Unless you’re quite wealthy, you probably feel an economic pinch— a job that’s not keeping pace, a fair amount of debt, insecurity about Social Security. The economic priorities of the Bush administration and Congress are fairly plain to see; the road to fiscal propriety in a more progressive America is not rocket science— it comes down to priorities and discipline. I’m happy to speak with two guests today who have decades of combined experience watching the economy, the media, and the rest of the factors that support it. My two guests for this interview about progressive economics are the experienced Jared Bernstein, Ph.D. (J.B.) and, the venerable Professor Edward Herman (E.H.). I am represented by the letter “M”.
M: Progressive economics is an important concept to me; I think the way the country is being stewarded by those who hold the power are extraordinarily important. You read about Walmart trying to squeeze its workers a little bit more in the paper on this day, the national debt on that day, the trade deficit in the paper yet another. Then tax cuts, then it’s the minimum wage not keeping pace with inflation. For those who follow it, it seems ceaseless and unsettling. Conditions are as bad for the middle class as they have ever been – or worse.
“There’s enough on this planet for everyone’s needs, but not for everyone’s greed.” ~ Mohandas Gandhi
…I came across a book three or four months ago. It’s a short read, and only cost $12. It’s got a nice cover and it’s extraordinarily-endorsed— it’s entitled All Together Now: Common Sense For A Fair Economy. On the front, it has an endorsement by former Senator John Edwards, it’s got Barbara Ehrenreich on the back, Robert Reich, EJ Dionne – I couldn’t think of better endorsers if I were trying to impress someone (well, John Edwards’s chicanery aside).
It is written by Jared Bernstein. He earned his Ph.D. in social welfare from Columbia University; he is a senior economist and director of the Living Standards Program at the Economic Policy Institute in Washington, D.C. He is the author of the last seven editions of the State of Working America, as well as The Benefits Of Full Employment: When Markets Work For People. He is a contributor to The American Prospect. The book is very well laid out; it doesn’t use a lot of jargon or anything like that. Here are a few examples of some of the intriguing claims/opinions one will find in All Together Now: Common Sense for a Fair Economy.
“With a strong economy and soaring productivity, we ought to have access to reliable healthcare, more confidence in our ability to get our kids to good public schools, and a greater sense that if we play by the rules, things will fall our way more often than not.” ~ Jared Bernstein
That’s an apt quote on progressive economics. He also wrote:
“Economics, once an elegant and principled set of ideas, dedicated to shaping economic outcomes to the betterment of society, has been reduced to a restrictive set of ideology- inspired set of rules devoted to an explanation of why we cannot take the necessary steps to meet the challenges we face.” ~ Jared Bernstein
Dr. Bernstein not only analyzes, in an elegant and astute way, what is going on nowadays with the economic priorities of the Administration, but also lays out a plan for how we can make improvements and come together as a people. So, without further ado, I’d like to welcome Dr. Jared Bernstein.
JB: Hello, thank you for having me on.
M: Sure! Would it be okay if I called you Jared?
JB: Of course. It sounds like you’ve read the book…
M: Indeed. For someone like me who doesn’t know much about economics at a theoretical level – I don’t even do my own taxes! – it’s great to be able to see some of the ideas laid out in ways not too jargon-laden. You kind of just tell it like it is, in layman’s terms. Is that what you were going for?
JB: Absolutely, and I was actually trying to riff off of Thomas Paine’s pamphlet back in 1776 called Common Sense, wherein he tried to muster a set of critical but intuitive arguments as to why it would be in the interests of America to do something very different. I’m trying to muster a set of credible arguments vis-à-vis economic policy, which I judge to be very much off track. I offer what I hope is a useful analysis as to how we got here. I introduce this concept of “YOYO Economics,” and then try to suggest a different set of approaches to the challenges we face.
M: Yes, indeed, you have a website that is dedicated to this book, www.noyoyoeconomics.com. It is an acronym, and kind of a play on words, right? How do you describe what that stands for?
“The economic owning class is always the political ruling class.” ~ Eugene V. Debs
JB: It stands for “You’re On Your Own.” The idea is that the economic policies of the last few decades – be they Republican or Democrat (this is largely a nonpartisan argument) – have for the most part emphasized individual action and solutions to the biggest economic challenges we face. So, for example, if you look at healthcare – and I’m going to go partisan here! – if you look at the health care plans offered by the Bush Administration, they refer to something called “health savings accounts” – supposedly designed to make citizens better healthcare consumers. The idea is, “Here is a tax cut, and a private account and a little bit of a slap on the back and you’re out there in the market, fending for yourself.” The rationale is that government can create better, more cost-conscious consumers if it can tap the forces of the marketplace to generate savings. I show in the book that all this does is shift risk to individuals that would be much better shared amongst large groups of people…
…It’s a theme I’ve seen in Social Security; I’ve seen it in terms of inequality, in globalization, in health care, in unemployment – in practically every aspect of social policy. I document the shift to “You’re On Your Own” economics as similar to a more collaborative, “We’re In This Together” (a WITT agenda), which pushes back the other way and taps the efficiencies of pooling risks and approaching these large problems as a group of concerned citizens – as opposed to each of us on our own, trying to fend for ourselves.
