Art Pearl Against the World, The Mess We Are In. Part 2: Can conservative economic policies cure our economic problems?

These problems are:

1. High unemployment, high underemployment, too many of the existing jobs are part time and low pay. The deep recession wiped out primarily high-wage and middle-wage jobs. Yet the strongest employment growth during the sluggish recovery has been in low-wage work, at places like strip malls    and fast-food restaurants.
2. “Outsourcing,” shipping of high wage, good benefits jobs to areas where wages are very low and neither environmental nor worker safety measures exist.

"Steve Jobs real name was: Steve Jobs in China. Apple, whose founder was Jobs, employs 550,000 workers, 500,000 work in China." (Art Pearl, speech, Victoria University, Melboure, Australia, April 2012).

3.      The impact of technology - machines replacing human workers

Many people fear a jobless future — and their anxiety is not unwarranted: Gartner, an information technology research and advisory firm, predicts that one-third of jobs will be replaced by software, robots, and smart machines by 2025.

Kathleen Elkins, Experts predict robots will take over 30% of our jobs by 2025 — and white-collar jobs aren't immune. (Business Insider, May 1, 2015).

4.      Widespread inequity wage income and wealth -- the rich get richer, everyone else become    poorer

. . . Our data show that the bottom half of the income distribution in the US has been completely shut off from economic growth since maybe the 1970s. From 1980 to 2014, average national income per adult grew by 61% in the US, yet the average pre-tax income of the bottom 50% of individual income earners stagnated at about $16,000 per adult after adjusting for inflation.

In contrast, income skyrocketed at the top of the income distribution, rising 121% for the top 10%, 205% for the top 1%, and 636% for the top 0.001. (Thomas Piketty, Emmanuel Saez, Gabriel Zucman, Inequality in the US: A Tale of Two Countries, Naked Capitalism March 31, 2017).

This blog deals with the “free market” unregulated, Republican economists treatment of the economic challenge

The Republican economists see cutting taxes, reducing interest rates and reducing government as the solution to all economic problems, actually all problems. Their logic of how cutting taxes and lowering interest would reduce high unemployment as well as the current high underemployment and the part time and low pay is that money would be freed up and that money would bring about increased aggregate consumer demand and that demand would result in the creation of new jobs.

Also, Employers would use their tax cuts to enhance factories, open businesses, etc. The problem with this “solution” to depressions and a recession as strong as the one beginning in 2007 is that tax cuts have very little effect on the job market. The cuts to the moderate income tax were used by those in them lower 80% to repay debt and initiate saving. Employers, who benefited from much bigger cuts had no reason to add workers because of very limited increase in consumer demand. The tax cuts had another consequence less money available for government workers, some of whom jobs were cut, others suffered wage reductions. Thus we have the story of a lack luster post recession recovery. Ten years after the recession, still way too high unemployment, fewer working than before downturn, and the jobs that have been created are mostly minimum wage jobs, few of the good jobs lost have been replaced.

How did the small government, low taxes economists handle “outsourcing,” the shipping of high wage, good benefits jobs to areas where wages are very low and neither environmental nor worker safety measures exist? They didn’t simply because that was not their concern. Profit was their concern and the policies they supported were directed towards profit.

Isn’t a “rising tide lifts all ships?” one of the mantras of monetary economists – the ones that supported the economic policies of George W. Bush. Yes, but not acknowledged “except for those anchored to the bottom.” The dramatic shift in distribution of wealth, the direct consequence of economic policies that emphasize low tax rates, various ways that allow the wealthy to pay little or no taxes, and commitment to small government, particularly small when responsible for health, education, welfare and even infrastructure repair, however, not small when police, prisons and the military are considered, has resulted in an ever larger proportion of the population anchored to the bottom,

Because wealth and power are so strongly connected. The use of concentrated power to crush trade unions, destroyed one avenue for wealth redistribution.

. . . The bottom half of the income distribution in the US has been completely shut off from economic growth since maybe the 1970s (Piketty, et al above).

Prior to his inauguration Donald Trump seemingly took effective action in support of his campaign pledge that he would end “outsourcing.”

Trump reaches deal with Carrier to stop factory jobs from moving to Mexico (The Associated Press November 30, 2016).

