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A year ago, Daily Kos was the scene of a great deal of back-and-forth about whether or not the economic recession was over and, if so, what that meant for the average American. Based on my observation, it meant little. Today, other diarists and columnists are wringing their hands over persistent unemployment, even as corporations reap enormous profits and sit upon a Smaug's hoard of cash. Wealth still flows exclusively to the uppermost tier of our economic hierarchy, jobs are still being exported overseas, and our trade deficit is still ballooning as the goods we import overwhelm those we export.

Little has been said of what all this means for us as an economic power and a nation. If it keeps up -- and it shows no sign of abating -- very soon we won't be either. And the reason is, we're falling deeply into economic backwardness. The real danger we face, and have been facing for the last decade, is regression.

Our regressing economy

Jane Jacobs put her finger on the problem in her 1983 book Cities and the Wealth of Nations: Principles of Economic Life. Trying to explain the "stagflation" of her time -- a combination of inflation and unemployment which, according to conventional economics, couldn't exist, because each ill was supposed to vary inversely with the other, like the ends of a seesaw -- she hit upon an insight while contemplating the "economic discomfort index" of Arthur M. Okun:

Just so, we can think of stagflation as a coherent condition in its own right: a condition of high prices and too little work.

The moment we think of it so, we instantly realize that this condition is not abnormal or unprecedented. Rather, it is the normal and ordinary condition to be found in poor and backward economies the world over. The condition is abnormal only in economies that are developing and expanding or have been doing so in the recent past, which of course are exactly the economies which have harbored, among so much else, economic scholars and thinkers from Cantillon right down to Milton Friedman and Arthur Okun.

From this she concluded:

If I am correct, the emergence of stagflation in formerly developing and expanding economies is appalling in its implications and portents. It is not just a problem of inflation to be gotten under control along with a problem of unemployment to be dealt with by mastering inflation, or vice versa. It is a condition in its own right, the condition of sliding into profound economic decline.

What indications do we have that this is going on in America now? The obvious one is unemployment. Between our most recent low, in November 2000, and our most recent high, in April 2010, the official unemployment rate (U3), which counts only unemployed workers actively seeking full-time employment, rose from 3.9 percent to 9.9 percent, while the U6 rate, which also includes "discouraged jobseekers" and underemployed workers, rose from 6.8 percent to 17.1 percent. The years 2001 through 2003 were particularly bad for the U3 measure, as full-time workers lost their jobs at a relatively higher rate (in other years, U3 and U6 have tracked each other closely).

Inflation is a less visible factor, largely because of how we choose to measure it -- i.e., without regard to quality of goods and without accounting for certain intangibles. In 2005, Sylvia Allegretto of the Economic Policy Institute wrote:

[T]he poverty measure is woefully outdated and little has been done officially to remedy the situation. For instance, the current methodology for poverty thresholds was designed over four decades ago in 1963 and has only been updated using the Consumer Price Index. Academics, policy analysts, and social scientists -- most of whom overwhelming agree that the Census poverty measure is seriously outdated -- have been engaged in dialogue and debate about alternative measures for some time.

Most analyses of alternative poverty measures find that an updated poverty measure would increase the percentage of those classified as poor (Bernstein 2001). Hence, one barrier to redefining poverty thresholds is political, with most presidents reluctant to have official poverty numbers revised upward during their administrations.

Allegretto engaged in her own redefinition: She calculated a basic family budget consisting of housing priced locally at the 40th percentile, food according to the USDA's "low-cost" plan for nutritional adequacy, the cost of owning and operating one car, child care for children ages 4 and 8, a weighted average of health care expenses, and the cost of clothing, personal care items, household supplies and other miscellaneous necessities from the Bureau of Labor Statistics' Consumer Expenditure Survey. What she found was that, for a family of two adults and two children, a basic household budget would range from $31,080 in rural Nebraska to $64,656 in Boston, with a national median of $39,984 -- more than double the official $19,157 poverty threshold for a family of four. Nationwide, 28 percent of families fell short of this line.

A 2008 update of Allegretto's story found an increase in the median basic budget to $48,778, ranging from $35,733 in Marshall County, Miss., to $73,345 in Nantucket, Mass., with most of the increase accounted for by housing, health care and child care. The official poverty threshold was $21,027, meaning that the basic budget now cost 2.3 times the defining poverty income, and the percentage of families falling short of it had inched up to 29.8. Undoubtedly, it's higher now.

So we have high unemployment, and ironically, given our obsession with obtaining everything as cheaply as possible, we have high prices relative to what we can afford to pay. This, according to Jacobs' theory, is an indication that the United States is in deep economic decline.

What's the nature of this decline? Essentially, a reduced ability to provide for our own economic needs and generate future wealth-producing capacity. Jacobs posits that economic growth is driven by the local manufacture of goods formerly bought from someplace else. This process of import replacement requires innovative spirit and the ability to operate independently on a small scale. It ignites a cycle of economic activity:

  • Replacements stimulate more replacements, not only of finished goods but also for goods used in the production process.
  • The wealth retained permits expansion, so that the replaced products can be exported as well as consumed locally.
  • The capital raised from these exports funds more innovation and allows the purchase of other imports, which may themselves be replaced later.

