In the last decade anxiety has grown about the vulnerabilities and inadequacies of modern capitalism. The financial meltdown and Great Recession of 2008-10, rising material inequality, and the specter of climate catastrophe have focused a lot of minds and some people wonder if systemic change is in order. No one wants early 20th century-style command economies, of course. But, it might be a good time to dust off a debate that was briefly popular after the Cold War ended: Is a “Third Way” possible, a new economic system balanced between capitalism and socialism with characteristics of each?
I tend to think that our worst problems and inability to act are more products of political failures than of any fatal flaw of capitalism. Yet, others say that today’s hyper-globalized, giant corporation-controlled, finance-dominated capitalism is the root cause of many of them, or at least that today’s capitalism never will be able or willing to act on them. Problems such as –
- Climate and environmental damage.
- Soaring economic inequality.
- Financial system instability.
- Concentration of corporate power fewer and fewer hands.
- Loss of interest among economic elites in maintaining high wages and full employment.
- Disruptive technologies on the horizon (like AI) that could render vast numbers of jobs obsolete.
- The existence of seemingly successful but authoritarian models of development, especially China’s.
To these problems you can add political ones, like disappearing social institutions that used to help to constrain concentrated private power, paralyzed governments, and a pissed-off public searching for populist scapegoats.
To be sure, capitalism has always been very adaptive and dynamic. A disruptive and painful “creative destruction” has always been the price we pay for the enormous wealth capitalism creates and the personal freedom it allows. Moreover and as we’ve discussed, there isn’t just one model of capitalism in the world. To simplify somewhat, there is a Nordic model, a German one, an Anglo-Saxon one, and several state-led Asian variants, notably the authoritarian Chinese one. Their freedom to experiment is somewhat limited by international law and trade rules, as is ours to a lesser extent.
It’s almost too big a topic, when you think about it. We might get somewhere on Monday if we ask some of the right questions. Focusing on who should own the means of production, how much government planning is needed, and the merits of the profit motive seems a little archaic to me. IMO it also focuses more on means than ends. Maybe my educational/career background can help here. So, I will open us up with a short introduction that frames the big questions we are going to have to ask in the years ahead regarding capitalism – questions I think will bedevil us regardless of what type of “system” we say we have. Here are a few general questions and some reading ideas.
DISCUSSION QUESTIONS –
- Socialism: What is/was Socialism? What was/wasn’t socialized and why? Different types?
- Capitalism: How many different models of mixed capitalism exist today? What are the biggest differences between them in term of property ownership; corporate governance; govt planning, tax/spend, regulation; democratic accountability; etc.?
- Successes: What makes an economic system successful? What’s an economy for? Do some economic systems support democracy better than others and vice versa?
- Failures: Is capitalism in crisis? Which models fare best and are best prepared for the future? Is capitalism or politics to blame and can one be in crisis without the other?
- Priorities: What more do we want from our economic system, and what are we willing to give up? (Stability, growth, opportunity, sustainability, social justice, etc.?) Tradeoffs.
- Future: Disruptive technology issues, rise of China/India, climate crisis…
SUGGESTED BACKGROUND READING –
Types of capitalism –
- Nordic model. (Notice it’s a political system, too.)
In praise of it. A conservative rebuttal. Recommended.
- German model.
- Asian model – Should the West be mimicking it?
- China model – Its appeal is not going away.
Alternative Third Ways –
- 10 alternatives to capitalism, some farfetched.
- Stakeholder capitalism: Change corporations not the whole economic system. Recommended or shorter version here.
- Globalization’s one-size-fit-all approach. Its rules don’t leave enough room for democracy nor permit countries to develop different economic models. Recommended.
- State-owned industries: Maybe sometimes it’s a good idea.
- Conservative POV: Quasi-capitalism cannot work and should not be tried. Very long but fair.
NEXT WEEK: Religiosity – How has its decline affected the USA?
Penny suggested this topic and that we focus on one specific aspect of it: The outsized role that big corporations play in making the American diet unhealthy. CivCon has discussed some related issues in the last two years. In May 2017 we debated how far government should go in encouraging healthy lifestyles and in 2015 we looked at some of the implications of Big Ag itself, with a focus on the industry’s huge political clout and the environmental problems of hyper-concentrated food production. On Monday, we will tackle some of the big health issues surrounding the American diet.
There are a lot of them. It is well known that over the last few decades Americans have grown much more reliant on heavily-processed food, especially fast food. Many of these products are chock full of unhealthy or at least nutritionally-questionable ingredients such as sugar, salt, corn, and chemical additives. A lot of people blame this new American diet for the recent large rise in obesity and related diseases, like diabetes and heart disease. Some go farther.
Like many of our topics, this is not an area I am very familiar with. However, here are some articles that explore the idea that our diet is being manipulated by big companies and several defenses of industrial agriculture.
