequality was rising in countries such as the U.S., "the economic surges of China, India and some other nations have been among the most egalitarian developments in history."
      
  Cowan piously concluded that "the true egalitarian should follow the economist's inclination to seek wealth-maximizing policies, and that means less worrying about inequality within the nation... [C]apitalism and economic growth are continuing their historic roles as the greatest and most effective equalizers the world has ever known."   
     
   In a prior book, Average is Over, Cowan extolled the rise of what he chronicles as the "big earners" in the emerging meritocracy that he foresees. He also argues that, rather than expand the safety net, governments should curtail spending.
  
      As an alternative and to maintain civic peace, Cowan suggests that local governments might offer engaging distractions to those whom he has identified in his Darwinian dystopia as the "big losers" and the "zero marginal product" workers. These "big losers" and "zero marginal product" workers presumably include the 162,000 U.S. architects and engineers whose jobs were shipped to third-world counties between 2000 and 2009, according to Bureau of Labor Statistics, and the 180,000 computer IT and programming professionals who, according to Yale University's Jacob Hacker, lost their jobs between 2000 and 2004.
   
     Perhaps taking an unconscious cue from Aldous Huxley's Brave New World, Cowan proposes a palliative that he suggests would enable the 49% mooching class that Mitt Romney decried to live contented lives, albeit with reduced means and with substantially reduced expectations: "What if someone proposed that in a few parts of the United States, in warmer states, some city neighborhoods would be set aside for cheap living? We would build some 'tiny homes' [that]...might be about 400 square feet and cost in the range of $20,000 to $40,000. We would build some very modest dwellings there, as we used to build in the 1920s. We would also build some makeshift structures there, similar to the better dwellings you might find in a Rio de Janeiro favela.  The quality of the water and electrical standards might be low by American standards, but we could supplement the neighborhood with free municipal wireless..."  

        Cowan's paen to globalization and the onward march of capitalism blithely ignores the systematic, well-documented failures of the capitalist system he extols. His apologia offers small solace to the millions of Americans whose jobs have been lost to out-sourcing and the de-industrialization of the U.S.; his soothing entreaty that, in the long run, everything will work out nicely - some fine day - ignores Keynes's sage observation that "In the long run, we will all be dead."  One also suspects that Cowan would be less sanguine about the economic landscape he surveys if he were informed that his tenured  position at George Mason University were about to be converted into an adjunct faculty position.  

  All of the empirical evidence, Cowan and other apologists notwithstanding, suggests that out-sourcing, deregulation, austerity, the commitment to the myth of "free-trade," -i.e. "laissez-faire" in trade policies - and reduced government regulation have been major contributing factors to the loss of manufacturing, stagnating wages and the growing impoverishment of the former middle class.

  The net effect of current economic policies - sadly endorsed by Democrats as well as Republicans-  has been an extraordinary concentration of wealth and power into the hands of financiers and other moneyed interests who have become the winners in this game of  economic Russian roulette. As a result, the decisions and predilections of fewer and fewer individuals now determine the outcomes in the American economy, while the overwhelming majority of Americans have little ability to influence macro-economic trends or economic and political policies.

         The contrast between "private affluence" and "pubic squalor" in America has only grown worse in the subsequent decades since Galbraith first used those terms to describe what he foresaw as evolution of inequality in the U.S. economy. The disparity between the few who are wealthy and the many who are poor has widened alarmingly in the United States since the advent of the Reagan era and the kind of "trickle-down" economics to which he and his advisers subscribed.
         In his General Theory, Keynes observed that "the ideas of economists and philosophers, both when they are right and when they are wrong, are more powerful than commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the salves of some defunct economist....But, soon or late, it is ideas, not vested interests which are dangerous for good or evil." 

           The classical liberal paradigm of the market economy has long since ceased to explain present day economic reality, but the intellectual chains of that received wisdom from long since dead economists continue to control the public narrative. Unfettered competition, based upon allegedly free market decisions made by solitary actors in which goods and services are sold to the most willing buyers, is a myth that does not create individual opportunity for the vast majority of Americans, nor has it maximized business opportunities. 

         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 services contract. Without the intervention of the government into market economies, as Hyman Minsky has argued, the buyers and sellers of goods and services become locked in mutually destructive death throes.

In addition, given a shared mind-set that sincerely believes that the pursuit of self-interest is somehow a public good, the defenders of the economic status-quo remain oblivious to the adverse effects of poverty, the lack of health care, pollution, climate change and to basic principles of social justice.  Further,  the insecurities of the marketplace persuade those who are successful to institutionalize their advantages. Monopolies and plutocracy are the inevitable result and, as the Forbes 400 list shows, economic inequality becomes more pronounced.

