Bored by Economics? Read On.

Author: Gary Hart

Economics is boring…until it isn’t. It isn’t boring right now because a lot of trains have rushed into the same station at high speeds and the future of the United States and much of the rest of the world is at stake.

Here are the trains: globalization; aging populations; economic stagnation; health care costs; a military empire; debt and deficits; unemployment; faltering education; and much else. The U.S. economy, with its many commitments to a social safety net, far-flung military deployments and engagements, lower taxes, and financial deregulation, is built on the assumption of continuing and continuous growth and expansion. In the hey-day years, few questioned what would happen if growth didn’t occur. How would we finance all this?

Predictably, when stagnation collided with large-scale commitments politicians reverted to ideology. Raise taxes to pay for all this, or cut spending and rely on corporate wisdom. Except the tax well was poisoned in the age of Reagan and before. And we found out how much wisdom there is in the financial world in the fall of 2008. Further, it seemed to occur to only a few that countries like China and India might be able to take our markets away while we were specializing in manipulating money rather than producing things that people want to buy.

There are many choices and baskets of choices, but two stand out. Revert to a pre-Rooseveltian age of every-person-for-himself. Or, buckle down and convert our debtor-consuming nation into a creditor-producing nation. Problem is, this will not happen in an unfettered, unregulated economy of a million separate corporate decisions and rewards for moving money around. It will only happen when public policy, created by a government many Americans distrust and too many hate, rewards investment, educates and trains the workforce, stimulates innovation and research, controls financial manipulations, and rebuilds our infrastructure.

It would be interesting to know how many of those who claim, knowingly or ignorantly, to want to go back to the age of Coolidge and Hoover would support abandonment of Social Security and Medicare, taking granny back into the home, experiencing permanent high unemployment, substantially increased poverty levels, lowering of life expectancy, and a return to the Grapes of Wrath. This is the result of the end-of-government philosophy (if you want to call it that).

The restore America option includes: recognition that we are in a global, competitive market; recognition that investment in education will not be made by the private sector; much innovation (think jet aircraft, the Internet, and much else) comes from public investment; creating a system of higher education that attracts the best minds in the world; the social safety net, including letting granny live on her own, must be financed by fair and equitable taxes; substantial shrinkage of our vast military deployments; rebuilding the public sector infrastructure; and, finally and most importantly, accepting that we are all in this together.

In some ways this is all about economics. In other ways it is about who we are and who we want to be.

12 Responses to “Bored by Economics? Read On.”

  1. Elisabeth Guerrier Says:

    What a wise and almost obvious text.
    What is at stake is to realize there is no economics without a choice of the ideological frame that support it. We could act as if economics had their own independant life, some theoretical trend brought it up a few decades ago.
    We know know that it doesn’t work without a huge and unbeara

  2. Elisabeth Guerrier Says:

    What a wise and almost obvious text.
    What is at stake is to realize there is no economics without a choice of the ideological frame that supports it. We could act as if economics had their own independant life, some theoretical trend brought it up this way a few decades ago.
    We know now that it doesn’t work without a huge and unbearable price all over the world.
    Economics only follow political choices and the ones you describe seem pretty healthy.

  3. Jeff Says:

    Since there are a wide variation of economic theories, from Friedman to Keynes, this is about philosophical views of present and future America. We are a wealthy country with many challenges. How do we maintain technological, scientific innovation? How to we have an educated populace? How do we provide for the “have nots?” How do have sustainable foreign and domestic policies? What role should the Federal government have in determining energy policy?What is the appropriate level of regulation and oversight (think: Wall Street, banks, food, medicine, worker safety, education, etc.) – are we over-regulated as some claim? The list goes on and on. For every position A, there’s a position B, each with its proponents and critics.

  4. Pat Boice Says:

    Again – excellent! I pass your blog to several friends and sometimes to the editor of our local newspaper. It is astounding that some of my friends – and family – who are intelligent and well-educated, refuse to open their minds enough to even read a blog like this one, as they are committed to ideology to the exclusion of rational discussion. What is wrong with this picture and what can be done about it?

