Remaking of Economy Taking Root
It is time for the economy to work for the people, not the elites; it is time for economic democracy.
As the school year ends, college students are coming home to a paucity of summer jobs and young adults are graduating into an economy with 27% underemployment and unemployment for them.This generation has inherited a failed economy. Not only do they graduate to lousy job prospects, but they also graduate with record high debts.
There are solutions to the economic crisis they face – and it is a crisis. In fact, a coalition of students and the Roosevelt Institute developed a “New Deal” for youth to address the student debt crisis. We support free college or trade school education for high school grads, but, as Stiglitz writes, we should at least be giving students very low cost loans.
The slightly older Generation X is not doing well either. Members of GenX suffered losses amounting to 45% of median net worth between 2007 and 2010. As a result, they are facing a genuine chance of downward mobility and may never be able to retire.
The older generations may have dodged a bullet, thanks to the fraud of austerity being exposed. Once again Obama’s constant attempts at a “Grand Bargain” that would cut Social Security and Medicare seem unlikely – for now. But, people need to remain vigilant because these cuts are really about privatization of both programs and a massive wealth transfer to Wall Street – an agenda of both parties, albeit using different rhetoric.
The young graduates and those still of working age will be suffering with significantly increased costs of health care, with much less coverage. The average cost for a family of four is already over $22,000 annually. Obama’s attack on the kind of healthcare all Americans should have, falsely labeling decent healthcare “Cadillac Plans,” is causing them to disappear and resulting in increased premiums, increased co-pays and less coverage. The new “bare bones” plans will put many more Americans at risk for serious health problems as well as health-related bankruptcy.
And, while Americans earn low wages and work without adequate healthcare, they also live in the only wealthy country in the world that does not guarantee paid vacation. According to a report by the Center for Economic and Policy Research, even the average vacation time given in private employment – a total of 16 days – does not meet the minimum requirement in Europe, 19 days. On top of that Europeans get 5 to 13 paid national holidays, while there are none in the U.S.
Why is the United States so abusive to its people? At the root, it is because of deeply embedded corruption. Both the government and the economy are corrupted by the power of big business money. This was on display in the week’s news. United Republic published an excellent infographic that shows the pay-off for investing in “ buying” the government. The Return on Investment is an extraordinary 77,500 percent for pharmaceutical companies. Oil companies had a return on investment of 5,900 percent, and multinational companies, 22,000 percent.
Mother Jones exposed how Citigroup was able to write a law that allowed tax-payer funded banks to engage in risky trading practices. The law passed the House with the exact words drafted by Citi. And, the banks’ constant pressure on the Commodities Futures Trading Commission resulted in weak regulation of the derivatives market that puts the economy at risk.
At the Department of Justice, it has become evident that the decision that banks were too big to jail was based on no research, no evidence, nothing except a corrupt agency headed by a former corporate lawyer, Eric Holder, with the chief of enforcement, Lanny Breuer, leaving the DoJ in March and going to the same firm where Holder worked for a salary of $4 million a year .
If big business can’t get what they want through Congress or the regulatory agencies, they fight on another playing field: trade policy and globalization. It is becoming evident that the Trans-Pacific Partnership is a forum for transnational corporations to do an end run around governments. .And as Joseph Stiglitz points out, it is also about hiding profits through manipulation of tax laws and creation of tax havens.
What has all this deep corruption of government and the economy created? According to the Organization for Economic Cooperation and Development, in all developing countries, “inequality has increased by more over the past three years to the end of 2010 than in the previous twelve.” Now the average executive of a publicly traded company’s income has risen to $9.7 million annually. And, corporate bullies like the CEO of Caterpillar are admired for keeping workers’ pay so low that many workers are on food stamps despite $66 billion in sales, generating $5.7 billion in profits last year.The CEO of Caterpillar, Doug Oberhelman, who pays himself $22 million, has been chosen to chair the National Association of Manufacturers. Shouldn’t these kinds of people be shunned rather than applauded?