The generation of capital in this manner allows an economy to adapt when another economy becomes able to produce the same goods more cheaply -- it simply stays ahead of the curve, producing something else that it can consume domestically and export. This cycle allows the economy to expand in five ways: enlarged markets for imports, job growth, transplants of city work into exurban locations, new technology and growth of capital.

Places that stop replacing imports with domestic production lose capital, are overtaken technologically, suffer from high unemployment and reduced buying power, and over the long term "sink into hives of rural subsistence" and gradually even lose the knowledge of past innovations, such as craft techniques. Or they become exploited monocultures or outposts of transplanted industries, or their workers abandon them for more prosperous economies. Their bonds with other advanced economies dissolve. In short, they are no longer in charge of their own economic destiny; they become dependent on others.

Thus, a decade of exporting our manufacturing facilities and technological knowledge and of hoarding wealth for private gain rather than reinvesting it in job creation and research has amounted to eating our seed corn. We're losing both the capital and the actual, physical production activity necessary to pull our economy out of its tailspin.

But it's even worse than that: We've allowed our economic vitality to be drained by spending that doesn't feed into the import-replacement growth cycle, specifically defense spending, welfare spending and something Jacobs didn't foresee: a perpetual-motion financial sector built on making money by making money.

Welfare spending is a moral obligation in our society, but it's one that's better met by creating productive jobs for everyone than by handing out money for nothing. As for defense spending, military bases absorb the products of economic activity but send nothing back out; the research and development that have produced such benefits for consumers, such as the Internet, could have been accomplished just as easily, and with greater economic efficiency, by funding it through universities and private companies. War is an even bigger drain -- one might as well take all the money that's spent and literally burn it. The $2 trillion spent on the war in Iraq is lost to us forever. And the finance sector? Aside from becoming an increasing source of friction in the economic engine, rather than the lubricant it's supposed to be, it's wandered off from the real world of necessary goods and useful services to play in a world of fantasy and invention, betting piles of real people's real money on virtual products and abstract measures of market behavior -- with some ugly real-world consequences, including the creation of an artificial worldwide wheat shortage.

Whatever further money and effort are spent on economic recovery, they must be targeted at increasing the amount of productive activity. That means jobs, particularly in manufacturing and technology research, but also in the infrastructure creation and repair that our nation needs so badly. There's so much work to be done, and there are so many people available to do it . . . the only thing missing is the mechanism to pay those people to do that work.

Somebodies and nobodies

So why has this crisis been allowed to happen? Surely this is just as bad for those at the top of our economic ladder as it is for those at the bottom, isn't it? Well, no, apparently not. As I mentioned before, 30 years of productivity gains have produced no increase in yearly wages for the mass of U.S. workers, and the wages of those at the bottom have in fact declined, while all the gains have gone to those at the very top. This crisis we're in right now was only acknowledged as a crisis when it began to threaten the luxury lifestyle of the executive elite. As soon as the "worst [was] over," according to the "leading economic indicators," Wall Street went back to business as usual.

This is a problem. And the root cause of the problem is a failure to acknowledge the personhood of ordinary Americans like you and me. In the language of the author Robert Fuller, we're nobodies. We lack the rank, the status, the power that grants us the right to be acknowledged. Corporate executives, Wall Street traders, senators and pundits are somebodies. They have rank, status and power, which gives them access to wealth, access to the rules about how wealth may and may not be accumulated, access to the means of production, access to the message machines that broadcast their point of view -- and the privilege of abusing and exploiting us nobodies without remorse or consequence. Barack Obama captured the essence of this state of affairs in The Audacity of Hope: Thoughts on Reclaiming the American Dream: "It's hard to imagine the CEO of a company giving himself a multimillion-dollar bonus while cutting health-care coverage for his workers if he thought they were in some sense his equals." Then, at least, he understood.

When the stimulus bill was passed, President Obama spoke forcefully of helping Main Street as well as Wall Street, but this has not come to pass. The somebodies have reasserted their dominance over the nobodies -- not just with respect to the economy but on health insurance reform, climate change, labor rights, you name it.

Unfortunately for us, with the exception of the hiccup of 2008–09, the existing system has worked well for the somebodies, and they see no reason to make any fundamental change to it. Unfortunately for them, they're in the same leaky boat we're in, even if they're in first class and we're in steerage. If it sinks -- or if it's attacked by pirates -- we're all done for.

But in the short term, don't expect them to see this. Though backward economies have never served the majority of their people well, they've typically been good to those at the top. Other than Tsar Peter the Great (whose attempt to modernize Russia failed because of that country's utter lack of import-replacement capacity), you won't find too many historical somebodies who've given much thought to the impact of economic backwardness on the well-being of their peoples. On the contrary, you'll find a plethora of examples of a maxim of Frederick Douglass: "Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them." We're finding that out again today. How much economic regression will the American people quietly submit to? Shouldn't we be refusing to submit right now?

Fall down go boom

Any person who wants to call himself well-informed needs to read Collapse: How Societies Choose to Fail or Succeed by Jared Diamond. It's not an especially easy or lively read -- it took me a couple of tries before I got into it -- but I don't think it's hyperbole to suggest that it may be the most important book ever written, at least with respect to our nation's future, so the effort must be made.

