Belaboring the Obvious

Monday, August 02, 2010

The conundrum of which few are willing to speak...

... is still with us, and will not be resolved until we make some fundamental reassessments of our obsession with so-called "free market" economics.

The conundrum of which I speak is the impossibility of creating a sustainable economy within the economic and political ground rules of today, in part because those operative ground rules are both justified by and are perversions of the nearly 250-year-old ideas of the two prominent philosophers of political economy of the United Kingdom, Adam Smith and David Ricardo. Both believed that markets were self-correcting, and that government interference in markets inevitably led to economic stagnation.

However, these views were informed by the position (held much more by Smith than Ricardo) that unlimited economic growth was both desirable and possible, and yet, we understand today that growth has built-in liabilities, which modern economists choose to call, in morally neutral fashion, "externalities," and that those liabilities are often unequally distributed in domestic society, as well as being unequally distributed among nations.

This problem is most evident when examining a world economy driven largely by petroleum energy. Perhaps the first and most obvious liability is that nations will inevitably and invariably compete for disproportionate shares of that resource, seeking to fuel economic growth through control of that resource, rather than simply seeking access to it through the markets, often through the use of military and economic power and war. The object of that control is as much to deny other nations access to the resource as it is to ensure the continuing supply to the nation carrying out such wars. The second liability is one unimagined by Smith and Ricardo, that the use of an economically beneficial resource is itself a threat to civilized society and the entire world, as global warming research now suggests. A third liability is the unequal distribution of economic benefit and liability itself in the production, transportation and use of petroleum. The ordinary inhabitant of the Niger Delta of Nigeria or of the Ecuadoran Amazon disproportionately bears the brunt of the liabilities associated with petroleum production without sharing proportionally in its economic gains.

For good and ill, governments inevitably intrude into markets and they do so due to competing interests within nations and among nations, and the great fallacy promoted by the right wing in this country (along with right-wingers in a few other nations) is that we would all be better off were government to leave business alone. As recent events have shown, nothing is further than the truth. First, much of the federal government exists to serve the business community, not the other way around. "The business of America is business," said that scion of laissez faire economics, Calvin Coolidge. For example, the statistics compiled regularly by the federal government are not used primarily by ordinary citizens, but, rather, by business economists and analysts, the USDA to an increasingly large degree works as an interface between the farmer and big agribusiness, and much of the research funded by the CDC and the NIH ultimately benefits the large pharmaceutical firms headquartered both here and abroad. The Pentagon, ever since 1950, has served as a subsidizer of contractor defense aerospace firms, and now, more recently, to those firms' subsidiaries in the intelligence/surveillance and war logistic support fields. The economic power of the Treasury has most recently saved the butts of big Wall Street banks from a retribution they richly deserved because of their lack of restraint and gross speculation with the money of others.

Second, what right-wingers mostly deride as government interference are those policies which marginally limit the corporate profits extracted by exploitation of the commonwealth and which in very meager ways put limits on the upward movement and concentration of wealth.

Therein lies a notable part of the problem--this decades-long insistence on so-called "trickle-down" economics requires genuinely huge rates of growth to have a positive effect on the economic life of the ordinary worker, since so much of the value of that growth is retained by the very few in society, and increasingly, as the graph shows, most of the last thirty years' productivity gains have been retained by the very wealthy in society. The wealthy will continue to demand greater growth in order to increase wealth, and the worker will, too, in the hope of even small increases in economic security, even if at the margins.

As noted above, much of that growth is tied to the burning of oil and coal, since density of energy use is intimately associated with economic expansion, and is a major contributor to global warming, which is, in turn, a direct factor in the unsustainability of the current economic model.

I don't think much of this is all that controversial, but, the notion that some huge structural change will be necessary to achieve sustainability remains at the ragged edge of economic and political thinking. Right now, the dominant model at work in U.S. government is an attempt to achieve stability by returning the economy to the status quo. Virtually every attempt to right the sinking ship of the economy has been directed at protecting the most politically and economically powerful entities in the country since, in traditional terms, they are the "engines of the economy."

They continue to be seen as such, even though they've become much less so in the last sixty years or so. The big Wall Street investment firms are doing much less in the way of traditional investment and are engaging in much more short-term, high-risk speculative ventures--raking off money from the "real" economy on which to provide a foundation for more debt-based schemes which prompted the recent meltdown. The Fortune 500 were responsible for nearly 25% of the nations jobs in the 1950s, but now account for about 7%.