M: I see. You noted that it’s primarily a bipartisan phenomenon – that Bill Clinton as president didn’t really enact policies (or maybe, facilitate policies would be better phraseology) that were in line with what you’re suggesting. Do I have that correct?
“It is not acceptable that the 6 largest financial institutions in this country have assets of almost 10 trillion dollars, and issue half of the mortgages and two-thirds of the credit cards. That is too much wealth and power in the hands of a few. If Teddy Roosevelt were alive today he’d tell us to ‘break them up.’ And he’d be right.” ~ Bernie Sanders
JB: Well, Bill Clinton was one guy – a very powerful guy – and he actually tried to do some good stuff in this regard, but he was derailed in part because of his inability to truly focus on what was needed, and in part because he was dealing with a very partisan Congress. What I tried to do was to point to the things that President Clinton did that were very much in “the WITT spirit.” For example, Clinton implemented tax changes that were progressive, such as increased tax credits for low-income people who were working, and worked to pass an increase in the minimum wage (I was working for the Administration at the time, and Clinton himself was brought along pretty much kicking and screaming on that one!)…
…On the other hand, if you look at healthcare reform, it was never really set up in such a way as to, in a straightforward manner, go from the dysfunctional, currently-unwinding system that we have with employer-provided coverage to universal-access. Bill Clinton tried, and again, the political exigencies, I think, pushed him in this direction. It’s not necessarily his fault; but, there was a lack of leadership in my view regarding a much more universal approach that would have been a simpler, easier to understand, easier to implement approach – one that is embraced by every other advanced economy.
M: Let me ask you this: I read a book by Howard Dean that is similar to yours – very manageable and very quotable; it’s called You Have the Power. In it, he said about Clinton:
“In retrospect, I see that it was incredibly shortsighted to believe that globalizing the advantages of world trade for multi-national corporations without globalizing protections for workers’ rights and the environment would lead to sustainable economic benefits for workers in the United States or anywhere else.” ~ Howard Dean (with Judith Warner)
JB: Yeah, I agree with Howard on that point and I should have mentioned it; Clinton was convinced, I think, that the type of “free trade” he pushed very hard for was the way forward. In fact, there was a pretty calculated decision early on that they would try to go for the North American Free Trade Agreement (NAFTA) first, and a better healthcare program second, and they spent so much – squandered – political capital on NAFTA that it turned out to be a very, um, “un-useful” piece of trade legislation. They squandered so much political capital on people who should have been their friends – the Democrats – and not to mention lost the Congress in 1994 – that he wasn’t able to implement a better healthcare plan…
…Clinton’s view of globalization is very much a YOYO view, which basically says, “This is great, it’s the way forward, and if you want to prevail in a new, globalized economy, then it’s up to you to get more education and you’ll be fine” – completely ignoring the fact that lots of folks who were (and are) hit pretty hard by these trends have high levels of skills. Many sectors of our economy have really been hit hard by our lack of competitiveness in world markets – which trade agreements have not helped at all. To the contrary, I think they exacerbated that problem. I will, say, however, that I think globalization is a very powerful macroeconomic force; it does lead to lower prices and lower interest rates, and that’s really important in an economy like ours. However, you can’t ignore the costs, and Clinton, I think, was guilty of that charge.
“It was natural and perhaps human that the privileged princes of these new economic dynasties, thirsting for power, reached out for control over government itself. They created a new despotism and wrapped it in the robes of legal sanction. In its service, new mercenaries sought to regiment the people, their labor, and their property.” ~ Franklin D. Roosevelt
M: How about his so-called “welfare reform”; I think he got some cooperation from Republicans on that… Did that turn out well?