He apparently convinced Carrier to not move to Mexico. However that “deal” came with promises of huge tax holidays, the lost revenues would cost as much in lost public sector jobs as would be gained in the non move. However, as wages in factory employment slumped in the US and the promise of no environment protection the lure of outsourcing vanishes.
Keeping low paying jobs in also the US is no biggie!

The critical issue for the economy is the distribution of wealth that has distorted the economy but has also made possible the ever greater concentration of power. It is concentration of power that defines fascism not concentration of wealth.

Widespread inequity wage oncome and wealth - the rich get richer, the superrich very much richer, everyone else become poorer is the result of policies that embrace their principles.. Not only is this not a problem for conservative economists according to Thomas Pikkety and his co-authors it is the low tax, small government, anti-union policies that have caused the inequality problems.

“the stagnation of bottom 50 percent of incomes and the upsurge in the top 1 percent coincided with drastically reduced progressive taxation, widespread deregulation of industries and services, particularly the financial services industry, weakened unions, and an eroding minimum wage (Thomas Piketty, Emmanuel Saez, Gabriel Zucman, Inequality in the US: A Tale of Two Countries, Naked Capitalism March 31, 2017).

All of which are part of the game plan of conservative economists.

No economist exemplifies faith in the market, and belief in the salubrious effects of low taxes and small government than Nobel laurate Milton Friedman; The problem in this world is to avoid concentration of power.

But that is exactly what we got with policies that concentrated wealth. Concentrated wealth and concentrated power go hand in hand. Throughout the history of capitalism in the United States, the wealthy found ways to concentrate power. Even as far back as 1895 when Mark Hanna was campaign manager for William Mc Kinley in the 1896 presidential race.

“There are two things that are important in politics. The first is money and I can’t remember what the second one is”
(Mark Hanna, 1895).

Friedman as expected doesn’t like either taxes nor government. But he recognizes the necessity of taxes and government, Unfortunately what he likes in government has led directly to what we have - government of the wealthy, by the wealthy, for the wealt

There's a sense in which all taxes are antagonistic to free enterprise … and yet we need taxes. We have to recognize that we must not hope for a Utopia that is unattainable. I would like to see a great deal less government activity than we have now, but I do not believe that we can have a situation in which we don't need government at all. We do need to provide for certain essential government functions — the national defense function, the police function, preserving law and order, maintain a judiciary. So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago (Milton Friedman, as quoted in Times Herald, Norristown, Pennsylvania (1 December 1978).

The government functions the way Friedman likes, the police and the military, are precisely those functions that make fascism, fascism. Incarceration in the United States is seven times greater than 30 years ago. The military budget largest by far in the world and President Trump wants to give it an additional 54 billion. The military has involved us in the longest war in our history against nations that did not attack us. There is no end to those wars in sight and there is real danger that the wars will be expanded and enlarged . The wars serve multiple purposes, they contribute signficantly to the wealth and power of the 1%. The wars are major destroyers of the environment. And most ominous of all the wars are used to justify the shredding the bill of Rights and every other vestige of democracy.

Adam Smith, the 18th Century moral philosopher, largely credited with inventing economics, The Wealth of Nations, in 1776, had a better sense of the inevitable ugliness of capitalism than did Milton Friedman.

. . . But the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot perhaps be corrected, may very easily be prevented from disturbing the tranquility of anybody but themselves
(Adam Smith, The Wealth of Nations (1776) vol. 11, bk. iv, ch. 7 (cf. napoleon, c. 1795)).

The merchants and manufacturers of Smith’s time pale to insignificance in “mean rapacity” when compared to the mega sized corporations of today. And nothing today is big enough or dedicated enough to prevent them “from disturbing the tranquility” of almost everybody.

So what can we conclude?

There is absolutely no, nodda, zilch, chance for a” free market” economics approach to get us out of the economic mess. It was an unregulated economy that got us into the mess and continuing with it as the dominant economic activity can only make things worse.

Those who profit from it will continue to support it and they will spend millions trying to convince the victims of such economic policy to support it.

In the pages ahead democracy as an alternative to unregulated economics is presented.

If the conservative approach to the crisis won’t get us out of the economic mess is there hope in the liberal approach, or in the Populism of Bernie Sanders? The next blog addresses what can be expected from economists associated with the Democratic Party.