SUGGESTED BACKGROUND READING –
- The Way We Eat Now: Our modern diet does not fit with our ancient bodies. Recommended.
- How big corporations cashed in on the obesity epidemic.
- Pollan and Schlosser: America is a still a “fast food nation” and a land of “unhappy meals.” Recommended
- Why corn is in practically everything we eat. Recommended.
- Trump has appointed foxes to guard the regulatory henhouses, including at all food-related agencies.
- OTOH POV:
NEXT WEEK: Does the “paranoid style” control American politics now?
Jim Z.’s topic is timely, for obvious reasons. But it’s also complicated and lends itself to different approaches.
First, we could discuss how much democracy this country has had in the past, given constitutional limits on majority rule and long-standing anti-democratic characteristics of American politics and culture. It might be helpful here first to explicitly identify which features make a democracy deep and lasting. Which of these does a democracy most depend on?
- A constitutional foundation of rights, separation of powers, checks/balances, civilian control of the military, etc.?
- Free and fair elections with universal suffrage and protections for voting rights? What about ease of voting?
- Public faith in democracy and/or in government and/or a high level of public engagement in civic life?
- Pluralism (multiple and competing organized interests)?
- Strong democratic institutions, in government and outside of it (free press, political parties, so on)?
- Limits on powerful private interests’ political power and on corruption and cronyism?
That’s a bunch of two-hour meetings right there, some of which we’ve done (undemocratic Constitutional features, voter ignorance, money in politics). Last year we even discussed whether U.S. democracy really could unravel.
A second approach for us would be to dive right in to the (in my opinion) large and growing threats to American democracy that have emerged in the last 20 years. Obviously, Donald Trump is embodies and leads the most obvious threats, his own presidency and political movement. But, there are others.
I believe that if we want to save our democracy, we have got to be honest about one particular elephant in the room: The Republican Party and its increasingly authoritarian nature. Their gutting of the Voting Rights Act and voter suppression laws/policies. The outright theft of a Supreme Court seat. Highly aggressive state-level gerrymandering to lock in electoral advantage. The welcoming of far right-wing news media and even White nationalists into the party. Legislative hostage-taking. Union-busting to “defund the Left.” And now, a deliberate, coordinated attack on the rue of law, including the FBI and DOJ.
To be fair and balanced (!) but also accurate, undemocratic forces may be emerging within progressivism, too. Examples: Antifa-type violence, intolerance of dissent on social media, etc. We could talk about the full range of partisan/ideological threats to democracy. Other, structural threats to U.S. democracy exist and might be worth discussing, too, especially runaway economic inequality and rural economic stagnation, rising xenophobia, and even foreign interference in our elections.
Finally and on a more philosophical note, we could challenge the implied premises of Jim’s question. Is a lack of democracy really a big problem in the United States? Would more of it really help solve our big problems? Does the Constitution straightjacket us from taking bold steps toward increasing majority-rule? And, does the public really want more control over a political system they all say they have no faith in and most of them care little and know even less about?
I will do a short intro on Monday and then focus my effort on making sure we address major avenues of inquiry in our discussion and on making sure everybody gets a chance to be heard. Jim, do you have anything you want to say to start us off?
A lot of links this week, since it’s a big topic. I think they all add value and don’t repeat much or rehash old issues. My suggestion: Focus on recommended ones.
SUGGESTED BACKGROUND READING –
How Democratic is the USA –
- Two big expert surveys said we’re doing pretty well but some reasons to worry – especially with Trump’s election. Recommended.
- Wrong. We are an oligarchy, another study said (in 2014!)
- Our political system has become biased against one major party and that’s bad in a democracy.
- Important: Healthy civic institutions matter more than just having elections.
Do we have too much democracy?
- USA has too much democracy and it may destroy us. , center-right author Andrew Sullivan. Related: The voters are the problem; ignorant, erratic, etc.
Recommended to read one.
- Conservative POV: Too much democracy + unconstitutional expansion of govt are the real problems.
Threats to US democracy –
- Three big threats: Voter suppression, gerrymandering, and Big Money in politics. Recommended;
by a Republican. More on the GOPs assault on voting rights.
- Economic inequality, because it reinforces political inequality. Recommended.
- Our Constitutional system was not built for this level of economic inequality. Interesting.
- Protest is being criminalized by GOP governments.
- How to deepen U.S. democracy.
- Obama’s farewell entreaty to protect our democracy from what is coming.
NEXT WEEK: Lessons of the Vietnam War, 50 years later.
This is one of those topics where it is a little vague what it’s about. My “end of paper currency” wording implies a focus on whether we are finally approaching the long-imagined “cashless society” in which all transactions are electronic. Cash is probably far too convenient in transactions for that to happen anytime soon, from what I read. But, the rise of PayPal and other e-payment technologies make the idea at least worth discussing, maybe.