JB: Oh, man, that’s not a simple question. I think Clinton had, in some ways, the right idea; he recognized that this was a very divisive program because, basically, you can’t sustain a program where one person can stay home and get benefits while they take care of their kids while somebody else across the hall can’t. Just the politics of that will never fly, and so the program was going to implode due to its own political contradictions. So Clinton got in there and tried to implement a change that was, in some ways, going to help people move from welfare to work. I mean, he increased the Earned-Income Tax Credit considerably; it went from probably in today’s dollars $1,500-$2,000 being the maximum benefit, and now it’s probably $4,500. So that was a huge expansion of this tax credit for low income, working families. Clinton, as I said, presided over an increase in the minimum wage…
“As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies while the citizen is struggling far in the rear –or is trampled to death beneath an iron heel. Corporations, which should be carefully-constrained creatures of the law and the servants of the people, are fast-becoming the people’s masters.” ~ Grover Cleveland
…I think after welfare reform we were probably spending more per case on helping folks move from welfare roles into the job market. That said, there is a group – I know it’s a minority – but there’s a group of low-wage, disadvantaged folks a lot worse off than they were before. So, it’s a complicated thing; I think probably more poor women got ahead during that period than fell behind; I’m sure that’s true. In fact, the poverty rate among single moms fell pretty steeply, but part of that was actually because we had a very solidly-booming labor market over the period and that was a lucky component of this thing. Note: By disadvantaged, I’m not talking about, say, race or gender; I’m talking about all kinds of problems having to do with medical care, the ability to get good childcare, maybe violence in the home, folks with drug issues – you know, people with multiple problems that welfare reform left behind.
“One of the lessons of the last few decades is that a rising tide does not necessarily lift all boats.” ~ Douglas Elmendorf
M: It has been said that liberal presidents and members of Congress do better with the economy than conservatives, by and large. It is claimed – not without some evidence, perhaps – that they are more likely to “throw money” at government programs that don’t work as was hoped (or have unintended consequences). They have also been criticized for offending working class whites. It is claimed that tax rates are too high under a Democrat, but Joseph Stiglitz notes that “…many countries in Europe have succeeded because of, not despite, high tax rates….”
…Fiscal conservatives, on the other hand, have relied on supply-side economics for quite some time now, and that philosophy put into practice doesn’t seem to function as it has been sold to the American people. In other words, the economy benefits the rich – deficits be damned. You have militaristic adventurism. “Starve the beast” is the worst example of this kind of bad faith plutocracy. And then pork and lobbying and such affects all Congressional representatives…
…You have noted that “when Democrats are in charge, the poor rip the government off, and when Republicans control it, the rich do the thievery. Either way, middle-class folks are left holding the bag. They want a level playing field and the opportunity to achieve.”…
“With corporate power increasing as labor declines, and with upper-middle-class suburban-based economic power firmly entrenched, the politics of the twenty-first century will be very different from that which many Americans once took for granted.” ~ Gar Alperovitz
…That reminds me of another Joseph Stiglitz quote: “The global financial crisis signals the failure of American-style capitalism. The worldwide financial system only worked because of repeated government bailouts and markets that have been saved from their failures to allocate risk.”
…There were nearly $85,000,000,000 in bonuses handed out on Wall Street in 2006-08. This obviously caused an outrage because taxpayers were the backstop. It also bred the Tea Party because it was a glaring example of crony capitalism.
…One question is: Was Wall Street any greedier in the run-up to the massive financial disaster, or was it just “greed as usual”? What was it the public was pissed about? One answer could be that they didn’t like seeing greed and recklessness rewarded on their dime. However, as Michael J. Sandel put it: “The American public’s real objection to the bonuses – and the bailout – is not that they reward greed but that they reward failure. …the idea that people deserve the rewards that success bestows is central to the American dream” (emphasis added).
…I think that is probably true; the taxpayers (especially libertarians) resented the fact that banks win in good times and they don’t lose in bad times (ironically, times mostly brought about by their own wanton behavior [yes, included in that is the legal bribery of elected officials to roll back regulations that were instituted in part to protect against the last debacle caused by anti-social behavior by hedge fund managers and so on – the Savings and Loan Scandal of the Reagan years]). Same behavior, different details. It all amounts to a kind of injustice writ large, I think…
“When people see that self-interested, competitive people may disregard the rules to their own advantage, then the moral restraint that they have placed upon themselves is harder to bear. Why should they have to pay the price while others not only do not [do so] but also enjoy the fruits of their incontinence?” ~ Michael Boylan
…Many executives lamented a “financial tsunami” beyond their control. To some degree, I grant that lax government regulations were somewhat out of their hands, and consumer behavior was, to some degree, in the famous capitalist lingo: “irrational exuberance.” However, Sandel brings up the important point that if “the weather” is to blame for Wall Street capitalists wrecking the entire system and creating massive amounts of suffering, then is not the weather due credit when they succeed and create successful financial quarter after quarter for investors (which I believe is primarily the rich, I would point out)?
…One has to question if these robber barons and crony capitalists do anything worthwhile. Making capital available is not like discovering a cure for cancer or putting a man on the moon. Local bankers and credit union loan officers could accomplish it for typical projects and needs. The “profession” is hugely over-rewarded – at least compared to average worker pay, or teacher pay, or judge pay. Certainly, other countries don’t reward what could be considered mere gambling and chicanery to the same degree – CEOs are paid a much more modest wage relative to the average worker and lowest-paid worker…
“The biggest threat to a healthy economy is not the socialists of campaign lore. It’s CEOs and politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.” ~ David Brooks
…If the Internet and globalization and many other causal factors are really responsible for boom times, then perhaps many financial services leaders are mere parasites that not only reward greed and recklessness, and lose, they accept taxpayer bailouts and, as in the stupendous case of insurer AIG, take TARP funds and still hand out bonuses! As Bob Herbert said: “There are few things more dangerous than a mixture of power, arrogance, and incompetence.”
