Alternet  [Printer-friendly version]
June 19, 2006


The era of corporate welfare and trickle-down economics championed by
Republicans for 25 years is over. It's up to us to think of what will
replace it.

[Rachel's introduction: William Greider says, "Momentous change is
approaching in American politics. Conceivably, the turning point has
already arrived, too indistinct to recognize. We are witnessing the
demise of the reigning economic ideology. A deep shift of this kind
is a very rare event, one that comes along only every thirty or forty
years. Economic disorders accumulate that the orthodoxy cannot answer
and may even have caused. Eventually, the ideological presumptions
are discredited by real-world contradictions."]

By William Greider, The Nation

Momentous change is approaching in American politics. Conceivably, the
turning point has already arrived, too indistinct to recognize. We are
witnessing the demise of the reigning economic ideology. A deep shift
of this kind is a very rare event, one that comes along only every
thirty or forty years. Economic disorders accumulate that the
orthodoxy cannot answer and may even have caused. Eventually, the
ideological presumptions are discredited by real-world contradictions.

The last time this happened was in the 1970s, when economic liberalism
foundered and collapsed. Ossified intellectually, unable to adjust to
changed circumstances, the liberal order did not know how to deal with
economic consequences like inflationary stagnation. As the long
postwar prosperity lost its energy, so did liberal politics.

Something similar is happening now to the Republicans. Their problem
is the underperforming economy, which must borrow to stay afloat and,
roughly speaking, lifts only half the boats. 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 would 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

The breakdown won't necessarily produce an immediate shift in power.
When the bottom fell out of liberal doctrine thirty years ago, what
first unfolded was confusion and political paralysis, then an awkward
retreat by the Democrats until they were finally displaced by the
aggressive new conservatives under Ronald Reagan. But it does mean
that Republicans have lost the political cohesion to advance their
more extreme measures (privatizing Social Security, freeing capital
entirely of taxation).

More to the point, the way is now open for alternative thinking: the
new ideas that can lead to a new governing order. These ideas must be
grounded in a determination to give people back their future. The
strange paradox of our times is that despite America's fabulous
wealth, most people's lives are shadowed by economic anxieties and
real confinements, the wounds that market ideology has imposed. They
fear that much worse is ahead for their children. Reform must re-
establish this fundamental principle: The economy exists to support
society and people, not the other way around. Only government can
liberate them from the harsh rule of the marketplace, the demands
imposed by capital and corporations that stunt or stymie the full
pursuit of life and liberty in this complex industrial society. This
very wealthy country has the capacity to insure that all citizens,
regardless of status or skills, have the essential needs to pursue
secure, self-directed lives. This starts with the right to health,
work, livable incomes and open-ended education, and to participate
meaningfully in the decisions that govern their lives. The marketplace
has no interest in providing these. It is actively destroying them.

A coherent alternative agenda that will fulfill these principles does
not yet exist. Nor will a liberal-progressive program emerge
miraculously if the Democratic Party should somehow regain power in
the next few years, since many Democrats in Congress have internalized
the market ideology and collaborate with the right. But elements of
that alternative agenda are already ripe for discussion. Before we
explore some of them, however, we should examine the economics of why
the right failed.

The economic engine is running on empty. It looks robust only if you
ignore the underlying conditions. Household savings were negative last
year for the first time since 1933; that is, families kept up by
spending more than they earned and by borrowing to do so. The national
economy, encompassing private-sector business and government as well
as households, also had negative savings in the fall quarter of 2005,
despite bountiful corporate profits.

