WE TOO CAN BE FRANCE:

A Progressive's Guide to Populist Economics: Can Democrats present a progressive economic program that is also politically popular? The outcome of the presidential election may turn on this crucial question. AlterNet's economic primer outlines the core economic principles that distinguish progressive Democrats from profligate Republicans, and offers seven concrete actions that will promote economic equity and make a difference in the lives of ordinary Americans. (G. Pascal Zachary, February 4, 2004, AlterNet)

The American economy is doing badly. [...]

Democratic economic principles are defined by the following:

Equity: For Democrats, equity ought to be the byword of their economic thinking. Wealth inequality is rising again in America. The work force is increasingly dominated by high-wage and low-wage jobs. Unions remain marginalized, growing weaker by the day. Worker rights are solely protected by the courts, whose remedies often deliver too little and come too late. Job destruction is occurring again in the U.S. and at an alarming rate, recalling the 1970s and early 1980s, when both highly educated people and non-unionized blue-collar faced gloom and hardship.

Any economic recovery worthy of its name must benefit all strata of American society. The economic democracy has been an engine of American history and democracy as far back as Thomas Jefferson. Freedom meant nothing if a people lacked the wealth to exercise it. Democrats need a set of policies that will promote the democratization of wealth in America. They need policies that will narrow the economic disparities in the nation, not widen them. They need policies that will promote greater economic opportunities for people without family wealth. They need to help preserve jobs as well as create them.

Corporate governance: Under the cover of the 1990s economic boom, corporate managers violated the basic rules of business fairness. The corporate sector may once have earned the right to increasing self-policing; corporations have lost that right. Business executives must once again submit to rigorous government regulation of their practices. Democrats must make a case for the re-regulation of a corporate sector that has mortgaged values in its quest for quick bucks. The scandals of Enron and the mutual fund industry are not isolated, but rather reflect the widespread collapse of business values.

Government can help restore these values (with assistance from consumer, investors, employees and a new generation of corporate leaders). Democrats must concentrate on promoting an alternative business ethos rather than lay the blame for corporate misbehavior on Republicans, where it doesn't belong. The boom -- as booms always do -- undermined business values. Easy money is the enemy of honesty and fairness. With the end of easy money, the stage is set for a revolution in business values and practices, if only the Democrats are brave enough to promote it.

Fair trade: The economic boom of the 1990s owed much to a dramatic reduction in trade barriers -- and an equally dramatic rise in trading partners. With the collapse of the Soviet Union and the bloc of communist countries in Eastern Europe, capitalist trade greatly widened. The emergence of a pro-capitalist Chinese government also spurred trade. The virtual end of socialist movements in Latin America and the rise of at least officially democratic governments in Mexico, Brazil, Chile and Argentina further expanded the pool of world trade.

The U.S. economy was a major beneficiary of trade expansion. U.S. hegemony over global finance and technology -- the two big winners of the 1990s expansion -- meant that both jobs, money and talented people flowed onto American soil. But widening trade, while accelerating growth, brought destabilization. By the 1990s, a series of financial and economic crises -- in all parts of the world -- exposed the harsh truth: The shift to open borders had occurred too quickly. Poorer nations needed more government protection, while rich nations maintained an array of trade barriers (most egregiously in the areas of agriculture) that worsened the plight of the poorest countries, especially those in Africa.

In its approach to trade, the Bush administration has largely continued the "neo-liberal" policies of the Clinton years. These neo-liberal policies no longer suit the times. Democrats must do more to respond to the dark side of widening trade and the economic crises washed up in the wake of world capitalism. Bush's deviation from neo-liberal orthodoxy has been limited to selective protectionism based on the narrowest political gain.

Fiscal discipline: In a few short years, the U.S. government has gone from the epitome of fiscal rectitude to the ultimate financial binger, spending without concern for the debts incurred. What's changed? The American president. Former President Bill Clinton sacrificed social programs -- and the chance for bold initiatives -- in order to restore a balance federal budget, and to even run surpluses.

His administration was helped, of course, by a booming economy, in which rising incomes and staggering capital gains led directly to higher tax revenues. The end of the boom reduced these tax revenues, wringing out the surpluses. But Bush's tax cuts are the chief reason for record budget deficits, which are conservatively estimated to exceed $500 billion this year (meaning government will spend one-third more than it take in). Since the fiscal year 2000, the tax receipts of the U.S. government fell from 20.9 percent of the gross national product to a projected 15.7 percent this year.

Higher taxes, protectionism, propping up failed industries, and increased regulation--you can practically smell the "progressive" boom years coming.

