Short Term and Long Term: Letter to Barack #4

OK Barack,  I admit that I am one of the millions of people who wish they knew how to read your mind, and I admit that my brother Ken is probably not as good at it as your wife Michelle, but I nevertheless think he has an inside track so instead of guessing myself I will adopt his guess.   Ken has some professional political experience and some high-up contacts and I believe he can assess what you are probably thinking more accurately than average persons, with the possible exceptions of average persons who happen to live in Illinois or Hawaii .    Yesterday my brother expressed the opinion that your mind is probably preoccupied by two questions:

 

One:  How to save people’s 401(k) plans and other retirement assets that are invested in stocks and lose value when stocks lose value.

 

Two:  How to save the American automobile industry.

 

          One might say –I know people who do say—that until these and other short term issues that make up the current economic crisis are resolved, the Obama administration will not be able to turn its attention to the long term.

 

          Indeed you did say –I watched you say it on television—that before implementing some major parts of your program we need to “get past” the current crisis. 

 

          The same day, yesterday, the day my brother expressed an informed opinion concerning what is on your mind, the Secretary of the Treasury, Henry Paulson, reported on what his office is doing to restore confidence in the economy.

 

            Paulson’s office is doing two sorts of things:

 

          1)  It is providing cash to banks and other credit-granting institutions.  For example it has bought preferred (non-voting) stock in banks.   The bank gets the cash and the government gets a right to dividend payments in the future.

 

          2)  It is guaranteeing loans.

 

          The rationale is that if credit-granting institutions have more money and/or run less risk they are more likely to make loans.   Then people can borrow more easily to meet payroll, to buy an automobile, or for any business or consumer purpose.

 

          The Congress has already:

 

          3) Put more money into the pockets of consumers with tax rebates and tax cuts.

 

          The rationale is that the consumers will spend their money buying products, thus making it profitable to produce them.

 

          If I may elaborate a little on what my brother guessed was on your mind yesterday, I suspect that you are thinking of three other ways to stimulate the economy:

 

          4) Subsidies for the automobile, green technology, and perhaps other industries.

 

          5)  Incentives to produce in America rather than overseas.

 

          6)   Massive public works, for example hiring the unemployed to plant trees.

 

          Behind all of these measures is the assumption that the economy runs on profits.  When business stops being profitable it stops running.   The government then takes measures to restore profitability, in order to restart the economy.   Even (6) is about restoring profitability insofar as it expects the workers employed on public works to stimulate business by spending their pay.

 

            Let the above serve as an executive summary of the sorts of measures that are generally expected to “get us past the crisis.”            An element missing in the public debate about these measures is the need for a paradigm shift.

 

          Anybody who does not believe the following should check it out for herself or himself:   Postings on anti-Bush websites and listserves and eloquent print prose pieces in Nation magazine, articulate many arguments in favor of putting money into the pockets of ordinary people and rescheduling their debts to save their homes.  They condemn spending billions to bail out the wealthy.  It is argued that people-oriented stimulus packages are fairer and more effective.   But there is no questioning of the paradigm.  It is taken for granted that the objective is to generate economic activity by making it profitable.

 

          My humble suggestion is to walk on two feet.   One foot moves to restart the economic machine by restoring confidence (not because it is an ideal economic machine, but because it is the one we have).   The other foot moves to diversify the economy, freeing us from our excessive dependence on expectations of profit to motivate production and distribution.

 

          Don’t wait.   Don’t wait to get past the crisis to get started on the transformational agenda.   If we wait for stimulus packages to restore investor confidence (if they ever do); if we wait for gradually rising rates of employment to re-integrate society, we will wait too long.  We need to pick up the slack ASAP with civil society efforts and with public efforts and with private-public partnerships.   A world full of loafers and part-timers (and of people a bit better off who fear crime and despise the loafers and part-timers) is a world that will generate strange and violent ideas.   Before government policies bring about economic recovery (if they ever do), the culture war will be lost.   People will hang on to every word Rush Limbaugh speaks.  They will be attracted to the worldview of Fox News.  On a best case scenario their arms will be tattooed with images of Sarah Palin; in the worst case the image will be a swastika. 