…It is nothing less than a gross miscarriage of social justice to lavishly reward the “dangerous mixture” that CEOs, Wall Street, and government oligarchs engender while we sink further into debt and watch our infrastructure crumble and pay lags behind inflation. Does government really want to be an unwitting partner to capitalism run amok? Is that proper and is it wise? It’s worse than laissez-faire capitalism because it has the tinge of corruption to it. Compared to democratic socialism and other hybrid economic systems, free market capitalism is rough enough – but at least it doesn’t entail institutionalized cheating, corruption, and bribery like our current system does. Ask a former Enron employee who has $0 in pension, or a Ford executive who witnessed Chrysler receive a huge windfall. Ask a teacher making $37,500 a year to deal with our social problems. In a time of massive private wealth this is highly questionable.
“To ask whether a society is just is to ask how it distributes the things we prize – income and wealth, duties and rights, powers and opportunities, offices and honors. A just society distributes these goods in the right way; it gives each person his or her due. The hard questions begin when we ask what people are due, and why.” ~ Michael J. Sandel
M: I hope progressive economics is an important topic for you, the listener; I believe reforming our economy – the way that it works, whom it rewards, and to what degree— are really important. I am speaking with Jared Bernstein, Ph.D., primarily about politics vis-à-vis his book All Together Now: Common Sense for a Fair Economy. Here is an example of how he can sometimes have sharp elbows when he makes his case and defends his values:
“To push back hard against decades of the basic unfairness that falls under the antiseptic rubric, ‘rising inequality,’ we need to shift some power from the narrow sliver of ‘haves’ to the thicker slices of those who have less, but who are busy expanding the economic pie.” ~ Jared Bernstein
…It’s a compelling read and I’m happy to have his ear today to ask him questions to help clarify for me, and you, some of the economic issues which underlie what we see here in the present day.
…Robert Reich, Ph.D., President Clinton’s former Secretary of Labor and a Professor of Public Policy at UC Berkeley, made a wonderful statement about your book: “This vitally important and readable book couldn’t have arrived at a better time. You examine the so-called gap between the booming economy and the waning economic security of the very people creating that growth with common sense and common decency. You show where we’ve gone off course and how we can find our way back.”
…So, it is true, then, that the rich are sort of “standing on the backs” of the working and middle-class Americans in fomenting an economy that in a way hums, but in another way, leaves a lot of people behind? I think we need to clarify the moral elements of that, if indeed you see them being moral to some degree.
“The conservative order – inspired two generations ago by Milton Friedman and Friedrich von Hayek and brought to power by Republican ascendancy – pushed government aside so business and capital will be free to generate more lasting prosperity. But their utopian promise was not fulfilled. Instead, the Right’s principal product, one can say, was economic inequality.” ~ William Greider
JB: Yeah, I definitely think morality ought to be brought into the discussion; as an economist it’s probably not my expertise, but as a person, I think there’s a real problem here. Think about some of the really impressive aspects of the current economy which some of the listeners may or may not be familiar with— we’re generating very high levels of productivity growth in this economy. That means that we are producing more efficiently now than ever before, and the increase in rates of efficiency are growing.
…For example, if we could make, oh, three widgets in an hour 10 years ago, we are now making six. That might not sound like much, but it is precisely the most important type of improvement that an economy can experience because it means that we can enjoy greater output without working more (or if we choose to work more, as we typically do in this country, we should be able to improve our living standards). But the fact is that incomes and wages and wealth of most families is falling way behind the gains in productivity. It’s as if the bakers themselves are more efficiently baking a larger pie, but ending up with smaller slices.
…This leads to a variety of problems: first of all, there’s just a general sense of being squeezed— and middle-class families talk about this a lot these days. For example, whether it’s healthcare, tuition, or paying for gas, people note that their paychecks aren’t keeping up with the cost of living. At the same time, they hear the economic elites saying, “Boy, this economy looks great!” Well, from 40,000 feet it does appear pretty good, but down on the ground folks know the kinds of problems I’m talking about.