The household accounting reflects a common reality: Wage incomes,
adjusted for inflation, are stagnant or falling. The weekly wage for
92 million people in nonsupervisory jobs (82 percent of the private-
sector workforce) has declined for three consecutive years, largely
because total working hours shrank across the economy. Even per capita
income -- a broader measure that includes the billionaires -- declined
for four years in a row under Bush. One in six manufacturing jobs has
been lost since 2000 (39 percent in communications equipment, 37
percent in semiconductors). These losses are explained as free-market
"efficiencies" but mainly represent the global relocation of American

The cumulative effect is an economy that doesn't produce enough to pay
for what it wants and needs. The conservative order, notwithstanding
its proclaimed values, makes up the difference by borrowing. In five
years, Bush has added $2.5 trillion to the federal debt with more to
come (thanks to his regressive tax cutting, deficit spending, the war
in Iraq and the subpar economy). In the same five years, the national
economy as a whole took on even more debt -- $2.9 trillion -- to pay
for the ever-swelling trade deficits. The creditors are our trading
partners, led by China and Japan. The collective indebtedness is
growing much faster than the nation's collective income -- always an
ominous sign for a debtor. George W. Bush may wind up as history's
goat because he had the bad luck to inherit the effects of 25 years of
rightward governance (including Bill Clinton's tenure). Government
shifted tax burdens downward, favored military spending over
productive domestic investment, encouraged multinationals to disperse
jobs and production overseas and embraced the Federal Reserve's hard-
money monetary policy, which suppressed working-class wages. Fortunes
were shifted upward, fabulously.

The era produced a great ideological irony: Starting with Reagan, the
right repeatedly finessed its contradictions with debt -- the borrow-
and-spend "sin" they once assigned to liberalism. In 1981, Reagan's
first year as President, the federal debt surpassed $1 trillion for
the first time ever. Twenty-five years later, despite fiscal restraint
under Clinton, the federal debt has surpassed $8 trillion.

The Republicans now find themselves in a corner with no good choices.
If Bush withdrew the stimulus of federal deficits, economic growth
would collapse. The sensible course would require a massive shift in
priorities -- moving money and benefits from the wealthy few to the
struggling many -- but that is ideological heresy and would double-
cross the GOP's monied patrons. Bush could confront the huge trade
deficits by imposing unilateral limits on imports, but that is also a
humiliating heresy he won't touch. So conservatives are likely to
muddle on, hoping the economy will somehow work itself out of its
weaknesses. Progressives should get busy now developing alternative
ideas for the major shift that must inevitably follow.

For life and liberty

You wouldn't know it from reading the newspapers, but substantial and
often overwhelming majorities of Americans have repeatedly endorsed
governing concepts that conventional politicians dismiss as radical or
unrealistic: Universal healthcare. A job for everyone who wants to
work, guaranteed by the government. Secure retirements. Stronger
enforcement of environmental laws. Stronger defenses against
encroaching corporate power. Union protection for workers against
exploitative employers. The list goes on. These widely endorsed goals
assume an activist government that nurtures people and society first,
ahead of corporations and capital. Imagine a political agenda that
sets out to give the people what they say they want. The heart of the
problem is the deterioration of work and wages. There are many other
elements damaging the pursuit of life and liberty; but as old-school
liberals always understood, if wages and working conditions are not
moving in the right direction, you won't accomplish much toward
healing other social injuries and disorders. What follows is a short
list of provocative ideas meant to stimulate imaginations.

Repair wages:

This should start with government acting as the "employer of last
resort" and involves a large and permanent program of federally
financed jobs, open to anyone ready and willing to work and closely
integrated with skill training and education. For most workers, the
public jobs would be temporary, a safe harbor until opportunities
improve in private employment. What might the people do? Any work that
helps address the vast inventory of unmet public needs -- a broad
program of public investment that rebuilds neighborhoods, reclaims
ruined ecosystems or restores production. Local citizens and
governments would choose the priorities, not Washington.

The most dramatic benefits would obviously accrue to the poor --
injecting jobs with reliable (and legal) cash incomes into desolate
urban and rural communities, a financial platform to stimulate private
enterprise and redevelopment. Young people could hold part-time public
jobs, conditioned on staying in school, and bring cash home to the
family, while getting hands-on experience and productive skills--a
powerful alternative to dead-end lives. The federal job guarantee
would also bolster the broad working class: a new safety net for the
people displaced by recessions, offshoring or corporate downsizing.
Wages could be scaled upward for the public jobs, based on the skill
levels involved, and the displaced industrial workers would have
access to retraining.