Diamond analyzes a number of societies over the course of history -- societies that fell, societies that stagnated, societies that survived and even prospered while their similar neighbors fell apart, societies that struggle on the margins of stability today. What he finds is that there are five major threats that can bring a society down. Actually, a sufficiently resilient society can survive any one of them at a time, but they don't always come one at a time. Two at a time can cause a society to go into prolonged decline and stagnation. Three at a time is rarely survivable; societies facing such a "perfect storm" disintegrate, sometimes messily.

These five threats are environmental degradation, climate change, attacks by hostile neighbors, abandonment by friendly allies, and rigid ideology.

Let's take stock. Climate change? That one's coming. We know it's coming. If we had a goddamn ounce of sense in our heads, we'd be preparing for it instead of putting a bucket over our head and running around in circles. Environmental degradation? A year ago, that was more of a regional problem than a nationwide problem, but then came the BP gusher, destroying an ecosystem that produced food (and created jobs), beaches that attracted tourists (and created jobs) and confidence in the industry that supplied our main source of energy (and created jobs). Who knows what further damage it might do -- or what other catastrophic incidents might compound the damage? Hostile neighbors? Fortunately, we no longer have an administration that goes around picking fights with any nation or culture that doesn't kowtow. Similarly, I think we have less cause to fear that our allies will abandon us . . . unless . . .

It's that fifth one that's going to kill us. Rigid ideology. Somebodies and nobodies. American exceptionalism. The addlepated, misplaced reverence for the "free market" (read: privatized profit and socialized risk). Our political servility toward the reactionary, out-of-step South and what Jake McIntyre hilariously called the "insane vuvuzela of Republican fringe lunacy." Nothing dooms a society heading toward the precipice like an unwillingness to change course. Moreover, the probability approaches 100 percent that if we find one of those other threats bearing down on us, our rigid ideology will provide the catalyst that blows everything to smithereens, whether it be alienating our allies by refusing to act on climate change, inciting a new wave of terrorism through economic and cultural imperialism, or, through greed and negligence, allowing a wide-scale environmental catastrophe to . . . hey, wait a minute.

As worried as I am about the long-term effects of our rigid ideology, I'm even more worried about the American public's lack of willingness to stand up to it forcefully. The Declaration of Independence was never so right as it is today: "[A]ll experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed."

These threats are dangerous enough even in a healthy economy. The further we allow our economy to regress, the more acute all these threats become. We'll lose the resources we need to clean up environmental disasters or invest in climate-neutral energy. We'll have less global influence with which to deter enemies. We'll be left behind by our closest trading partners. And you may have noticed that the political machinery in nations with backward economies tends to be reactionary, self-serving and repressive, not forward-thinking and adaptable.

Where do we go from here?

Despite my railing against rigid ideology, there are some consensus opinions that I think we're right to cling to and that we must not let go of, however fierce the pushback: We must not let go of our national identification with human rights and dignity. We must not abandon the idea that the right to govern flows from the consent of the governed, or that every citizen is entitled to a voice in his government. Our civil liberties are nonnegotiable.

But Thomas Jefferson's follow-up to the words quoted above are compelling: When citizens are subjected to "a long train of abuses and usurpations" from their government, "it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security." Is there any doubt that our current economic crisis has been caused by "a long train of abuses and usurpations" of working people, of citizens, of every "nobody" in this country, at the bidding and at the hands of economic elites?

Jefferson called it "self-evident" that all human beings are entitled to life, liberty and the pursuit of happiness. I'd like to add a second triad of rights to his, an economic triad: that just as all people, as political beings, are entitled to life, liberty and the pursuit of happiness, all people, as economic beings, are entitled to security, flexibility and opportunity.

Security: the assurance that misfortune won't knock us off the ladder into the economic abyss.

Flexibility: the freedom to choose a different role, a different field, a different way of making ourselves socially useful, or to continue in our current role and field while dealing with other commitments in our lives.

Opportunity: the power to advance ourselves and elevate our condition based on effort and merit, and the right to be informed of our options and properly prepared for them.

What kind of economic system should we aspire to, work toward and demand from our leaders? One that takes this nation's wealth -- less vast now than it once was, but still vast -- and puts it to productive use, replacing imports, creating jobs and researching new technologies. One that treats everyone -- employer, employee and unemployed alike -- as a somebody, deserving of dignity both in the workplace and outside it. One that reduces and eventually eliminates the need for welfare by providing meaningful work for every able-bodied adult. One that not only respects but promotes security, flexibility and opportunity for all.

It may be capitalist, it may be socialist, it may be a social-democratic mixed economy, or it may be something entirely new. But it must be all the things described above, for the sake of our economic well-being. There is nothing more essential at this moment in time than reversing the regression of our economy. All the other things we pin our hopes on -- workers' rights, universal health coverage, climate change prevention, energy independence, affordable housing, job creation, support of small and independent businesses, school improvement, rescuing states and municipalities from bankruptcy -- depend on our re-creating a self-sustaining domestic economy. The alternative is ever-increasing poverty and unemployment, ever-dwindling dignity, a hollowing out of our democracy, and America's eventual collapse.

Thus, in addition to a new economic system, we have to aspire to, work toward and demand a new political system as well. One in which no American is a nobody, and in which every American can be heard, both by his elected representatives and by his fellow citizens. One that respects the will of the majority and doesn't allow a reactionary minority to exert disproportionate influence. One with the foresight to see catastrophe on the horizon and the adaptability to steer clear of it. One in which no corporation has the right to prosper at the expense of the general welfare.