“Change before you have to.” ~ Jack Welch
M: Jared, let me interrupt you; I know you had a few other examples, but because you used this airplane metaphor, I want to be sure to add that it’s no coincidence that George Bush who, for a long time, had a Federal Reserve Chairman who was pretty, what’s the word— almost transparently ideological. From what I understand, his new Chairperson is a little more balanced. This is a man who was ushered into office not only by the Christian fundamentalists, but also the super-rich (his so-called “Pioneers,” his “Base,” and so-forth)… So this is the type of person that he demonstrably is; it’s just apt that you used the airplane metaphor because he also has caught a lot of criticism for his handling of Hurricane Katrina, and there is that famous picture of him in Air Force One, high above the devastation…
JB: Yeah, I think that’s exactly the image that, if I were a political cartoonist, I would draw – him looking down on the economy, commenting: “Looks good from up here!”
M: So, go a little further; it seems as though the folks who are willing to do the bidding of those who are very rich – as far as policy goes – it’s most convenient and easiest for them to be at 40,000 feet because then they don’t see the squalid conditions that are going on in places like former steel towns and inner cities – places where there is real suffering going on in a certain way, and yet, the refrain he always sings is that…
“It is time to reestablish priorities. Protection of human health and the environment must take precedence over corporate efforts to rush the latest product to market and please investors.” ~ Ralph Nader
JB: … the refrains that he always sings is, “Why don’t you get it?” I mean, there was a Secretary of the Treasury (Hank Paulson – who actually gets a lot of this stuff), who said the “$64,000 question” is why people don’t understand that this is a better economy. To which I say the $300,000 answer is the fact that the median income – real terms, working-age households – has fallen by $3000 over the past five years. It shouldn’t be such a “head-scratcher.”
…So, that’s one answer. The other answer that we hear – from policy elites in both parties, but very loudly from the Bush folks – is, “You just need more education.” So they’ll go to a place in the Rust Belt, a town which has suffered from the fact that we’ve lost over 3 million manufacturing jobs since 1998, had a trade deficit now for 10 years (which has been a drag on our economy)… They’ll go to these towns and say, “Look, what you folks don’t realize is that it’s a great new global economy” – Tom Friedman in the New York Times constantly rings this theme as well – If you just get new skills, you’ll be fine.
…Um, that’s a totally inadequate answer to the question of how you deal with the fallout from the downside of globalization. I mean, 75% of working-age men are non-college-graduates; a lot of those guys are never going to go to college. God bless them if they do – it’s a great advantage; I went to college and I wholly endorse that path. But we have to deal with the fact that even college-educated workers are falling behind inflation over the last five years, so they are not insulated from globalization either – especially with the off-shoring of some of the kinds of occupations that these folks have. So you can’t simply solve this problem with this YOYO notion of: “just get some schooling and you’ll be fine.”
“I found that if business is managed from the heart, great things can and will happen. All that is stopping us is our imagination.” ~ Anita Roddick
M: I understand. I am discussing progressive economics with author and economist, Jared Bernstein. Jared, I want to be respectful of the time that you committed, so let me ask you a final question – and it is about Thomas Friedman and it does come from the New York Times. It’s about “economic populism.” One of the things he writes about often is the “oil addiction” that we seem to have in this country, which has obvious costs – not the least of which is the way we are hamstrung economically. There are also obviously environmental and political ramifications of the massive, unyielding use of fossil fuels for energy.
…Here’s specifically what I want to ask you: in talking about this leader called a “petrocrat” – an amalgam of “petro,” meaning “oil,” and “autocrat,” referring to the dictators that you see in Iran – and, according to him, Venezuela. He wrote: “…to indulge a buffoon like Chavez, who uses Venezuela’s oil riches to sway democratic elections in Latin America and promote economic populism that will eventually lead his country into a ditch.” So, do you think that you and Thomas Friedman have a differing opinion about “economic populism,” and whether you believe it leads to a ditch, or a kind of “lifting of all boats”?
JB: Well, when Friedman talks about energy, one of the things he often gets absolutely correct is the need to conserve more, and he’s an advocate for higher gasoline prices— forcing less consumption – and CAFÉ (mileage standards for our automobiles), I think conservation is terribly needed. I think Freidman gets it right with this notion that we are funding both sides of the war in Iraq with our “petrodollars” – funding corrupt regimes, some of which have ties to terrorism and, of course, we’re funding our side as well…
“Changing the structure and rules of the global economy will require a mass movement based on messages of compassion, justice, and equality, as well as collaborative and democratic processes…. If we stay positive, inclusive, and democratic, we have a truly historic opportunity to build a global movement for social justice.” ~ Medea Benjamin
…Where he gets it wrong is on globalization. I mean, he is a ceaseless supporter of “everything global” and, while I have stressed earlier in our conversation that I completely agree with the upsides, he largely dismisses the downsides and somehow thinks that we can find our way out of this if we simply pay more attention to education. Education is absolutely a critical asset for an economy, so it’s foolish to keep beating that drum because no one disagrees; it’s a straw man. If your sole solution is education, then you’re just not trying hard enough [to solve globalization downsides].