We also could talk about cryptocurrencies, a very different thing. Also called altcoins, these are non-government-backed monies (or, “monies”) that can be used in electronic peer-to-peer transactions. Bitcoin is the most widely known cryptocurrency, but there are hundreds of others, many with tech-bro names like Etherium, ZCoin, and Einsteinium. Cryptocurrencies have a lot of limitations and problems, notably no governmental central bank to back their value or control their volatility. They are vulnerable to bubble and the machinations of peculators and get used a lot in criminal commerce (but then, so do $100 bills). Still, cryptocurrencies may be here to stay, at least in some forms, and the idea of a currency free from government will continue to be appealing to some Libertarians.
A third way we could expand our topic would be to talk about some of the more, um, exotic (crackpot, maybe) stuff that comes up when you Google “the end of paper currency.” These range from advocates of returning the United States to the gold standard and Ron Paul’s “end the Fed” stuff, to survivalists predicting a collapse of society and a return to a barter-based economy. It’ll be fun for the whole family.
Re: Readings. Cryptocurrency is a brand new topic for me, so I don’t know which of the primers on the subject are best for you to read.
SUGGESTED BACKGROUND READING –
A Cashless Economy? –
- What is a cryptocurrency? Wiki. More detail from an industry sight.
- How their prices get determined.
- Recommended: Atlantic Monthly clearly explains this stuff + a big potential problem with crypto-money.
- Views of cryptocurrencies’ future:
Gold standard –
- Returning to it = “world’s worst economic idea.”
- Trump has said we should, a truly loony idea. Recommended.
NEXT WEEK: What is the legacy of the 1980s?
Oops. I forgot that “Fair Trade” is the name of a consumer movement that asks people to make ethical choices when buying imported goods. Consumers are encouraged to buy only products that carry the fair trade label indicating they are produced sustainably by companies that pay a living wage, keep safe working conditions, etc. The Fair Trade movement is interesting of course. It’s one small way individuals can make a difference in the world of foreign policies few of us have any input in fashioning, and the movement helps to build awareness of global poverty and how people in rich countries can contribute to it (even though in the broadest sense globalization has reduced poverty in developing nations).
I had in mind something more ambitious. How “fair” is free trade to, well, to Americans? The consensus in favor of free trade has collapsed. President Trump owes his election to pandering to resentments of all sorts, of course. But anger over “unfair” trade agreements allegedly foisted on pitifully-led Americans by wily foreigners was a major theme of his rage-filled campaign. It resonated because Republican voters are actually more hostile to free trade than Democratic voters – probably because blue cities benefit more from globalization than redder areas. Yet, many Democrats, too, are abandoning free trade, as Bernie Sanders’s near-success and Hillary Clinton’s reversal on the Trans-Pacific Partnership pact attest.
Why do so many Americans believe trade and globalization are unfair? Some dumb reasons, sure. But, I think the links below finger a very legitimate reasons: Modern trade agreements go far beyond simply knocking down barriers to increased imports and exports. They have sought to rewrite some of the basic rules of business and commerce to harmonize them across countries, areas of policy that used to be the sole province of national governments. Progressives sometimes exaggerate the extent of this, IMO. But, it’s real, and a big change in how the now highly-integrated global economy is managed. More is at stake than freer trade.
This notion and other reasons why free trade allegedly has turned against us are highly-disputed. It’s complicated and not just a left-right thing. Trump’s reality-free trade rhetoric doesn’t help the debate, nor did Bernie’s big foreign policy vision speech yesterday that ignored trade. Still, I think we can carve off a few digestible chunks of the controversy over the fairness of free trade and turn the chewing into an informative meeting. Maybe we could focus on these questions a bit.
DISCUSSION QUESTIONS –
- Consumer movement: What is buying Fair Trade + where can I get more info?
- Trade v. convergence: How much have global trade rules gone beyond freeing trade towards harmonizing economic regulation in general?
- Quo bene? Why was this done? Whose interests were served? Elites/big biz? Doesn’t trade help the public interest via faster growth, spurs innovation, etc.?
- Quo screwed? Who has been harmed? What evidence it was due to (1) trade and (2) trade agreements?
- Alternatives: IF trade has turned against interests of U.S. public and/or democratic accountability, now what? Renegotiate them, one by one (Trump)? Do nothing/double down (GOP)? Attach labor and enviro standards (some libs)? Strengthen edu/training + social insurance/safety net (other libs)?
SUGGESTED BACKGROUND READING – Fewer this week, but longer ones.
- The free trade consensus is dead (2015 article).
- It should be (progressives):
- How to make globalization work for all Americans. Or try this shorter one. Either.
- Where it all went wrong and what Trump gets wrong. [Duplicate 2nd link deleted]
- Basic economic regulations does not belong in trade deals. Hard, but key arguments.