Let's not allow the dispiriting setbacks of the last year and a half define our politics or drive our economy any longer. Let's insist on a healthy and self-sustaining economy that creates wealth and work for all of us. Even if the "recession" is over, there's still work to be done. The end of the Great Regression begins when we insist that our representatives, our employers and our news media acknowledge us as somebodies.

Originally posted to Geenius at Wrok on Wed Jul 28, 2010 at 06:13 AM PDT.

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Comment Preferences

    •  The Gigantic (10+ / 0-)

      hole in economic theories today is their inability to really articulate how the US defends its standard of living in the era of globalization.  One of the foundational beliefs of economics is comparative advantage.  It is widely accepted even by people like Krugman.

      I highly recommend an article written by Andy Grove, a founder of Intel, who argues that we need a import tax.  He at least identifies the scale of the problem.

      But the demise of the ability of the nation-state to limit the power of capital is occuring across all of the industrialized world, and nobody that I have read has a serious notion of what to do about it.  See an IMF document from 2009 that discusses this problem for a great introduction.

      The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

      by fladem on Wed Jul 28, 2010 at 07:16:40 AM PDT

      [ Parent ]

      •  Galbraith the Younger, (1+ / 0-)
        Recommended by:
        Earth Ling

        in The Predator State claims that Ricardo's theory of comparative advantage if flat false. His counter-example is Japan. There is no reason Japan should have had an advantage in automobile production; no coal, no steel.

      •  Yup... (6+ / 0-)

        The corporations and the wealthy that control them have no real love-loss for the nation-state.  If America collapses in a puddle of 'Running Man' poverty and chaos, they will just move to the next country - or be able to hire private security forces for their uber luxury gated communities.  The wealthy have no connection to what is happening to the country, by design.

        Irony: Apparently, the teabaggers would have apologized to the East India Trading Company for dumping their tea into the Boston Harbor.

        by RichM on Wed Jul 28, 2010 at 07:30:10 AM PDT

        [ Parent ]

        •  The Maya nobles thought they were safe (5+ / 0-)

          in their stone palaces. They were wrong.

          The French nobility thought they were safe in their stone castles. They were wrong.

          The Russian nobles...need I go on?

          If it's
          Not your body
          Then it's
          Not your choice
          AND it's
          None of your damn business!

          by TheOtherMaven on Wed Jul 28, 2010 at 07:34:24 AM PDT

          [ Parent ]

          •  That... (1+ / 0-)
            Recommended by:
            YucatanMan

            I fear, is exactly were we are headed.  Nobody owns property - they only own it because there are government institutions that enforce that ownership.  When that government is 'drowned in a bathtub', who is going to enforce that ownership?

            Irony: Apparently, the teabaggers would have apologized to the East India Trading Company for dumping their tea into the Boston Harbor.

            by RichM on Wed Jul 28, 2010 at 07:36:59 AM PDT

            [ Parent ]

            •  Of course this is where we're headed. (1+ / 0-)
              Recommended by:
              Geenius at Wrok

              The trouble is that the kleptocrat class, the Goldman Sachs types, don't know any history, not even back to 1929.

              They didn't learn about the dangers of breaking the system which creates their wealth, and they believe "it can't happen here".

              Those of us wealthy people who actually studied history really want to get rid of those people who are killing the goose which laid the golden eggs, because they're going to destroy it for all of us.

              -5.63, -8.10. Learn about Duverger's Law.

              by neroden on Thu Jul 29, 2010 at 04:08:45 PM PDT

              [ Parent ]

        •  BUT (5+ / 0-)
          Recommended by:
          RichM, ATinNM, relentless, Earth Ling, ozsea1

          and this is why this problem is bigger than people realize, is that there is no one who can replace the American consumer.

          Countries all over the world tell themselves that they will export more - but to whom?

          The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

          by fladem on Wed Jul 28, 2010 at 07:38:40 AM PDT

          [ Parent ]

          •  Which is why Jacobs emphasizes (5+ / 0-)

            production for domestic consumption. It's basic sustainability and self-sufficiency: Take care of yourself first, and then if you have some left over, share.

            "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

            by Geenius at Wrok on Wed Jul 28, 2010 at 07:42:57 AM PDT

            [ Parent ]

          •  True... (3+ / 0-)
            Recommended by:
            relentless, YucatanMan, Earth Ling

            But they didn't feel that pinch when the financial crisis hit.  Those banks should have been nationalized and the executive team should have been kicked to the curb.  But that didn't happen.  So the race to the bottom continues.

            Irony: Apparently, the teabaggers would have apologized to the East India Trading Company for dumping their tea into the Boston Harbor.

            by RichM on Wed Jul 28, 2010 at 07:58:57 AM PDT

            [ Parent ]

        •  Who's Needed? (5+ / 0-)

          I just read a provocative article on this by Michael Lind - whether America's rich need the rest of us anymore -

          http://www.salon.com/...

          •  Interesting article... (1+ / 0-)
            Recommended by:
            YucatanMan

            But he did leave out another historic possibility.  Armed revolution.