…So, one of the things that I’d like to see, and I think Freidman probably agrees – an endorsement of a major American public/private initiative – meaning that both government and private industry work on this together – to achieve energy independence in 10 years. Interested listeners should Google something called “The Apollo Alliance,” which is a group of folks and institutions, both public and private, religious, progressive, political – all over the map – to achieve that goal. Much like the Apollo Project, where Kennedy acknowledged he was clueless as to how we were going to achieve it, but once we began it, it was a really important economic program in terms of generating research and development and good jobs.
…So, I guess I’d like to see folks like Friedman, who has such a good bully pulpit, and is a really smart guy, go beyond the breathless embracing and applauding of everything global, and think a lot more about what we can do together as a nation to push back against some of the really serious challenges we face.
“Our social life is a collective effort. We contribute to the public good and depend on other useful members of society. This exchange of services, based on common interests, defines solidarity and unites the human community. We may pride ourselves on our contribution; we are always humbled by our dependence.” ~ Laurent Grenier
M: Dr. Jared Bernstein, thank you kindly for your time. I appreciate speaking with you, especially since I was impressed with your book. I wish you well.
JB: Well, thank you; bye.
M: And now, let’s continue the discussion of progressive economics by bringing on Dr. Edward S. Herman. He’s a professor emeritus of finance at the Wharton School of Business at the University of Pennsylvania where he taught courses in micro- and macroeconomics and financial regulation for thirty years. He also specialized in courses on the political economy of the mass media and on the analysis of media bias at the Annenberg School of Communications at Penn for a decade. His Ph.D. in economics comes from UC Berkeley. He’s written extensively on economics, political economy, foreign policy, and media analysis. A web search will acquaint you with his books – some co-authored with Noam Chomsky, and many about media; for example: Manufacturing Consent: The Political Economy of the Mass Media, The Terrorism Industry, The Global Media, as well as The Missionaries of Global Capitalism.
Without further ado, here is Professor Emeritus Edward Herman. Hello, there. May I call you Edward?
EH: Hi Jason. You can call me Ed; that’s shorter.
Is there anything shorter than “Ed” that I can call you?
EH: No, I’m afraid that’s the shrimp!
M: Okay! Thank you for joining me today. Jared Bernstein, whom you might have read, and I were talking about a number of things; perhaps I will start us off with the following: It seems as though the number of billionaires has grown. In fact, in the latest Forbes, the 400 richest Americans are all billionaires, which is a new thing. Is that because we have an economic system in this country where the smartest, hardest-working folks can make it all the way to the top, and if the rest of us can’t make it it’s obviously because we don’t have the mettle, character, or natural talent to do so?
“Wages account for 10 percent of the retail price of a garment made in the U.S., but one 1/3rd of 1 percent of the price of a garment made in the Third World.” ~ Charles Kernaghan
EH: We don’t have the luck, either. Primarily, we don’t have an economic policy program that is supporting us. We’re in the midst of what I consider to be a system of “class warfare” and a counter-revolution, and so lots and lots of things are being done to facilitate the aggrandizement of people who are already rich. It is true that some very wealthy individuals start with virtually nothing, but not too many; most billionaires were born pretty darned rich. They have gotten a lot more so in the last 20 years— especially under the Bush regime, but even before that under Reagan. We’ve seen a tremendous movement toward inequality in the United States, and it’s rooted to a very considerable extent in policy.
M: Yes, it seems as though the “supply side economics” that Reagan seemed to endorse isn’t as effective as we were told— making the water level rise so that everybody’s boat is lifted. It is a view that is pretty much antithetical to progressive economics. Is that fair to say?
“What if, instead of defining money in that benign and neutral way, as a “medium of exchange,” we defined it as “an instrument for the mobility and accumulation of capital and the concentration of economic power”? That would give us a whole new slant on life.” ~ Michael Parenti
EH: That’s as clear as crystal because actually a lot of statistics show that the average (median) worker in the United States has hardly made any [prosperity] gains since 1973. There has been a substantial increase in worker productivity, but a very small fraction of that increase in wealth has gone to ordinary citizens. It’s been a tremendous windfall to the upper 5% of income-receiving units. That traces back to policy— tax policy, policy toward unions (Reagan actually “busted a union” when he came into office, and it has been class warfare ever since).
Acknowledged. I am discussing progressive economics with Professor Edward Herman.
“In 1960, the moguls of America paid a marginal tax of 90 percent on their incomes, which translated into an effective rate – after all deductions and credits – of some 50 percent. They also paid hefty taxes on their capital gains. And when they died, their heirs paid estate taxes. But in 1960, it was also the case that over two-thirds of Americans trusted government ‘to do the right thing all or most of the time,’ according to survey research. Now, the moguls pay an effective rate of about 15 percent of their incomes.” ~ Robert Reich
M: Ed, you’ve been teaching as long as I’ve been alive, so there’s so much you can teach us. I’m sorry we don’t have more time. Let me ask you this: imagine somebody worked very hard their whole life, accumulating $10 million worth of assets which they long to leave to their four children; they would appreciate it if the government did not take $5,000,000 because it’s “unfair.” That has a kind of a compelling ring to it; can you address that perspective?