  5. Andy Sturgell Says:

    I would take issue with a number of your assertions in this blog. First, Hoover was not a laissez faire president – quite the contrary. FDR himself campaigned against Hoover on the premise that Hoover was too interventionist – your assertion that Coolidge and Hoover are similar in their governmental methodologies is simply false. One of FDR’s advisors even admitted the following: “When we all burst into Washington … we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself.”

    Second, you seem to believe that the market was largely laissez faire prior to the Roosevelt era. Again, this is false. The Federal Reserve Bank was created in 1913, and was proceeded by many other national or state banks prior to that time. The money supply and interest rates have always been manipulated by government or banks with government laws allowing them to do so. To argue that we’ve *ever* had a free market economy in this country does not comport with history. Also, the US government has always been meddling in economics from day one…examples of this include land grants to railroads, loan guarantees, and tariffs.

    Third, your claim that we’ve been largely deregulated financially is simply false. We’re a very regulated economy – the SEC, Fed, Commerce Department, and many others been around for a long long time, and to take one example, Enron, I think one can see that they simply cannot be a force of good. With respect to Enron, the SEC actually signed off on their accounting practices. This created a huge moral hazard because investors, instead of doing due diligence, relied on government to assure them that Enron’s books were sound. All regulation creates this sort of moral hazard – it gives people the impression that various risks are removed or mitigated and then they act less prudently than they would have had there been no regulation in the first place.

    Third, I’m extremely annoyed that you would make such an absurd statement that “investment in education will not be made by the private sector.” Wow – that’s a loaded statement, and quite a false one was well. I think what you’re saying is that the private sector won’t invest in education that Gary Hart wants – but that’s not the same as education. Education exists to do two things, in my mind…to enrich human understanding of the world, and to provide the workforce with skills so that that might be more productive. Our present government school system might do some of the first point (though in a very politicized way), but is sorely missing the mark on the second point; we can see that this is true by looking at the unemployment and student loan default rates – clearly, there has been malinvestment in education whereby students are not taught skills which satisfy market demands. I believe the problem with our education system as it stands today is that it is largely independent of market forces – with federal guaranteed student loans, a student can borrow virtually any amount of money to study nearly any discipline and Uncle Sam will cosign. This causes a whole lot of negative consequences because there’s absolutely no mechanism repressing “willingness to pay” on the part of the students (which leads to out of control education prices and stagnation on the part of universities) nor a mechanism ensuring that the student is pursuing a course of study that will yield productivity benefit later. One visit to Starbucks to talk to the baristas will tell us that we have way too many students studying things like Psychology, Political Science, Music, Art, Humanities, Literature, and so on – there’s simply not a demand for this many graduates in those areas. On the other hand, areas that are demanded, such as health care, computer science, and so on are often neglected because there’s no bank saying to the student, “Well, before I give you this student loan, I’d like to make sure this is actually a good investment given market conditions – what’s the likelihood you’ll get a job in this field upon graduation?” In the end, students are left with heaps of debt and very little marketable human capital.

    Look, I was a democrat for many years, so I have some understanding of the desire to meddle in the freedoms of others to achieve societal political objectives. But we have to learn the limits of our knowledge – a politician or bureaucrat can’t possibly know what needs to be done with our macroscale economy and further will almost always fail to anticipate unintended consequences of his or her actions. Also, since the world is not a laboratory, we cannot run social experiments in a controlled way – thus, our cause-effect analysis is often flawed in the social “sciences” which drive political decision making.

    Finally, I’ll quote one of my favorite economic historians, Dr. Robert Higgs, who said the following about turning to government for solutions…it may sound extreme to the average Dem but I believe it is philosophically sound: “We need to remember that whenever we resort to government, we’re resorting to the gun, because government backs up every action it takes from the time it collects its taxes to allow it to operate right on down the line of enforcing every one of its rules, with the threat of violence. And all you have to do is continue to resist the government’s dictation and you’ll soon enough find yourself exposed to violence, clapped in prison, or shot dead…the government’s way is the violent way. And in my way of thinking, the private, cooperative way is so much more appealing that it makes no sense to turn to the violent way when we have an alternative available to us.” Government is violence – and even if those who make up the government are well intentioned, it’s still a violent, monopolistic way of promoting objectives…and it will almost always amplify the negative consequences of greed and ignorance by imposing by force its members’ preferences upon the whole of its territory.