            Irony: Apparently, the teabaggers would have apologized to the East India Trading Company for dumping their tea into the Boston Harbor.

            by RichM on Wed Jul 28, 2010 at 08:59:40 AM PDT

            [ Parent ]

            •  He didn't leave it out (3+ / 0-)
              Recommended by:
              RichM, YucatanMan, Earth Ling

              He just took it as axiomatic that it wouldn't happen here.

              "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

              by Geenius at Wrok on Wed Jul 28, 2010 at 09:27:40 AM PDT

              [ Parent ]

              •  so, so stupid (1+ / 0-)
                Recommended by:
                Geenius at Wrok

                I think this is the unstated axiom which causes the Goldman Sachs kleptocrat types to be very, very stupid.  They have no sense of the fragility of their position.

                Neither did the French royalty or nobility prior to 1789.  And look what happened to them.

                In contrast, when the upper classes recognize the fragility of their position, they can maintain the lifestyle of their children for many generations with only moderate concessions.  Look at England's history.

                -5.63, -8.10. Learn about Duverger's Law.

                by neroden on Thu Jul 29, 2010 at 04:10:41 PM PDT

                [ Parent ]

    •  It's by design... (8+ / 0-)

      The wealthy do not want to invest in new production strategies.  That means dealing with workers who demand things like living wages, healthcare, pensions, etc.  They only want to preserve their wealth and doing so in make-believe financial instruments fits the bill.  We pretty much bailed out the wealthy by underwriting those instruments when everything went south and we only provide weak regulation as a way of preventing it from happening again.

      This ideology has taken its grip.  Witness all of the hyperbole over deficits while the consumer markets continue to stagnate.  Nobody is spending, nobody is investing in small business which will fuel the jobs to provide the righteous cycle you mention above.  And Republicans and Democrats alike, including the economic team in the WH, are more scared of deficits than of the complete collapse of the middle class.  Hell, there is even a vocal group that is rallying and screaming for it (the teabaggers).

      Your prescription is correct.  I just don't see anybody that is willing to fill it.  Certainly not this Democratic leadership or this administration.  Instead, it's a constant stream of compromises based upon a failed ideology.  I honestly think it will continue to happen and when we meet another collapse, all Hell is going to break lose.  I just have to figure out how to capitalize on it with what little capital I have.

      Irony: Apparently, the teabaggers would have apologized to the East India Trading Company for dumping their tea into the Boston Harbor.

      by RichM on Wed Jul 28, 2010 at 07:27:41 AM PDT

      [ Parent ]

      •  This is described by Veblen (1+ / 0-)
        Recommended by:
        Geenius at Wrok

        in Theory of the Leisure Class, he makes a distinction between industrialists -- who can be wealthy, but who believe in 'getting their hands dirty', understanding and dealing with actual production -- and the Leisure Class whose highest goal is to do nothing actually useful, and whose highest goal is basically to have 'the most' by stealing stuff from other people.

        -5.63, -8.10. Learn about Duverger's Law.

        by neroden on Thu Jul 29, 2010 at 04:13:39 PM PDT

        [ Parent ]

    •  So glad this was on the rescue list and (6+ / 0-)

      I found it. EXCELLENT diary and worthy of huge attention.

      I'm hotlisting it and sending the link around to many more people.  And I'll be sending it to a number of conservative know-nothings, not that I have a lot of hope for them.

      Tipped and Reccd.

      Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

      by YucatanMan on Wed Jul 28, 2010 at 09:52:54 PM PDT

      [ Parent ]

    •  Oh, excellent diary. (0+ / 0-)

      I have little to add.  You've nailed it.

      -5.63, -8.10. Learn about Duverger's Law.

      by neroden on Thu Jul 29, 2010 at 04:03:03 PM PDT

      [ Parent ]

  •  It's interesting that you don't acknowledge (0+ / 0-)

    how fundamentally wrong Jane Jacobs was when she wrote that we'd entered into a period of long-term decline (two-plus decades of low-inflation, low-unemployment, high-growth with a few short, shallow breaters immediately followed the publication of that book) and ask why she was so wrong.

    Hint: central planning turned out not to be the solution.

    •  She wasn't wrong. (12+ / 0-)

      America had a decadelong economic resurgence thanks to advances in biotechnology, miniaturized electronics, personal computing and the Internet -- exactly the sort of import-replacing activity she points to as essential for an economy to flourish.

      Then we took all the knowledge and technology we'd gained and shipped it overseas to China, and the economy went due south again.

      "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

      by Geenius at Wrok on Wed Jul 28, 2010 at 06:28:44 AM PDT

      [ Parent ]

      •  Much of That Boom Was the Creation of the Out- (6+ / 0-)

        sourcing infrastructure. It's the infotech revolution that makes it so feasible to outsource both labor and knowledge work.

        We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

        by Gooserock on Wed Jul 28, 2010 at 06:34:13 AM PDT

        [ Parent ]

        •  Sad but true (6+ / 0-)

          We manufactured our own economic demolition equipment.

          "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

          by Geenius at Wrok on Wed Jul 28, 2010 at 06:34:54 AM PDT

          [ Parent ]

          •  Well, we manufactured it and we fell for (5+ / 0-)

            "Free Trade Agreements" that were simply a race to the bottom for everyone.