 

          These considerations lead to a renewed appreciation for the work community activists do, not just because they achieve material goals such as decent housing and food security, but also because they engage people in constructive activities.   Organizing, as Cesar Chavez frequently said, means giving people something to do.   A disorganized unemployed population passively waiting month after month for someone to bring them employment is a dangerous population.

 

Howard R.

November 13, 2008

 

 

More on Creating J.O.B.S: Letter to Barack #7

Dear President-elect Obama,

 

          I resume my optimistic suggestions regarding how all of us working together can transform America and the world with the topic

 

3.  Government work.

 

          Two basic questions need to be asked regarding jobs created by public funding:

 

(1)   What kinds of work should the workers do?

(2)    Where ought the money to pay them come from?

 

          One might add a third question:  (3) What institutional forms should be supported or assisted by public funding?    Asking this third question suggests that institutions ought to be diverse and hybrid (public sector/private sector partnerships) rather than monolithic.  I will defer discussion of this first question to another letter.

 

          My (our) answers to the first two questions are:

 

(1)  The workers paid from the public purse should do work that ought to be done, but which is normally not accomplished relying on the motivations that drive for-profit business and the people’s (self-employed) economy.    The government should break the profit barrier to job creation.   The government should break the market barrier to job creation.

 

For example, the biosphere ought to be preserved for the benefit of generations yet unborn.   The unborn are not at this point customers with purchasing power in any market.  Further, as Amory Lovins has remarked, the market quickly discounts the future value of natural resources to zero.   I congratulate you for your plans to use public funds to green the economy.    I add that evaluations of your programs should consider not just the green businesses that your green programs will generate, but also the long term consequences for the species and the planet.

 

For another example, it is easy to reach consensus (as in fact the city of Rosario did reach consensus through a highly participatory strategic planning process) that we want to live in an environment where music and the arts flourish.   Yet when it comes to tearing ourselves away from our television sets to show up on Friday evening to pay money to listen to the local symphony orchestra, the amount of money collected is not enough for the musicians to live on.   The people who derive economic benefit from financing the creation of a highly cultured environment are mostly the hotel and restaurant owners who cater to tourists and the owners of real estate, not the artists.   Public funds ought to break the market barrier to improve quality of life for human beings, both by supporting people who have a passion to live creative lives in the arts and sciences; and by improving the moral, intellectual and esthetic atmosphere for everyone.    Evaluators who do not know how to measure “atmospherics” should learn.

 

A third example and then I will stop although many more could be listed.  Sports.  The value of paying coaches and community youth organizers to run a basketball program for kids is not correctly measured just by what the kids or their parents will pay for it.  It is also measured by health, by the growth of self-discipline, by social integration, by keeping kids off drugs, by crime prevention, and by the accomplishment (or failure to accomplish) of a series of goals not normally served by for-profit business or by the people’s economy.

 

Now let me add two conceptual nuances:   The first is that job creation that breaks the profit barrier and the market barrier should be supported not only by public funding.  It should also be supported by private funding.   It should be supported by foundations and by large scale and small scale philanthropy.  

 

The second conceptual nuance is that public sector performance in general should be measured by social efficiency, not by financial efficiency alone.  I agree with Toye and Toye when they write in their intellectual history of the United Nations that the money spent by the OECD in the 1980s to fund studies designed to justify privatizing public sector enterprises could better have been spent studying how to improve the efficiency of the public sector, and how to measure its efficiency by appropriate criteria.  Admirers of India’s economic miracle would do well to take note that after the reforms of 1991 poverty in India actually increased for a few years due to the unemployment generated by privatization,  and when the gradual reduction of poverty in India resumed it was the resumption of a trend that began not with the 1991 reforms but in 1975 due to a new international division of labor which gave (and still gives) India a comparative advantage as a global supplier of low-priced high quality labor.  Our (my but not only my) view is that public sector job creation should be counted as a plus, not as a minus.  Providing employment is a benefit, not just a cost.   If some workers of a public electric company are redundant in terms of the work that needs to be done to serve paying customers, instead of firing them and increasing unemployment management should consider putting them to work extending service to poor people in outlying areas, or putting them to work on alternative technologies whose benefits will accrue mainly to our children’s children.

 

 

(2)   The money to pay for creating jobs paid for with public funds should come mainly from capturing the income generated (“rents”) by the sale of natural resources.  It should come from public capture of unearned income, easing the burden on earned income.

