http://www.newsweek.com/id/162401/page/1
The Fall of America, Inc.
Along with some of Wall Street’s most storied firms, a certain vision of capitalism has collapsed. How we restore faith in our brand.
By Francis Fukuyama | NEWSWEEK
Published Oct 4, 2008
The implosion of America’s most storied investment banks. The vanishing of more than a trillion dollars in stock-market wealth in a day. A $700 billion tab for U.S. taxpayers. The scale of the Wall Street crackup could scarcely be more gargantuan. Yet even as Americans ask why they’re having to pay such mind-bending sums to prevent the economy from imploding, few are discussing a more intangible, yet potentially much greater cost to the United States””the damage that the financial meltdown is doing to America’s “brand.”
Ideas are one of our most important exports, and two fundamentally American ideas have dominated global thinking since the early 1980s, when Ronald Reagan was elected president. The first was a certain vision of capitalism””one that argued low taxes, light regulation and a pared-back government would be the engine for economic growth. Reaganism reversed a century-long trend toward ever-larger government. Deregulation became the order of the day not just in the United States but around the world.
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Like all transformative movements, the Reagan revolution lost its way because for many followers it became an unimpeachable ideology, not a pragmatic response to the excesses of the welfare state. Two concepts were sacrosanct: first, that tax cuts would be self-financing, and second, that financial markets could be self-regulating.
Prior to the 1980s, conservatives were fiscally conservative”” that is, they were unwilling to spend more than they took in in taxes. But Reaganomics introduced the idea that virtually any tax cut would so stimulate growth that the government would end up taking in more revenue in the end (the so-called Laffer curve). In fact, the traditional view was correct: if you cut taxes without cutting spending, you end up with a damaging deficit. Thus the Reagan tax cuts of the 1980s produced a big deficit; the Clinton tax increases of the 1990s produced a surplus; and the Bush tax cuts of the early 21st century produced an even larger deficit. The fact that the American economy grew just as fast in the Clinton years as in the Reagan ones somehow didn’t shake the conservative faith in tax cuts as the surefire key to growth.
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Even at home, the downside of deregulation were clear well before the Wall Street collapse. In California, electricity prices spiraled out of control in 2000-2001 as a result of deregulation in the state energy market, which unscrupulous companies like Enron gamed to their advantage. Enron itself, along with a host of other firms, collapsed in 2004 because accounting standards had not been enforced adequately. Inequality in the United States rose throughout the past decade, because the gains from economic growth went disproportionately to wealthier and better-educated Americans, while the incomes of working-class people stagnated. And finally, the bungled occupation of Iraq and the response to Hurricane Katrina exposed the top-to-bottom weakness of the public sector, a result of decades of underfunding and the low prestige accorded civil servants from the Reagan years on.
All this suggests that the Reagan era should have ended some time ago.
As long as its normatively OK to “compete” with low-wage countries, First World workers will find themselves increasing turned into something resembling their Third World counterparts. While this may appeal to US business, what will it do to aggregate demand in the consumer economy?
The debt-driven economy is not coming back anytime soon, and the US consumer/worker is tapped out. Where will the demand for goods and services that are now in over-supply come from to reduce over-capacity? As the US standard of living slips, so will the US economy as a whole, and with it US business profit.
Moreover, the US is going to have to share future profit with foreign ownership more and more as it pays the ultimate rent on getting the funds it needs to keep operating — or else retrench.
But what I found interesting was that he didn’t specifically mention “socialized medicine” as being one of the things about the European system that was unsustainable.
Of course, everyone else paying about half of what we do for medical care pretty much settles any argument on that.
For those who don’t know who Francis Fukuyama is:
http://en.wikipedia.org/wiki/Francis_Fukuyama
“As a key Reagan Administration contributor to the formulation of the Reagan Doctrine, Fukuyama is an important figure in the rise of Neoconservatism.”
He’s been moving away from the NeoCons, but this article is a more broad-based departure than I was aware of.
Fukuyama:
Ibid., p. 5
Fukuyama erroneously and intentionally equates productivity as an economic concept with apparently self-evident matters that are essentially irrelevant to productivity. Productivity is not increased in any material way in a modern economy by time and effort on the part of the workers. It is increased by working smarter, not harder, along with technological innovation. In fact, research shows that a satisfied, relaxed and focused workforce is more productive that one that is over-worked and stretched. Doh.