            There's a book somewhere - I've been trying to find it for a couple weeks - that examines economic history and contends that no economically powerful nation ever became that way without protective trade policies. Oh, tonight's the magic night:  Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

            Reagan and all his trickle-down baloney started the mess and "the government is the problem" destroyed any chance at maintaining sensible protective trade policies in concert with vigorous trade.  With "Free Trade," the doors were flung open and allowed our manufacturing base to pick up, lock, stock and barrel and literally walk away.  

            Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

            by YucatanMan on Wed Jul 28, 2010 at 09:50:07 PM PDT

            [ Parent ]

        •  Yes (3+ / 0-)

          How true.  Our leading export was jobs.  And as for industries, surely the info/Internet ranks way above biotech in terms of accounting for growth.

      •  I thought that was the import-replacement cycle (0+ / 0-)

        As you develop, you ship lower-level jobs overseas, and then concentrate on even more advanced activities.

        •  Almost, but not quite (3+ / 0-)

          In the import-replacement cycle, other countries that have been importing your advanced technology learn to make it for themselves, do so more cheaply and eventually export it back to you. But in the meantime, you've been reinvesting the profits from your high-tech exports into improved manufacturing processes and research into new technology, so that by the time, say, China is selling our laptops back to us, we're already producing the next big thing.

          American companies short-circuited that cycle by taking the entire manufacturing process, relocating it overseas and pocketing the profits. So now American workers aren't doing the work, American suppliers aren't benefiting from the multiplier effect, and the know-how is dying off.

          "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

          by Geenius at Wrok on Wed Jul 28, 2010 at 07:29:20 AM PDT

          [ Parent ]

          •  I would agree with that to an extent (0+ / 0-)

            I just think that you can't cite Jane Jacobs from 1983 talking about long-term decline and what her solutions for it were, and then completely ignore that totally different solution were implemented, which resulted in two-plus decades of unprecedented growth and prosperity. Maybe it was all just "bubbles" and no we're "really" going to see the decline that she saw then, but I would think you'd have to at least make that argument, and not just omit all consideration of the "elephant in the room".

    •  The American Middle Class Peaked in 68 or So. (7+ / 0-)

      They began a long decline not much later, offset at first by moving women into employment.

      But by the time of Reagan the middle class began gradually reducing savings and taking on debt to hold ground.

      During the Clinton so-called good economy, whatever improvements we had in incomes, nobody went anywhere forward on wealth. Nobody in the bottom 99%.

      Image Hosted by ImageShack.us

      And this chart was made before we'd know how much wealth was fantasy bubble wealth in the end.

      So is the population the nation? Or are we just the occupants?

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Wed Jul 28, 2010 at 06:33:23 AM PDT

      [ Parent ]

      •  Could you post the source for that chart? (2+ / 0-)
        Recommended by:
        neroden, StrayCat

        I'm building a collection of links to good articles on the middle class, tax cuts for the rich,, etc.

        Thank you!

        Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

        by YucatanMan on Thu Jul 29, 2010 at 08:58:51 AM PDT

        [ Parent ]

    •  Answer: bubble blowing. (4+ / 0-)
      Recommended by:
      NoMoreLies, ohmyheck, Earth Ling, Azazello

      Isn't it pretty obvious that what "beat" stagflation was not real, substantive reforms of the system but Fed-fed asset bubbles that have now all burst?

      Real wages have continued to be stagnant or decline with one brief uptick in the 90s.

      Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all. - JM Keynes

      by goinsouth on Wed Jul 28, 2010 at 06:40:23 AM PDT

      [ Parent ]

      •  No, it was a real period of growth (3+ / 0-)
        Recommended by:
        ATinNM, NoMoreLies, Earth Ling

        led by American advances in technology. The problem, as I mention above, is that instead of reinvesting the profits into further growth, as in Jacobs' import replacement cycle, corporate bosses simply pocketed them, so the engine turned over once and then stalled again.

        "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

        by Geenius at Wrok on Wed Jul 28, 2010 at 07:33:51 AM PDT

        [ Parent ]

  •  Tip snd Rec for the Hobbit reference...NT (2+ / 0-)
    Recommended by:
    recentdemocrat, Earth Ling

    "Ridicule may lawfully be employed where reason has no hope of success." -7.75/-6.05

    by QuestionAuthority on Wed Jul 28, 2010 at 06:23:33 AM PDT

  •  Considering That Getting Here Involved Repealing (12+ / 0-)

    thousands of protections and incentives from the time of our greatest economic period, simply reinstating those policies --almost all of them the product of the Democratic Party-- might be all we need to do.

    The problem is institutional memory.

    Nobody younger than boomers remembers living in the country under those policies, and that includes the President. It's been so long since we ran the country on a level or ascending track that the policies seem preposterous compared to the established normality that we now know has been 40 years of decline.

    Everyone comparing today's Dems with any from the past forgets one of the elephants in the room, and no, the Republicans are the other elephant.

    Most of the past leaders we revere today were inventing policy from scratch with little or nothing to guide them.

    Today's Democrats have the entire record of one, often two and sometimes 3 periods when now-gutted policies were implemented and the results can be seen. Many have one or two occasions when they were weakened or repealed, and we have the record of how their sphere worsened as a result.

    This more than anything else about present party leadership is what drives the real-world reality wing mad in dealing with the political reality wing. Only one of our present crises is new --climate change, and not even energy bottlenecks are new to American history. All the rest are well precedented, and we have extensive records of both successes and failures at dealing with these same issues.