Making the situation much, much worse is that these wealthy individuals and corporations are increasingly using their economic power to influence legislation to their advantage through campaign contributions and lobbying, mostly in the effort to reduce tax liability. That has to be the explanation for the results of the recent GAO study which indicated that in the years studied, 94% of the country's corporations paid an effective tax rate of 5% or less, and fully 60% of those corporations paid no taxes at all.

All this flies in the face of Adam Smith's dictum that at least some of the wealth accrued must be used to sustain the infrastructure which enables the wealth of the nation. More importantly, when those external costs begin to overwhelm the nation, and the corporate and individually wealthy are unwilling to assume some of those costs, the infrastructure begins to decay. If the impulse of the "engines of the economy" is then to make the situation worse through exercise of political power, in the expectation of increasing wealth by the greater avoidance of those external costs, the rate of decay can only increase.

We see that decay in ways that aren't always apparent as a diminution of economic strength or as a permanent loss of the commonwealth. For example, the country is littered with Superfund sites due principally to environmentally unsound manufacturing and mining practices, and rather than accepting those external obligations, the corporate community during the Bush administration successfully sought to upend the principle that the polluter pays and to transfer the clean-up costs to the taxpayers and/or slow down clean-up efforts, and in this age of demand for deficit reduction, Superfund clean-ups will become a back-burner item, so the external costs will probably increase over time due to adverse health and welfare issues.

We see the same impulse in the BP disaster in the Gulf of Mexico. BP has expended huge sums on lobbying and public relations to both shape public opinion and to limit its liability for its actions. The latest news reports that "the oil is gone," prompted by both government and corporate sources, are examples of this determined effort to evade the external costs of maintaining a rotting status quo.

Which brings me to that sticky matter of sustainability. Sustainability, by definition, requires not only a complete accounting of those external costs, but, as well, their elimination. Eliminating those external costs will require changes that a system built upon protecting the wealthy from their own excesses cannot tolerate. The very entities that traditionally have been designated as "the engines of the economy" are the major dead weights in the climb toward sustainability and may well constitute threats to the survival of the nation and its people, not to mention the rest of the world, because their profitability may be compromised.

We're going to have to rethink a great many things that we do without thinking much about them if we're going to last, as a nation and a species. We are, at this moment, living out Thomas Jefferson's worst nightmare:

“There artificial aristocracy founded on wealth and birth, without either virtue or talents.... The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendancy.”

That artificial aristocracy is now real, not ascendant so much as realized and supreme, and has much more political power than the rest of us, and its political power is directed toward protecting and increasing its wealth and power. Unless that power is blunted, there's no genuine hope for a sustainable, equitable and egalitarian society. Very possibly, we're on the cusp of a precipitous decline the effects of which the wealthy, for a few generations at best, may be able to use their wealth to personally stave off. Eventually, Monsanto's drive toward oil-derived chemically-dependent monocultures may well starve the rich as well as the poor. BP's evasion of its responsibilities to people and planet may well destroy more seas and marine life and livelihoods, leaving rich and poor alike destitute. Lockheed-Martin's lobbying for more weapons production will only increase its profits until the society funding its production collapses, since it's become wholly dependent on taxpayer money for its survival.

We spend trillions on war, trillions more on arms and the standing army, and our government wages a continuing assault on the civil and human rights of its own citizens and others, all to protect a system that is destined to fail because of the flaws introduced into it by the moneyed aristocracy. We imprison more of our citizens than any other country in the world in large part to support the profits of companies which have taken over the state function of incarceration via the specious process of privatization. We create criminals to keep that part of the system going. We tolerate the wholesale destruction of our livelihoods to protect the wealth of the few. Our legislators subsidize corporations which offshore jobs with taxpayer dollars.

The nation's governance has been completely captured by those with the most economic and political power and we, in turn, have been rendered virtually powerless to influence either current events or our futures, in very large part because wealth accumulation is now the country's dominant religion among the movers and shakers in society.

The essential quality of tragedy is the inevitability of a fall from grace, that the qualities which bring the protagonist to the pinnacle of prominence are the same ones which ensure his downfall. Shakespeare would have understood well our dogged, perverse furtherance of a system which reveres the power and wealth of the few at the expense of the survival of all.


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