This economic fact is intentionally misrepresented by the elite who use it to justify capturing proportionately more of the income gains instead of sharing productivity gains with labor. This tendency is evidence of the nature of capitalism to be exploitative unless counter-balanced by the bargaining power of labor and restrained by legislation, regulation and fiscal policy, in order to ensure distributive justice and advance national prosperity instead of encouraging “growth” as code for wealth capture at the top.
Reaganomics is a right wing political philosophy based on a particular variant of neoliberalism that intentionally undercuts the bargaining power of labor and opposes distributive justice, emphasizing “growth” as a code word for increased corporate profits and investor returns instead of national prosperity based on distributive justice and at the expense of a fair deal.
The things that Fukuyama decries as reducing productivity are instead evidence of capital’s desire not to share wealth from productivity gains equitably with labor, that is, benefits along with higher wages. On Fukuyama’s reading productivity increases due to lower wages and reduced benefits for labor, with gains dedicated to wealth capture by capital. Same-o same-o.
“Productivity is not increased in any material way in a modern economy by time and effort on the part of the workers.”
Your broad-brush loses me there. In certain limited situations, that may hold true. Not in any general sense. Our economy isn’t THAT modern.
It seems counter-intuitive that harder work doesn’t yield any great productivity benefits in comparison with smarter work, which is why it flies as a right wing bromide. The real productivity gains come from improvements in education, training, scientific advances, R&D, and technological innovation, not longer hours, shorter vacations, and fewer benefits, as the righties would like one to think.
For the first time in my living memory, this week I heard both George Bush and John McCain as the first Republican voices ever to utter the phrase, praise the productivity of the American worker. Surely it was a mis-speak but likely because they were selling the bailout plan, and American workers would have to pay the bill. I take terms to mean what they say. When I hear the word ‘productivity’ I think of the production of a greater quantity in a man-hour of work– nice and simple. Being a person who also thinks in the American sense of fairness, I’d allow a little latitude considering the equipment used to perform the work.
All the other defining terms are not productivity, they are cost of labor and working conditions imposed by the nation or the society. When those factors are added into the equation, business is saying we Americans should work for a dollar an hour or whatever rate they deem cost effective and die without medical care if needed, and never have time off for weekends or holidays with our families. Social Security is a cost shared by workers and employers. We have been told we need individual private plans we fund entirely ourselves. The events of the last week in the stock market and an investigation of the private plan touted by Bush in operation in Chile, show us that is a seriously bad idea.
What I’ve seen all my life is a work force that puts their all into getting the job done.
When those factors are added into the equation, business is saying we Americans should work for a dollar an hour or whatever rate they deem cost effective and die without medical care if needed, and never have time off for weekends or holidays with our families.
You just described life for Third World workers perfectly, which is where offshored jobs are going unless the American worker is willing to “compete.” Fukuyama still seems to think that this is a good idea.
Competition with the Third World is the neoliberal option. Mercantilism & protectionism is another.
Why not tax extranational broadband, for example? Infitesimally more expensive long distance telephony would kill the third world call center business.
“The Playboy reader invites a female acquaintance in for a quiet discussion of Picasso, Nietzsche, jazz, sex.†– Hugh Hefner
Right now it’s Republican neoliberalism vs. Democratic neo-mercantilism/neo-protectionism, neither of which are good options. The former seeks to control globalization and the second to negate its effects by looking backwards.
Progressive economists have put forward better options.
Progressive Economics Guide
Globalization and Progressive Economic Policy (book) Edited by Dean Baker.
Progressive Utilisation Theory (PROUT)
Taming Global Capitalism Anew (article in The Nation) By Joseph E. Stiglitz, Thea Lee, Will Hutton, James K. Galbraith, Jeff Faux, Joel Rogers, Marcellus Andrews & Jane D’Arista
This is important because if the US doesn’t get this right it will be in a race toward the bottom, and that just isn’t competitive in the long run. Some people will get very rich on the way, but in the end, the US will lose its status as a world leader as the American dream slips away and the lights go dim in the “shining city on a hill.” The attitude of American “exceptionalism” will get its comeupance, and it will be poetic justice aka karma.
The way the word ‘productivity’ is used by the business community is as if workers could bust ass and be more ‘productive’. In some cases by the use of automation or advanced equipment, we accomplish that. As far as I’m concerned, those complaining can take their jobs to other countries and forfeit access to the American market for their products.
All the free trade bull about leveling the playing field means dropping salaries here below a living wage. They can abandon that pipe dream.
The way the word ‘productivity’ is used by the business community is as if workers could bust ass and be more ‘productive’.
Don’ let ‘em get away with this BS.