A War of a Different Sort

In the May edition of Vanity Fair, Joseph Stiglitz [economist and professor at Columbia University and recipient of the Nobel prize in economic sciences, 2001] wrote a prescient essay entitled, “Of the 1%, For the 1% and By the 1%.”

In a strange way, the piece voiced what would months later become the rallying cry of the Occupy Wall Street Movement, a foreshadowing of the public’s growing discontent with high unemployment, rising poverty and income disparity as well as the social damage resulting from Government failure to address the problems: the distortion it creates, how income disparities breed a climate of imbalance and lack of restraint, encouraging:

. . . no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining.

In addition, Stiglitz underscored how inequality erodes our national identity–the sense of fairness, equal opportunity, our sense of community–the very elements we consider American staples.  In fact, while listening to the GOPs’ endless political debates these past months, I’ve felt like a stranger in a strange land.  Abandon child labor laws?  Let the uninsured die?  Begin massive deportations?

Really?

In any case, Stiglitz was the first to sound the warning in clear, concise and effective prose.

Which is why I found Stiglitz’s recent VF piece, ‘The Book of Jobs,’ required reading.  Great title, btw.  Even better is the comparison made between the Great Depression of the 1930s and the present downturn.  Or as Stiglitz refers to our current dilemma: the Great Slump.  An interesting aside, Paul Krugman pulled out all the stops over the weekend and called our economic crisis a depression, period.  Hardly a surprise for the underwater homeowner, the long-term unemployed or those juggling multiple part-time positions to make ends meet.

I’d encourage readers to take a few minutes and read Stiglitz’s recent essay. It’s amazingly concise and clear, even for non-economic types [like myself]. But here’s the gist: Ben Bernanke, a self-proclaimed scholar of the Great Depression, turned on the money spigots in response to the 2008-2009 meltdown because traditional wisdom said the Great Depression was the result of excessive money tightening by the Federal Reserve. So, doing the opposite would be the charm, right?

Not quite.  As Stiglitz notes, this time we have proof that monetary manipulations were neither the cause nor the answer.

Why?

Because despite the flood of money, we’re still in the crapper.  Consider this an Advanced Economics Lab experiment, playing out before your eyes.

So what is the root problem?

The economy itself, Stiglitz contends, a structural dislocation, a weak economy disguised by whopping bubbles in the real estate and financial markets, the easy, even crazy availability of credit, but basically a shift in the jobs we have to the jobs we need.

This is eerily similar to the precursor of the Great Depression.  Then, massive unemployment resulted as the country moved from agriculture to industry. The cause?  Increased agricultural productivity.  What was once done by 20% of the population would be accomplished [with surplus] by 2%.  Currently, the economy is moving from industry to service.  Again, this shift has been provoked by increased productivity.

What is old is new again. With a twist, of course: the impact of globalization.

Industry to service? you say.  Most Americans wince at the prospect of ‘service’ jobs—low skills, lower pay, 8 hours of mindless burger flipping.

Not really.

For instance, addressing our energy needs alone will require an abundance of high tech skills [and commensurate wages] to develop cleaner, more efficient fuels.  Support of basic research work is critical in this and other areas and leads to increased innovation and economic growth. Examples are plentiful—research produced the Internet and biotech industry, spawning huge upticks in economic growth.  And this is something Americans excel at—thinking outside the box.  Education will be required to retrain the work force and prepare and encourage our children with requisite skills and creative know how.  In addition, infrastructure, a growing national concern, offers years of labor for out-of-work construction crews.  We certainly don’t need an American version of ‘London Bridge is falling down.’  The Minneapolis bridge collapse in March was one too many.

Yes, Stiglitz says, we will need to rein in the banks, turn them back into the boring businesses they once were [they’re suppose to be serving us, not the other way around]. And we will need to seriously re-evaluate our tax policies, most of which favor the rich.  But to solve the most critical problem—structural change—will require investing in our future, our own people.  Private enterprise will not and cannot do that on a massive scale [I can hear Republicans wailing in unison].

FDR had World War II, spurring the necessary investment [spending] that launched the US into an unparalleled cycle of growth and prosperity.  We are now faced with another war, a battle of ideology and political one-upmanship.  Yet the solutions are real and within our grasp, Stiglitz suggests.  I, for one, believe him.

Now it’s a matter of mustering the national will.  We employed that fierce will during the Second World War; our survival and ultimate victory depended on it.

As it does once again.