Market economies are affected by the frailties and the foibles of human actors. Although many of these actors are motivated by selfish, short-sighted concerns, the consequences of their actions harm everyone else. It is for that reason that regulation in the public interest and investment in public goods by the government - as the agent of the people 
in a democracy - are essential antidotes to the temper the excesses of capitalism and to create the foundations for a truly just society.

Pope Francis Confronts Right-Wing Politicians

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                  (Chapter 25 of Private Affluence and Public Squalor: Social Injustice and Economic Misery In America)

   Pope Francis presents a challenge not just to self-styled GOP Catholics who describe themselves as "conservatives" but to the entire Republican establishment and its supporters and enablers. In February of 2017, for example, the Pope, while ostensibly rebuking Myanmar for its mistreatment of the minority Rohinga population, exhorted Christians "to not raise walls but bridges, to not respond to evil with evil, to overcome evil with good." The pope continued, "A Christian can never say "I'll make you pay for that.' Never! That is not a Christian gesture.'"




    Shortly thereafter, Pope Francis sent a letter of encouragement to the U.S. Regional World Meeting of Popular Movements in Modesto, California. In his letter, the Pope reaffirmed the church's commitment to social justice and deplored tyranny amid the "gutting of democracies." He also condemned leaders who preyed upon "fear, insecurity, quarrels, and even justified indignation, in order to shift the responsibility for all these ills on to a 'non-neighbor" 

     The Pope's challenge is likely to become even more formidable and divisive as the Trump administration announces its effort to dismantle the existing meager social safety net that Americans currently enjoy and the environmental, safety and health policies that were adopted to protect the planet and our collective well-being. The Pope's refusal to embrace waht passes for  conventional wisdom in the U.S. underscores the  chasm between the market values - that have accelerated the growth of inequality and public squalor - and the inability of classical liberal doctrine to address the misery created by its own policy prescriptions.
   


    After the collapse of the Soviet Union, Francis Fukuyama, borrowing a phrase from Hegel, wrote a book entitled The End of History and the Last Man. The work became a cause célèbre among those who are often described in the popular media as "neo-conservatives."

     Fukuyama postulated that the emergence of Western liberal democracy, with its emphasis upon individual rights, limited government and market capitalism, potentially represented  the apogee in the evolution of Western  political philosophy: "What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government."

    Fukuyama's myopia with respect to the breadth and depth of Western political thought also left him oblivious to the older, still vibrant school of Western political discourse - the conservative tradition, as exemplified in Catholic social teaching. That tradition, harkening back to the Greeks and Romans, continues to insist that individuals realize their potential and humanity to the extent to which they participate as full members of a political society - as citizens. The notion of citizenship, based upon mutual obligations and reciprocal rights, remains central to that political philosophy.

     Equally emphatic is the Catholic Church's rejection of those economic doctrines that have elevated the primacy of the markets and capitalism over basic human need. In his encyclical, Mater et Magister, Pope John XXIII emphasized the central role of the state in promoting social justice: "As for the State, its whole raison d'etre is the realization of the common good in the temporal order. It cannot, therefore, hold aloof from economic matters. On the contrary, it must do all in its power to promote the production of a sufficient supply of material goods, 'the use of which is necessary for the practice of virtue.' It has also the duty to protect the rights of all its people, and particularly of its weaker members, the workers, women
and children. It can never be right for the State to shirk its obligation of working actively for the betterment of the condition of the workingman."


    Historically, Catholic social thought has insisted that the state exists to serve the needs of civil society; not as libertarians and classical liberals would have it, to serve only the needs of the individual. As such, the state should not be viewed as a passive instrument, designed merely to protect private property or to protect rights, but that it imposes reciprocal obligations upon each citizen as a member of a political community.

    Thomas Aquinas taught that, because God endowed each man in his own image and likeness, man has become the steward for the earth, and for all of its creatures and its bounty. It is for that reason that Catholic social philosophy to the present remains deeply skeptical about arguments for an unregulated market economy dominated by the profit motive and the accumulation of wealth. As Aquinas observed, "It is lawful for a man to hold private property" but "Man should not consider his outward possessions as his own, but as common to all, so as to share them without hesitation when others are in need ..." Historically , Catholic social doctrine has condemned, in theory if not in practice, aggrandizement and selfishness. Avaritia (greed) and luxuria (extravagance) are counted as two of the Seven Deadly Sins.

     Catholic social thought is essentially communitarian, in contrast to the political philosophy of Speaker Paul Ryan and other eighteenth century liberals who contend that society and the state are abstractions and that only the individual is real. Catholic social thought emphasizes that the state exists to serve the needs of civil society; not as libertarians and classical liberals would have it, to serve only the needs of the individual. As such, the state should not be viewed as a passive instrument, designed merely to protect private property or to protect rights,  but imposes reciprocal obligations upon each citizen as a member of a political community.