EH: Well, the people who are accumulating a lot of wealth are doing so because society has provided them with the framework in which they were able to succeed; it wasn’t done in a vacuum. They wouldn’t have accumulated all that wealth if they were living in Zambia. So, the idea that the society is entitled to a chunk of accumulated wealth is a sound point. Also, equality and democracy rest not on the fact that people have to be of equivalent wealth, but at minimum, you can’t have an enormous maldistribution of wealth and still have a democracy. So, taxing inherited wealth is consistent with a democratic system…
“If the corporations have their way, the Earth will be killed – and that’s in your lifetime. It’s revolting to me that students are being trained to work in corporations. It’s obscene to me that the corporations are running the world. We’ve got to get cross. Anger is an appropriate emotion!” ~ Helen Caldicott
…Of course, the argument that is made against it is misleadingly labeled the “death tax” (the implication being that large numbers of persons are going to be hit by this, which is of course, baloney, because the number of people who would be subject to inheritance taxes is very tiny – under 2% of the population). I’m a firm believer in the estate tax and I think the attempt to remove it is just part of a project that is detrimental to a fundamental moral principle— that of the principles of equality, of democracy, and of fairness in a society where huge accumulations of wealth are attributable in large part to the society at large.
M: It hasn’t always been like this. There was a time when trying to tinker with Social Security was thought of as a very dangerous idea politically, and the estate tax was firmly in place, and the top tax rate was over 90%. Under Eisenhower, the Republican. Now, that is a bit high – even for a marginal rate. Angie D. Holan writes adroitly in the online resource, PolitiFact:
“There are millionaires who earn their income like most of us – in salaries. And then there are the millionaires Warren Buffett wrote about in his famous op-ed column for the New York Times asking the federal government to ‘Stop Coddling the Super-Rich.’ They earn their living as hedge fund managers or through investments and enjoy a lower tax rate.” ~ Angie D. Holan
“We checked Buffett’s statement that the ‘mega-rich’ pay about 15 percent in taxes, while the middle class ‘fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.’ We rated the statement True.”
M: “The Oracle of Omaha” sparked this debate by noting that his rate was “only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.” Buffett and William Gates, Sr. are prominent members of a group of what appear to be some kind of “megalo-altruists,” “The Responsible Wealth Project.” This is progressive economics for sure. As their website www.responsiblewealth.org describes:
“Responsible Wealth is a project of United for a Fair Economy — an organization that supports workers organizing and advocating for policies that make our economy more fair and equitable. We make a powerful partnership — one that challenges decision-makers and politicians to act in the best interests of the people our economy is supposed to serve. By becoming a member of the ‘Responsible Wealth Project,’ [one can] use [his or her] unique voice to support a variety of progressive groups working on many economic, racial, and social justice issues.”
M: So, things have been changing; do you think starting with Reagan, Bush, and Clinton – or do you think that Clinton was a devotee of progressive economics and had the people’s best interests in mind?
“Markets and money must again become the servants and not the masters of our vision and values.” ~ Jakob von Uexkull
EH: I think, certainly, Reagan was the real beginning. It all traces back to the fact that the business community was very dissatisfied with developments in the late 1970s; they were starting to be subject to competition from the Japanese and the Germans, and they didn’t have it all that good, in part because of unions, who were very powerful – and pension systems. So, they began gathering their forces in the late 70s and early 80s to reverse the trend – to weaken and destroy the unions, to go after the welfare state – and Reagan was one of their great success stories. He did their bidding; he represented the business community. As I mentioned a little while ago, union-busting became the order of the day; a rearrangement of the tax/expenditure structure in favor of business; encouraging outsourcing abroad; a whole range of policies including militarization— all these things became institutionalized.
…Clinton carried on in that same tradition; he talked a little bit populist, but he didn’t act populist. Clinton was a very conservative president. He wasn’t a reactionary, but he was a conservative president— for example, balancing the budget – but he didn’t do anything for his underlying constituency. He pushed hardest for the North American Free Trade Agreement (NAFTA) and World Trade Organization (WTO); these things were very detrimental to his base. He was a great “triangulator.”
“Solidarity is quite dangerous; from the point of view of the masters, you’re only supposed to care about yourself (and not about other people). This is quite different from the people they claim are their heroes, like Adam Smith, who based his whole approach to the economy on the principle that sympathy is a fundamental human trait. …It’s taken a lot of effort to drive these basic human emotions out of people’s heads, and we see it today in policy formation — for example, in the attack on Social Security, which is based on the principle of solidarity — caring for others.” ~ Noam Chomsky
…Of course, with George W. Bush, we have a genuine reactionary who is really trying to set the clock back. What he’s doing is really frightening. I mean, this torture business is [trampling] the Constitution of the United States, and his tax and expenditure policies have been staggering and very “un-conservative.” He has been a spokesperson for the upper 1% of income-receiving units. The fact that the business community supports this is kind of appalling.