Above all, a permanent program of public employment, properly
conceived, would boost wages. It would mop up surplus labor (about two
times larger than official unemployment) and create a new wage floor,
generating upward pressure in the labor market. In a more bountiful
era, this might seem unnecessary, even inflationary. But today's
economy has things upside down: It proliferates the low-wage service
jobs that cannot sustain families, while it gradually eliminates the
high-wage manufacturing jobs that provide middle-class incomes. Public
jobs, together with a sustained campaign to raise the minimum wage and
other measures, would gradually shift the flow of rewards in the other

Employers will not like this, obviously, and will argue that rising
wages are bad for the economy -- higher prices, lower profits. But is
that really so? The steady deterioration of working-class wages over
the past thirty years did not produce a healthier economy. Someone
should ask working people whether they would choose cheaper prices at
Wal-Mart or better incomes for themselves. The current labor market
does indeed benefit the more affluent Americans who have been enriched
by what happened to the price of labor. Now it is time to reverse the
flow and heal the wounded -- that is, restore a balanced prosperity.

Deregulate labor:

The destruction of worker rights (the right to organize a union,
established by the 1935 National Labor Relations Act) is a great
failure of regulatory government and a critical factor in the
deterioration of wages and working conditions. Union density has
declined to 8 percent of the private-sector workforce, yet a poll last
year found that 53 percent of workers would like to be represented by
a union -- if they could. The gap between aspirations and reality is
maintained by systematic and often illegal corporate tactics that
block workers from exercising their rights.

One answer might be to eliminate the National Labor Relations Board --
free the workers of regulation. Federal law and regulators are quite
lame in policing the corporate illegalities, but workers and unions
are prohibited by law from using effective tactics like secondary
boycotts, sit-down strikes occupying workplaces and mass
mobilizations. A newly enacted labor law would be grounded in
constitutional rights -- free speech, freedom of assembly, the
Thirteenth Amendment prohibiting involuntary servitude -- rather than
politically vulnerable regulatory law.

Rethinking labor rights is another opportunity to build bridges across
class differences by creating a broader set of rights that apply to
all employees, regardless of union status. That would involve basic
protections against managerial abuses, and also new rights of self-
expression and the right to participate in decision-making within the
firm. The best companies already do this, because they know the free
flow of information among employees stimulates innovation and
efficiency reforms. Labor law effectively inhibits unionized workers
from even meeting with nonunion colleagues without the boss's consent.

Ultimately, labor-law reform should encourage an economy of worker
ownership in which employees share responsibility for the firm with
management and share more equitably in the returns. The top-down
corporate structure is a major source of inequality. Does anyone
imagine that employees, if they had a voice, would ratify the
scandalous executive pay for CEOs?

Tax corporate behavior:

Major corporations used to be part of the liberal social contract.
They were the institutional partners that distributed health
insurance, pensions, labor guarantees and other progressive benefits
to workers and communities (reimbursed by federal tax deductions). But
during the last generation, companies have resigned from this role,
turning on their employees and extracting "profit" by expropriating
the value that belonged to their workers: wages, pensions, healthcare
benefits and good working conditions.

Government has to step in and fill the void to avert social calamity.
The old arrangement helped build the middle class, but it was never as
good as it sounded. Roughly half the country was left out. Moreover,
the voluntary nature gave managements the power to set the terms --
and the freedom to break promises -- which were challenged only by

Universal health insurance is the most pressing imperative because
health costs continue to soar as the burden is shifted to employees.
Pensions may become a larger crisis in the long run. The right's t25-
year experiment with individual pension accounts has failed, leaving
even middle-class workers unprepared for retirement. Instead of
tinkering with the failed concept, reformers should create an entirely
new national pension: universal, mandatory savings under government
supervision that, alongside Social Security, will insure comfortable
retirement for all. One model is the pension plan already enjoyed by
federal employees and members of Congress.