 

          In this respect North America has everything to learn from South America .  The post-populist regimes of South America are learning how to capture rents from natural resources, and how to use the money to support the people’s economy and to support public sector social, health, and education programs.

 

          The right-wing press and right-wing academics would have us believe that today’s regimes in Brazil , Venezuela , Ecuador , Bolivia , Paraguay ,    Argentina , Uruguay and perhaps Chile are just reruns of traditional Latin American populism.  They are not.   Traditional populist regimes ran up government deficits to fund their social programs.   Unable to simultaneously to increase production and to raise wages, they followed inflationary monetary policies.     In contrast, today’s post-populist regimes in South America are running budget surpluses.  They have sound currencies.  Contrast them with the United States with its astronomical government deficits, and with its beleaguered dollar.

 

          Much of the secret of the nations that are today up-and-coming  lies in the answer to the question, “Who owns the natural resources that are not the products of anybody’s labor, and not  the products of anybody’s creative entrepreneurial skills, but are  gifts of nature to the human species?”

 

          Giving an ethical answer to this question provides one of the keys to putting money in the public purse, so that government can contribute its share toward reaching the goal of J.O.B.S. for all who seek and need employment. 

 

Peace and all good,

 

Howard R.

December 1, 2008

A Comment on Your Inauguration Speech: Letter to Barack #13

Dear President Obama,

          The main problem with the economy can be simply stated:  We depend too much on selling.  We depend too much for our daily of bread on selling something or other to get money to pay for it.     Since there is nearly always a shortage of buyers, it is nearly always hard to sell.   It is nearly always hard to sell ourselves; that is to say, it is hard to get a job.  In other words, as John Maynard Keynes pointed out, if the market is left ungoverned full employment will occur rarely and when it does occur it will be temporary.    As the same John Maynard Keynes eloquently explained, the market system depends on people having confidence that at some point their investments will pay off in cash.   As we know from recent experience, very strange and convoluted behavior sometimes results from efforts to produce in investors confidence that what they are being asked to buy will sell for more than they paid for it. 

 

          For many reasons we need to become less dependent on the sales way of life  --even though for many reasons we should not abandon the sales way of life altogether. 

 

          Simple as it is, our political leaders, our economists, and the public in general seem not to understand the problem of excessive dependence on sales.     They continue to think that the solution to a slow economy is to create more buyers.   They think in terms of stimulus and confidence-building, trying to crank up a system in which employment depends on sales and sales depend on customers.  

 

           Solving the main problem requires a different approach.   It requires reducing our dependence on selling.

 

          Some of the measures you are proposing are right on right track.   As you said in your inaugural speech, the question is not whether government is too big or too small; it is whether the government works.    Most people are now on board with you in acknowledging that there is no way to make the economy work without an expanded public role.   This goes part way toward solving the simple problem I have defined as the main problem.    Insofar as public services do not require market demand, the chronic shortage of buyers is not a barrier limiting either production or employment.

 

          Further, as the experiences of sensible social democracies have shown, a strong public sector properly managed produces a strong private sector.    Insofar as the private for-profit sector can accomplish the goal of creating jobs for all, it can do so much better when it partners with a strong public sector.   

 

          But still more is needed.   The still more that is needed was the unifying theme of your inauguration speech.   We need a positive attitude toward contributing to the common good; we need good will, responsibility, willingness to sacrifice for the benefit of others, a spirit of service, unity, patriotism in a constructive sense of the word, and all the wonderful communitarian values you talk about in most of your speeches.   In their pastoral letters on economic and social issues the Catholic Bishops of the United States have rightly said that overcoming poverty requires not two sectors but three:  the private sector, the public sector, and the voluntary sector.   The voluntary sector is not a matter of selling things.   It is a matter of giving. 

 

          On Wednesday the 21st when you meet with your economic advisors, I hope you remember what you said on Tuesday the 20^th.  I hope you will not fall back into the paradigm that is currently in meltdown, the one that treats profit-making as if it were the central and perhaps even sole human motivation.     That is not what history shows, nor what anthropology shows, nor what psychology shows, nor what neuroscience shows, as you have learned by now if you have followed my advice and read Riane Eisler’s   The Real Wealth of Nations, and as you probably knew already even before reading her book.

 

Peace and all good,

 

Howard R.