…Remember when there used to be this notion that poor black people suffer from the desire for immediate gratification? The business community wants immediate gratification; they are supporting a president who is destroying the fiscal system, letting the infrastructure system erode, militarizing – I mean, he’s creating a decrepit economy; he is an economic as well as a political disaster and yet, the business community likes him.
…Just as they liked Newt Gingrich back in 1994. They were asked: “Well, what about Gingrich – isn’t he a little irresponsible?” And the answer was, “What he’s doing in the way of gutting environmental rules and cutting taxes and such – that’s worth a lot to us.” So, all long-run considerations are ignored because these guys will produce what business wants today. Jason, this is what I call irresponsibility because they are making the system more unequal. Bush and company are going after poor people, weak people, and hurting them. It’s “un-Christian.” It’s everything that our moral rules stand against.
“Today, we must rise to a new level of economic sophistication and creative institutional imagination. To advance Adam Smith’s hopes for a free society growing progressively more cooperative and inclusive, we must make more conscious efforts to redesign markets for public aims.” ~ Robert N. Bellah, Richard Madsen, William M. Sullivan, Ann Swidler & Steven M. Tipton
M: There is all of that — a veritable affront to progressive economics — and there is also the simple fact that when you have over $20 trillion in debt, it’s like an economic ball and chain — you’re not going to be as excellent an economy as you would be if you had a significant budgetary surplus, which is what Bush inherited, if memory serves. Ironically, it was Ronald Reagan who – though he honestly did inherit an anemic economy from Jimmy Carter – had budgetary and spending priorities that began to escalate the debt. He just didn’t have the discipline to be more honest and above-board with our economic and fiscal house. Nor did the Democrat-controlled Congress fight him earnestly on that morally-questionable set of priorities.
…Here is a quotation from Howard Dean, who has been fairly influential to me lately because of his populism, even though he is kind of a centrist and conservative. One of the notes that he sounds is very important:
“If we truly want to take the power to influence elections away from corporations and give it back to ordinary Americans, we have to stop the corporations from being essential to politicians’ campaigns. This means some sort of public financing for campaigns.” ~ Howard Dean
M: Would you say campaign finance reform is a keystone in the arch of significantly improving the way the system works? Can we find a way back to a more progressive economics?
EH: Well, I’m a pessimist on this, Jason. I mean, money talks! It has a way of finding its way into the political arena; it’s extremely difficult to get laws passed that will prevent money – which is really power – from realizing itself. So, in principle it’s a very good idea, but I don’t think it would work; you could never get it through with the existing structure of power in place.
…I’m not sure how the heck we’re going to get the structure of power changed, but I think you would definitely have more decentralized power. We have to fight desperately to prevent anymore concentration of business and of the media, because every step in those directions means greater aggregations of power that will flow into the political system…
“As Congress debates new security measures, military spending, energy policies, economic stimulus packages, and various bailout requests, wouldn’t it be better if we knew that elected officials had to answer to the people who vote, instead of wealthy individual and corporate donors whose profits or failure may depend on how those new initiatives are carried out?” ~ Bill Moyers
…What we’ve seen is the Democrats are like the Republicans in that they’re “on the take.” And the “corporate media” are, of course, hostile to populists. So, we’ve got a kind of an “ugly feedback system” in which the political parties are paralyzed – they must serve the ones that fund elections and are in turn supported by the mainstream media/corporate media.
…We are in a horrible box. So yes, what Dean says is good, and true, but we’re not going to have it; we have to fight for more decentralization of power, we have to fight for greater power and organization at the “grass-roots” – environmental organizations, labor organizations, etc. We need a power-base that would be able to fund elections or would be able to control the electoral process and bring about some kind of more democratic structure.
M: Well, I’ll try not to be depressed about what you say! Hopefully, you can kind of play the role of Paul Revere, who, though he was riding on that horse in the dark at a break-neck pace, he did have a message that the Americans needed to hear. So thank you, Ed, for your time today – I very much appreciate it. You’ve given us a kind of reality check so that we will make sure to understand what is going on and what is at stake.
This is but one of twenty chapters in the book Values & Ethics: From Living Room to Boardroom. An e-book is a mere $2.99. I welcome you to look up more quotations on progressive economics in The Wisdom Archive, an incredible search engine with 26,000 quotations on many topics such as values (including progressive economics, libertarianism, conservatism, liberalism, economic justice, etc.)
You can also hear a podcast of this interview here.