Companies need to pay, meanwhile, for their antisocial behavior. They
collect hundreds of billions in tax breaks and subsidies, yet abuse
society in return -- degrading the environment and communities,
ignoring the national interest, offloading their obligations.
Corporate taxation has declined since the 1960s from more than 20
percent of federal revenue to less than 10 percent. Despite their
profitability, scores of major corporations pay zero taxes (some even
collect refunds). One plausible remedy is to refashion the corporate
income tax as an important new mechanism for enforcing corporate
obligations to society. Imagine a reformed tax code that clears away
all the corrupted loopholes and sets the basic corporate tax rate
higher, at around 45 percent.

Corporations would then be able to reduce their tax liability --
perhaps by 15 points or more -- by demonstrating that their
performance adheres to higher social standards. Does the company, for
instance, increase wages for workers in step with its rising
productivity, as economists assume, or does it pocket the money for
the insiders and shareholders? A positive record could knock several
points off the tax rate. Does the company have an egregious history of
trashing environmental laws or fraudulent dealings in financial
markets? It would be ineligible for reductions. If the company is
increasing its American workforce, augmenting pensions and healthcare,
encouraging democratic relations with employees, it could be rewarded
at tax time. This leverage would penalize bad behavior at the bottom
line and reinforce the tattered regulatory laws. The performance
ratings would be public -- a "market signal" that tells investors and
consumers which companies are the white hats and which are the rogues.

Develop an industrial policy for essential needs:

Economic deregulation produced real economic gains, like stimulating
technological innovation, but it also fed inequality in sly ways. The
deregulated system raised costs for the least affluent, while larger
business customers were able to bargain for lower prices. Financial
deregulation (enacted by Democrats in 1980) legalized usurious lending
and created a large pool of families (now around 12 million) who can't
afford a bank account and who get ripped off by predatory lenders.
Deregulation of electric utilities led to Enron and the price-rigging
scandals. That sector, meanwhile, notoriously ignores its culpability
for producing global warming.

The point is, some consumer goods are too essential to be left to the
profit-seeking enthusiasms -- and reckless disruptions -- of private
enterprise. People need them to live and are thus always prey to
exploitation. Family finances will benefit and so will the environment
if government selectively re-regulates industrial sectors producing
for essential needs: banking and finance, energy, elements of
transportation and telecommunications, for starters.

The basic approach is restoring a franchise relationship in which
firms accept government-imposed obligations in exchange for limited
competition and an assurance of moderate profits. Market space can be
preserved for smaller, innovative firms. New rules can avoid the
inflexibilities of the old system. But the notion that corporations
have a right to annex common public assets and turn them into
profitable commodities has to be stopped. Companies are buying the
water. What's next -- selling us clean air?

A prime candidate for essential-needs regulation is the drug industry.
Among its many outrages, the drug companies ride free on the expensive
basic research financed by government, then convert it into private,
overpriced products -- paying nothing at all back to the original
financiers, the taxpayers. If citizens ever understood this scam, they
would be angry enough to demand a nationalized drug industry. At the
very least, citizens are entitled to reasonable pricing and a share of
the profits from the medicine they paid to create.

Re-regulation of commerce also requires some rules accepted as
everyday practice in business. When government hands out public money
to a company, it should demand an enforceable contract: written
agreement from the corporate recipient about what the public gets in
return and the right to recover the money if the agreement isn't
fulfilled. When government puts up public capital for a private
development as tax breaks or infrastructure, it should get equity in
return. If businesses don't like these terms, they don't have to take
the public's money.

These ideas and others can gain political traction if reformers
reclaim the language of freedom. It starts with a liberating message
for people: The failure lies in the system, not yourselves. When the
conservative order stripped away government protections for society,
control was handed over to another master -- the marketplace -- that
is even more remote from accountability and far less sympathetic to
the human condition. That old order is collapsing. Now life and
liberty can be restored. Government helps by creating the proper
foundations. People will do the rest for themselves.

William Greider is the author of, most recently, "The Soul of
Capitalism" (Simon & Schuster).