On top of this, over the last 60 years there has been a dramatic change in the tax system to a more regressive tax. Payroll taxes now make up 35 percent of all federal government tax receipts, up from 11 percent in 1950. Corporate income taxes, meanwhile, now make up less than 10 percent of federal revenue, down from about 26 percent in 1950. Again, the corruption of government by concentrated corporate power is the root cause.
But, there are obvious lessons from around the world and people are waking up to them. Economist Jeffrey Sachs points to an example of success – Turkey; a country in a very challenging region of the world, close to the economic disasters in Greece and Cyprus. Turkey has created a steadily growing economy by remaking their finance system and investing in their country, especially with infrastructure improvements.
This past week, Fed Chair Ben Bernanke finally advised Congress that creating jobs will be better for the economy and reduce the debt better than austerity.
Maybe the reality of a bridge falling in Washington State will wake Congress up to the inexcusable neglect of infrastructure. Infrastructure spending has declined in the Obama administration despite the jobs it would create and the urgent need. In Washington State alone there are 759 bridges worse off than the one that collapsed and nationally there are thousands of bridges at risk of collapse. The economy could get moving again if Washington, DC just solved the infrastructure problem.
Economist Mark Weisbrot says another lesson can be learned from Europe. As bad as U.S. economic policy has been, Europe has handled the crisis worse. They instituted austerity measures and are still in a long recession. Why? Weisbrot points to the lack of democracy in economic planning in Europe, with the European Central Bank, European Commission and IMF in charge. This Troika has less accountability to the people than the Federal Reserve in the United States, which is inadequately accountable in our view.
The solution is more democracy. In fact, if there was more real democracy in the US, the country would be doing better, which is why we urge economic democracy. Mark your calendar for the Democracy Convention in Madison, WI this August 7 to 11. We are organizing the economic democracy track with the goal of giving you the information you need to create change in your community.
People are fed up and are taking action. That is the antidote that is needed. We saw it at the ballot box in the Los Angeles election where people voted for a constitutional amendment to end corporate personhood by 76.6 percent, joining 175 cities in calling for an end to the rule of money. People know a root problem is the corruption of government by giving human rights and the power to control elections to big business.
The best news of the week was people standing up and insisting that the government and big business respond to their needs. We’ve seen a series of major protests that have garnered little corporate media attention, but show a growing popular resistance. Low wage workers have been striking across the country. They went on strike in DC last week and this week there was a massive Wal-Mart strike with a major “Ride for Respect” planned for their annual shareholders meeting on June 7. And, we are seeing labor and communities working together, a powerful combination. Unions are also getting involved in creating worker-owned cooperatives, so workers can build wealth.
Also last week, homeowners who lost their homes protested the failure of the Department of Justice to prosecute the big banks and urged a housing policy that rewrote mortgages to the real value of homes.They organized days of inspiring protests at the DOJ and corporate law firms that protect the banks.
One other major protest is the worldwide protests against Monsanto. Two million people participated in protests in 436 cities in 52 countries. People are learning how to avoid Monsanto and their genetically modified products – essentially by buying organic and non-processed foods.
These really are only a few among many protests that have been bubbling up throughout the country on many issues, for week after week. (We summarize the resistance movement every week, if you want to receive that newsletter sign up here.) There is a popular resistance brewing and we all need to be part of it.
Finally, generations have been taught to love capitalism through the game Monopoly, but now there is an alternative – Co-opoly – that teaches people how cooperatives and working together is the most effective way to build an economy.
More and more people are understanding that the government and the economy do not work for them, that we have to build a mass popular resistance that not only challenges what we oppose, but also builds an alternative economy and new systems of governance. The fact that people are waking up and taking action gives us hope based not in the rhetoric of phony politicians but in the actions of the people. That is where the real power resides, if we exercise it.