    It's not rocket science, it's not science at all. It's history, it's cut and paste.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Wed Jul 28, 2010 at 06:29:50 AM PDT

  •  Tipped and recced (2+ / 0-)
    Recommended by:
    RichM, Geenius at Wrok

    for writing a diary on an economic topic as seen from a different angle.

    It is one that I haven't really seen discussed in a diary, simply mentioned in comments.

    Food for thought.....non, nom, nom.....

    One man alone can be pretty dumb sometimes, but for real bona fide stupidity nothing beats teamwork." - Mark Twain

    by ohmyheck on Wed Jul 28, 2010 at 06:29:57 AM PDT

  •  Great stuff. Tipped and rec'd. (2+ / 0-)
    Recommended by:
    YucatanMan, ohmyheck

    Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all. - JM Keynes

    by goinsouth on Wed Jul 28, 2010 at 06:40:59 AM PDT

  •  The infantilization of America will be complete. (8+ / 0-)

    As you stated.

    ". . . they are no longer in charge of their own economic destiny; they become dependent on othe,rs."

    Sounds like the state of infanthood, except for us, if we become merely a resource colony we have the recipe for serfdom.

    Distrust of authority should be the first civic duty. - Norman Douglas

    by Fossil on Wed Jul 28, 2010 at 06:44:15 AM PDT

  •  I especially like this at the end (3+ / 0-)
    Recommended by:
    Geenius at Wrok, YucatanMan, Fossil

    Thus, in addition to a new economic system, we have to aspire to, work toward and demand a new political system as well. One in which no American is a nobody, and in which every American can be heard

    I could not agree MORE. Wrok On!

    One man alone can be pretty dumb sometimes, but for real bona fide stupidity nothing beats teamwork." - Mark Twain

    by ohmyheck on Wed Jul 28, 2010 at 06:51:03 AM PDT

  •  As long as war on consumer lasts...... (5+ / 0-)

     our economy will remain stagnant.  

      The bedrock principle of Republicanism is to disable the consumer by using the power of government to funnel resources to what they call the "supply side"  - the providers of goods and services and most specifically the biggest, most incompetent, inefficient, wasteful and profligate of the supply side denizens.  Think Enron, Caperton, Massey, BP - in the words of Dubya - the haves and have mores.

      Unfortunately - only the consumer can provide the demand (I remember when we used to think of the supply-demand "equation') for the supply side titans.  The result of the prolonged Dubya war on the consumer is that Americans realize that their houses are full of defects - and there is no remedy;  their investments can be looted - and there is no remedy;  the goods they buy are shoddy and poorly made - and there is no remedy;  the banks are free to rewrite credit card contracts, invent fees, prey upon retail shoppers, charge usurious interest - and there is no rememdy.

     So - as long as the American consumer feels, rightly, that there is no value being exchanged in the marketplace - the marketplace will remain depressed.

     

  •  Unfortunately, we're still at the bottom (2+ / 0-)
    Recommended by:
    relentless, YucatanMan

    of the slide looking up, waiting for the next kid to slam into us with his (probably Republican) feet.

    Peace

    Some people make you want to change species

    by ulookarmless on Wed Jul 28, 2010 at 07:11:32 AM PDT

  •  Bernanke is an expert on the Great (2+ / 0-)
    Recommended by:
    Geenius at Wrok, YucatanMan

    Depression, but it is like he uses his knowledge for creating another depression instead of avoiding one. He and his ilk are for the bail out policies and globalization. Now he wants to work on Social Security.

    Our politicians are not stupid. They know the likely outcome of the laws they pass and the laws and programs they dismantle.

    The republican and democratic leaders are working together and probably have a 'master plan'.  It couldn't be just to gut Social Security.  Social Security may be the first step, then there are the state, teacher and  military retirements, etcetera.

    The more people who are employed, the more money Social Security would take in and the more federal and state taxes would be paid and make it easier to pay back Social Security and the other retirees.  We know that and they know that.

    Dec. 03, 2009

    In testimony before the Senate Banking Committee Bernanke reminded Congress that it has the power to repeal Social Security and Medicare.
    "It's only mandatory until Congress says it's not mandatory. And we have no option but to address those costs at some point or else we will have an unsustainable situation," said Bernanke.

    He won reappointment. 60 votes would have stopped him.  That should tell us something.

    Bernanke and More

    Something that might help is to focus on one person like Bernanke at a time.  He already looks stressed, lets focus on him with fox like precision.

  •  Great (3+ / 0-)
    Recommended by:
    Geenius at Wrok, YucatanMan, StrayCat

    Excellent and thoughtful diary. We need to recognize, as Keynes, Gailbraith and others (like jacobs) tell us classical economics is bunk. It is the political process that creates the economics. There are no "Iron Laws" or "invisable hands" to save us. If they exist, they exist only to be weilded by thise with political power for their own benifit.

    See also the writings of Celso Furtado:
    "No society manages to completely escape the influence of its heretics, and nothing has had such importance in history as heresy." Global Capitalism.

    And those of his deciple Ladislau Dowbar:
    "Economic democracy therefore begins with the ethics of results. It does us no good to know that corporate directors are well intentioned, that they contribute to schools in poor areas if, as a whole, the result is a worsening of inequalities and environmental destruction."Economic Democracy-Strolling Through the Theories.