     The Spanish philosopher Miguel de Unamuno, echoing the tradition of Catholic social thought and epistemology, countered that the self is the abstraction. He rejected the argument that one's ability to reason and the quality of that reasoning are unique attributes that belong to the solitary self as opposed to the social self. Because of the self's ephemeral nature, the knowledge, customs and habits contained within a given political culture are essential guideposts to properly orient the self to its social self and to other social selves. Which then is the abstraction: the self or society?

    Centuries earlier, it was Edmund Burke, a Catholic sympathizer and an alleged favorite of William Buckley, who observed that political society exists as an historical project into which individuals enter and depart while sharing a common destiny: "...society is indeed, a contract....It is to be looked on with reverence; because it is not a partnership in things...It is a partnership in all science, a partnership in all art, a partnership in every virtue and in all perfection. As the ends of such a partnership cannot be obtained in many generations, it becomes a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born..."

    The U.S. Conference of Catholic Bishops, long before Jorge Mario Bergoglio became pope, issued a guide entitled Sharing Catholic Social Teaching: Challenges and Directions. The bishops insisted that "...[T]he economy must serve people, not the other way around. All workers have a right to productive work, to decent and fair wages, and to safe working conditions. They also have a fundamental right to organize and join unions. People have a right to economic initiative and private property, but these rights have limits. No one is allowed to amass excessive wealth when others lack the basic necessities of life."

    Because the conservative and socialist tradition share somewhat similar critiques about the limitations and deficiencies of liberal political ideology, the hysteria and discomfit of Rush Limbaugh, the Wall Street Journal, Human Events, Forbes, a legion of right-wing Catholic thinkers who defend market capitalism such as Michael Novak to Pope Francis' comments are understandable.


     In his inaugural address on January 30, 1937, Franklin D. Roosevelt spoke of the "millions of families trying to live on incomes so meager that the pall of family disaster hangs over them day by day...I see one third of a nation ill-housed, ill-clad, ill-nourished." Seventy-six years later, Roosevelt's message should still reverberate among all but the most indifferent.

    In October of 2013, the lingering effects of the Great Recession continued to be felt across the country. According to the U.S. Bureau Labor Statistics, the number of unemployed persons, at 11.3 million, and the  unemployment rate, at 7.3 percent, showed little improvement. The number of long-term unemployed (those jobless for 27 weeks or more) was 4.1 million and 8.1 million individuals were working part time because their hours had been cut back or because they were unable to find a full-time job while another 2.3 million persons were described to be marginally attached to the labor force."

    Equally distressing, according to the Census Bureau as of September, 2014, 15.4 percent of people lacked health insurance, which, while down from 15.7 percent in 2011, at 48 million, was not statistically significant. A US Department of Housing and Urban Development report noted there were 663,0000 sheltered and unsheltered homeless nationwide on a single night in January in 2013. Further, the US Department of Agriculture reported last month that 17.4 million U.S. households struggled to get enough food to eat because money and that in more than a third of those households - around one in eight US homes - at least one person did not get enough to eat at some time during the year. Lastly, as of the end of 2012, 46.5 million Americans (15.0 percent of the population) were reported to be still living in poverty. These statistics reflect what Michael Harrington described in the 1960s as, "The Other America."

    What has caused the misery index in the United States to increase so exponentially? The public policies of the Reagan administration and the successor administrations of Bush 41 and Bush 43 expressed the three verities of classical liberal economic orthodoxy (or, at very least, its libertarian strand): deregulation of business, tax cuts for the wealthy, and free trade that would enable businesses to seek the lowest costs for labor and to pay lowest prices for the purchase of goods and commodities anywhere in the world. Each of these policies was sold to a gullible American public on the basis of sonorous platitudes such as "A rising tide lifts all boats." They are the very policies that Pope Francis has identified as the among the root causes of misery throughout the Western world. The net effect of these callous and harmful policies has been to unravel the safety net stitched together by Franklin Roosevelt,  Harry Truman, John Kennedy and Lyndon Johnson.

    An equally important and baffling question is why so many Americans appear to be indifferent to the suffering of their neighbors?  Pope Francis' call for social justice is profoundly conservative, but to the tone deaf, it sounds far too radical. He has reminded all of us that the status quo is no longer acceptable because it is incompatible with human dignity. Those who seek to know the truth of the human condition will acknowledge this basic proposition. By contrast, the clamor and indignation on the right is solely calculated to vindicate the status-quo irrespective of the suffering and misery it has spawned.