  6. Forest Book Says:

    Mr. Sturgell: I urge you, and those who share your views to read the the works of John W. Gardner. He was one of our nations most compassionate, and visionary thinkers; and a Republican. He served our nation working in government. All of his writings are vital to the issues that our nation is facing at this hour.

    This passage is from his work: “Self Renewal : The Individual and the Innovative Society”

    Mr. Gardner writes in the chapter: ‘Attitudes Toward The Future’

    “Onward and Upwards?”

    ‘An individual cannot achieve renewal if he does not believe in the possibility of it. Nor can a society. At all times in history there have been individuals and societies whose attitudes toward the future have been such as to thwart, or at least greatly impede, the processes of renewal.

    There is a readily discernible difference between the society (or individual) that is oriented to the future and the one that is oriented to the past. Some individuals and societies look forward and have the future ever in mind, others are preoccupied with the past and are antiquarian in their interests. The former have a vivid sense of what they are becoming, the latter a vivid sense of what they have been. The former fascinated by the novelty of each day’s experience, the latter have a sense of having seen everything.

    No society is likely to renew itself unless its dominant orientation is to the future.’

    You Mr. Sturgell, and those who share your views appear to be advocating abandoning our principles of Democracy in favor of Corporatocracy. I refuse to abandon my nation, or our principles of Democracy in favor of turning our culture, our lives, over to business in such ways as you illustrate in your writing.

    Our excellence of economic policies, our governance guiding principles can not rule out knowledge workers, creative people or organizations, the craftsperson, the tradesman, the assembly line worker., the plumber, or the food server. We must examine every facet of what defines our society, and utilize it to its fullest advantage. Even our garbage is valuable as a waste asset; challenging us to re-engineering those waste assets into innovations to commerce. Not to burn them in municipal incinerators. No stone, no matter how dirty need left unturned in our pursuit of sustainable commerce. Everyone, and everything is vital to this healthful endeavor of any Democratic culture.

    Its time our nation, these ‘United States’ embraced the intelligence of Public Affairs and Public Policy, Excellence in Governance, Innovative Commerce; and turn our backs on the archaic methodologies of politics and business; which clearly have brought us to this brink. Simply stated: The time has come to prepare the works for a unified national strategy based on the principles of our Democratic ideals.

    The opposite of our Democracy is found in the guiding principles and the appeal of fascism. If any government is, as your Mr. Higgs described, then it is not Democracy. The only people to blame for the cherished principles of Democracy being turned into a buck, or the violence of a police state; are the lazy, greedy, and unimaginative whose sole drive was for self enrichment.

    Remember the words of Trevor-Ropper Mr. Sturgell: “At every moment in history, real alternatives exist.”

    I assert fascism and its counterpart corporatocracy are not alternatives.

  7. Gary Hart Says:

    Mr. Sturgell and I will disagree on a number of things, but history is history. With regard to Herbert Hoover’s role in the Great Depression, for example, I’ll stick with the overwhelming consensus of historians. What we should not disagree about, however, is that the deregulation of financial markets, begun under Clinton, Summers, Rubin, and Greenspan in the name of market freedom (which no less than Greenspan himself has acknowledged was a mistake) and continued throughout the succeeding Bush years, opened the door to packaged high-risk mortgage derivatives offering yields far in excess of more secure bond markets and led directly to the very near collapse of the US banking system. [http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_print.html]
    As to our government using guns against the American people, the principal incidents of this have been our Civil War, the infamous Palmer raids, and the imprisonment of Japanes-American citizens. Beyond that, as the Nixon administration demonstrated, government is capable of eroding our civil liberties in quite a number of ways.

  8. Michael Says:

    I don’t think there’s a question about which direction most Americans would want to move in if they were given a clear-cut choice. The problem is a lack of leadership and a political culture that has been corrupted to its core. Before we will be able to move onto solving core problems and build the kind of society you describe here, we need to get special interest money out of politics. Public financing of campaigns certainly won’t change the minds of those who want to go back to the 1920s, but it would prevent them from muddying the issues and buying legislation, which is largely how we got here.