    I have also written in this venue (Trenz Pruca) and in my own blog (Trenz Pruca's Journal )about this and called for action, but nowhere near as well as you, Bravo.

  •  This is one of the best economic diaries (4+ / 0-)

    I have read for a long time.  Thank you for writing and sharing it with us.

    A nation's wealth is built, as you say, by taking raw materials, or materials at any rate, and turning them into something useful, needed, more valuable than the parts alone.   That is the very definition of creating wealth.

    In our country, due to some hare-brained scheme called "free market philosophy" (also called Fresh Water Economics by Paul Krugman; aka, the Chicago School), we have dropped all barriers to imports from the lowest common denominator.

    We do not care -- literally -- if China uses slave labor (they do), child labor (they do), indentured servant labor (they do), or prison labor (they do) along with inflicting massive climate damage on an epic scale as long as the plastic buckets and tainted dog food are cheap.

    We have shipping -- literally -- our nation's manufacturing capacity overseas. When World War II came around, we had the machine shops, the knowledge, the resources and the will to out-build every other nation in war materiel and win the damn war.  Has anyone stopped to think just how we'd do that today?

    We cannot even produce our nation's own clothing and shoes, let alone rapid-build ourselves into a self-defensive or offensive posture needed for real war.  What Iraq and Afghanistan have proven to us is that the 'small-manpower military' may be able to defeat, explosively, another military.  But it cannot hold territory. It cannot defeat large numbers.

    And just what does China have to their advantage? Massive numbers of personnel. Vast territory. Manufacturing base of the entire world.

    We are actually building -- through our Walmart purchases -- the machine that will be our eventual defeat. China.

    As the diary points out, as we go into decline, our power will be supplemented by another. We can see who that other is today.  China and possibly India as well.

    We have to put to death the concept of "free market" as practiced today - private profits accumulated at the top / socialized losses spread among the poor. We have to end "free trade" that encourages the types of labor and environmental abuses seen both in the Far East and here in our own hemisphere. Sweatshop labor should be a global concern.

    Fair trade policies would help our manufacturing get back on its feet. Perhaps Levi's could afford to sew their jeans here again.

    Educational policies should be initiated that provide college educations for those who make their grades. Period.  It is a national security matter. Without a creative, educated, scientifically-literate population, we won't be able to rebuild our economy into a vibrant, future-oriented competitor.

    Progressive tax rates should be reestablished and estate taxes should be inescapable above a certain level.  Our deductions and write-offs should all fade away over a certain level.  There is no earthly reason the US government should subsidize mortgage interest on $10 million homes.

    And how will we do this while corporations are allowed to donate limitless amounts of money to political campaigns?  

    It will be a lifelong battle for those in their 20s today to elect more and better Democrats.  My life, and many of our lives, will not be long enough. It will take an evolution over time.  

    There is no hope on the horizon for a rapid shift. Even the massive catastrophe in the Gulf of Mexico is quickly fading from the national conversation. Crisis does not stimulate politicians to search for new answers or even to take advantage of the situation to do what is truly good for the entire nation.

    We've nothing to offer but blood, sweat, toil and tears. And yet, we've got to commit to the fight.

    Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

    by YucatanMan on Wed Jul 28, 2010 at 09:41:51 PM PDT

  •  An excellent diary (4+ / 0-)
    Recommended by:
    YucatanMan, neroden, psyched, BentLiberal

    Which I am sending to my conservatron friends and family.

    Tipped, wrecked and hotlisted. Diaries like this should be on the rec list, in addition to the Usual Suspects.

    •  Well, I gave it my best shot (2+ / 0-)
      Recommended by:
      YucatanMan, neroden

      but David Sirota came along 10 minutes later, so I was cooked. :-)

      "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

      by Geenius at Wrok on Thu Jul 29, 2010 at 05:41:40 AM PDT

      [ Parent ]

      •  Wait a week or so, update with a chart or two (2+ / 0-)
        Recommended by:
        neroden, StrayCat

        or whatever, and repost it.

        Seriously.  This needs to get recognition. This is important information. We need more substantive diaries over repeat discussion of current newscycle events.

        Coverage of long term policy impacts is one area where DailyKOS needs much more emphasis and it is hard to get the flock to pay attention to things like this. Yet, long term policy impacts are THE most important areas to consider.  

        Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

        by YucatanMan on Thu Jul 29, 2010 at 09:07:13 AM PDT

        [ Parent ]

        •  Heh. This IS a repost (3+ / 0-)
          Recommended by:
          YucatanMan, neroden, StrayCat

          albeit edited, of a diary that I wrote last year. It got five comments.

          "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

          by Geenius at Wrok on Thu Jul 29, 2010 at 09:44:58 AM PDT

          [ Parent ]

          •  DO IT AGAIN! How loud do I have to yell? ;-) n/t (0+ / 0-)

            Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

            by YucatanMan on Thu Jul 29, 2010 at 12:56:36 PM PDT

            [ Parent ]

          •  Just work on timing the release. (1+ / 0-)
            Recommended by:
            neroden

            Mid morning eastern time seems to be good.

            Seriously. I love this diary. I wish it would become a huge topic of conversation on KOS.

            Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

            by YucatanMan on Thu Jul 29, 2010 at 12:57:29 PM PDT

            [ Parent ]

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