MORE (via Jeff Guinn):
Lending a Lasting Hand: Economists of many stripes argue that poor people and the unemployed need more help from the government (DAVID GLENN, 1/16/04, Chronicle of Higher Education)

An ideologically diverse group of scholars is putting forward sweeping proposals that, they say, would transform the low-wage labor market for the benefit of poor people and society at large. One plan would guarantee all citizens a small basic income; another would revive the New Deal model of a government-created job for anyone who wants one; still another would provide huge public subsidies to private employers in order to raise the wages of low-skilled workers.

The proponents of these schemes, as you can readily imagine, do not always agree with one another. But their proposals have a few common denominators: The plans are all designed as universal benefits and are intended to avoid the perverse incentives (against work, against marriage) that have afflicted the U.S. welfare system. And all of the proposals -- yes, even the guaranteed-job scheme -- are touted by their designers as minimizing government bureaucracy and micromanagement of the economy. These plans are thoroughly postsocialist, these scholars say. We can provide much more to people at the bottom of the ladder and still allow the free market to do its thing.

Back to Basics

The most controversial of the plans is the universal basic income, whose best-known contemporary proponent is Philippe van Parijs, a professor of economic and moral philosophy at the Catholic University of Louvain, in Belgium. In his 1995 book Real Freedom for All: What (if Anything) Can Justify Capitalism? (Oxford University Press), Mr. van Parijs argues that the liberal value of freedom presumes that humans have an array of realistic choices. And having such choices, he says, depends in turn on having at least a certain level of resources. Therefore society should guarantee everyone a basic income, which would be financed through progressive taxation. The basic income, Mr. van Parijs says, should be as large as the economy can efficiently sustain.

The most common objection to Mr. van Parijs's model is that it would represent an unjust transfer of resources from people who do productive work to people who choose not to. (Scholars like to refer to this as the "Malibu-surfer problem.") Mr. van Parijs replies that the liberal principle of neutrality among conceptions of the good life, as articulated by such philosophers as Ronald Dworkin and the late John Rawls, demands that the state not favor the industrious (the "crazy," as Mr. van Parijs facetiously calls them) over the lazy.

Mr. van Parijs also makes a more subtle point: He says that a universal basic income might actually draw certain unemployed people into the labor market. "Part of what motivated this plan," he says, "was an awareness that the existing benefit schemes tend to create dependency traps." In means-tested benefit programs like the U.S. welfare system, you can often immediately lose all of your benefits if you take a job. "But if you have this floor of income that you're entitled to no matter what," he says, "that's a way of getting you out of that trap." (The same insight lay behind the conservative economist Milton Friedman's early-1970s proposal for a negative income tax, which would be structurally similar to Mr. van Parijs's universal basic income.)

Would Mr. van Parijs's proposal wreck the economy by shrinking the pool of workers willing to work for low pay? "I don't think the decrease in labor supply would be as severe as some commentators believe," says Michael A. Lewis, an assistant professor of social welfare at the State University of New York at Stony Brook and a proponent of the basic income. "Employers would tend to increase the wages they offer, and that would draw people back in."

Mr. van Parijs does not believe that low-wage jobs would disappear, but he believes that a certain kind of low-wage job would vanish. "Jobs with low immediate productivity, but that offer serious training or opportunities for advancement through social networks, would be able to find people to fill them," he says. "On the other hand, if you have really lousy jobs that don't offer any training, that are done under bosses that treat workers badly, these sorts of dead-end jobs will be more difficult to fill than before."

Mr. van Parijs would not mourn the loss of such jobs. "Just as there is nothing particularly good
about slavery, there is nothing particularly good about a system in which lousy jobs can easily be filled," he says.

A final objection to the basic income is that it would weigh down the economy by reducing people's incentive to learn new skills. "Basic income grants and the earned-income tax credit have a negative impact on human capital formation -- both theoretically and according to empirical evidence," says Robert A. Moffitt, a professor of economics at the Johns Hopkins University, who is generally skeptical of Mr. van Parijs's plan.

Mr. van Parijs replies that such concerns are based on "petty accounting." The basic income, he says, might actually help people to go to school or learn a new trade because they would have more flexibility to reduce their hours (or leave the work force entirely). "Basic income is part of a package that's far better adjusted to both the economic needs and to the social needs that result from the new technological and market complex in which we live."

Maybe so, but the basic-income scheme has no immediate political prospects in the United States.

Posted by Orrin Judd at February 9, 2004 2:51 PM