  9. Paul G Says:

    “We’re all in this together; Reform, Hope and Human Factor … Celtic-style!”

    Reminiscent of a modern Thomas Jefferson’s collection of essays a quarter century ago, Ireland’s poetic philosopher and newly elected president, Michael Higgins, spoke with wisdom and enthusiasm about his vision to restore the republic [excerpt]:

    ”The mandate I have received and for which I will seek with heart and head to implement over the next seven years … a vision of a real republic, where life and language, where ideals and experience have the ring of authenticity, which we need now as we go forward. We leave behind a narrow individualism that valued the person for what was assumed to be their accumulated wealth but neglected the connection between the person, the social, the community and the nation.

    During a long campaign which for me was almost 14 months … I saw and felt and feel the pain of the Irish people … I recognize the need for a reflection on those values and assumptions often carelessly taken that had brought us to such a sorry pass in social and economic terms for which such a high price has been paid and is being paid. I recognize the righteous anger but I also saw the need for healing and to move past recrimination.’

    Now we must respond collectively and cooperatively to what we all must recognize as our shared problems be it unemployment, mortgage distress or any form of exclusion. We must now work to our strengths at home and abroad, not only cooperatively and collectively but sustainably for the benefit of all of our present generations and those to come.

    The necessary transformation of which I speak, and of which my presidency will be a part, is built on turning creative possibilities into living realities for all our people. And I believe – and this is the wonderful thing about going around the country so often – I believe and recognize that that transformation has already begun.”

    Please click link for the full 7 minutes speech. “Granny” would be proud!

    http://www.3quarksdaily.com/3quarksdaily/2011/10/president-elect-michael-d-higgins-acceptance-speech.html

  10. Paul G Says:

    11.11.11

    May the better angels of our nature help us transcend our natural instinct to put others down to raise ourselves up; to move us from ignorance to knowledge; from greed to kindness; from emotion to reason; from hate to love; and, to truly honor the sacrifice of our war dead for us by constantly moving ourselves from war to peace.

  11. Jeff Rudisill Says:

    Sorry to be late to the party, but the economics issue is the “final” discrimination to resolve for humans. Though the others discriminations are with us constantly, we have evolved to recognize them for the impedance they are to a just and peaceful society. Not so with economic discrimination.

    We live with a 500+ year old economic system that no longer serves us. I find Senator Hart’s comments, and other posts stimulating and uplifting, but a bit short on the action end. Reestablishing the controls put into place by Glass-Steagall won’t suffice. It is time that the people of the US Controlled the monetary system. It is time that the function of the Federal Reserve be placed under a fourth branch of Government and governed by seven (nominally) governors appointed by the POTUS, much as Supreme Court Justices are appointed. This would maintain the alleged political insulation of the Fed, and, if Banksters ONLY have a proportional voice to the populace, would be able to serve the needs of the US economy instead of the needs of the financial industry. Mr. Sturgell points out (correctly) the the Fed has been with us since 1913, but fails to mention that until 1932, it was run by the banking industry. It hasn’t changed much with Timothy Geithner’s admonition of “Do no harm” (to the financial industry).

    Along with this change, and perhaps instead of it, the US Treasury needs to issue money and spend it into circulation, instead of borrowing money from the 1% of the 1%. This would finance education, infrastructure, healthcare, and research. Lincoln won the “War Between the States” with Greenbacks; we can win the “War Between the Haves and Havenots” the same way. Stop treating money as a commodity and use it to exchange value. Ask yourself, what has true value?

  12. Tom Flaherty Says:

    Paul

    You are as eloquent as man can be. Thank goodness the good out-number the bad. We will accend.

    Jeff your not late to the game and I agree we need to end the status quo. It sounds asif you .y have read Ellen Browns work. Greenbacks with the intrest strengthening the country not slaving it. In the name of do no harm the money should have at least been injected at the bottom not the aformentioned 1%. If it had we might look more finacially like a peramid (structually sound and stalble than a top). Do you remember the Oboma campain promise of bottom up police?

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