- Wrong. Free trade worked and still works:
NEXT WEEK: Social security reform.
What’s gone wrong with the U.S. economy? Outside of the horror of our national politics, this may be the central public issue of our time. This is true even though we have had almost eight straight years of economic growth, 4% unemployment, a 20,000 Dow, and record corporate profits.
Something just seems…broken. Wage growth is anemic and average real wages haven’t risen for 40 years. Economic inequality is at 1920s levels. Droves of Americans have dropped out of the labor force. Rural areas are especially stagnant. The gig economy and intelligent robot workers are coming. Americans are angry and anxiety-ridden.
We have talked about these structural problems of modern capitalism for many years in Civilized Conversation. Left and right tend to finger different culprits. But, as I have said before, experts focus their inquiries on these four broad causes:
- Technology – Technological advances have raised demand for highly-educated knowledge-based workers but not for anybody else.
- Globalization – Free trade and outsourcing expose more Americans to low-wage foreign industries.
- Immigration – Migrants depress wages, especially in labor-intensive sectors; and
- Government – Tax policy, regulation and/or deregulation, and lack of public investment have weakened the economy and benefitted only a sliver of Americans.
Monday’s meeting concerns a 5th possible perpetrator, one that is getting a lot of attention lately, even in the popular press: Corporate concentration and monopoly. There might even be some room for agreement among liberals and conservatives on the issue (although all national policy will remain frozen for the foreseeable Trumpian future).
But, the harm caused by monopoly power and how to combat it are tough issues. No one denies what we all see around us: Industry after industry has grown to be dominated by a handful of (3-5 or even fewer) gigantic companies. It’s true for health insurance, telecommunications, energy, mining, banking, social media platforms, even retail. Only a few industries are monopolies, dominated by a single company selling to the public. But, many are oligopolies (several firms dominate sales) or monopsonies (they dominate as buyers, of labor and supplies).
Yet, it is not clear exactly how much harm monopolistic concentration is doing to our economy. Experts even disagree on who is being harmed and how entrenched today’s monopolists are. I will go into more detail on Monday, but basically monopolies might be:
- Extracting what economists call “rents” from the rest of us; i.e., profits in excess of what could be earned in a competitive market;
- Raising consumer prices and limiting consumer choice;
- Extracting wealth from their supply chains or employees via lower wages;
- Depressing innovation and R&D;
- Contributing to growing economic inequality; and
- Buying off political power that could be used to stop them.
Here are some readings that purport to explain what’s going on. I’ve tried to note which ones are the easiest and hardest reads. Note the ones that argue growing monopoly power is NOT a big problem.
SUGGESTED BACKGROUND READING –
- Easy reads:
- Harder: America needs more competition. The Economist magazine.
- Hard: Market power in the U.S. economy today.
- The other side POV: Let’s be skeptical of how bad this problem is, especially in the tech industry? Easy.
- Political monopolies: Summary of Dark Money , a book on the raw political power of hyper-concentrated industries.
NEXT WEEK: Re-thinking the U.S.-Saudi alliance.
As most of you know, U.S. foreign aid is one of the least understood – and despised — government endeavors. Most people wildly exaggerate how much we spend. Most people think foreign aid is about 25%- 30% or more of the federal budget. The real figure is one percent, and more than one-third of that is security assistance, not economic aid.
There are also lots and lots of misconceptions and anachronisms in public perceptions of where the money goes and for what purposes. Forget sacks of grain for starving Ethiopians and well-digging in quaint little villages. We still do that. But American developmental assistance abroad is much more sophisticated and strategic than it used to be. We help to improve education, energy and food security, financial stability, regulatory regimes, gender equality, and much more. We also try to coordinate our assistance worldwide development goals, other countries’ aid, and private and non-profit sector developmental aid. Which countries receive the lion’s share of aid might surprise you, too
Yet, surely foreign aid’s small size and public ignorance about it do not by themselves justify the aid or prove that it works, for us or the recipients. Measuring success can be tricky and depends on the objectives, the performance measure, the available data – and the eye of the beholder. All of these were thorny issues back when I followed development issues slightly closely a few decades ago. I am looking forward to learning what’s new in measuring results. (I know there is now one office that coordinates our foreign aid.)
Since this is one of those some-details-needed topics I will open our meeting with a brief tutorial on (1) what we spend our foreign aid money on and (2) what the big goals are. Here are the questions I will focus on and some background readings.
A new schedule for June – Sept will be available.
DISCUSSION QUESTIONS –
- What: What does the USG spend its foreign aid funds on? Who spends it, doing what, and in which countries?
- Why: Goals, objectives, strategies.
- Context: How does our foreign aid fit in with other countries’, UN/World Bank/other IGOs, and private sector aid?
- Benefits: How do they measure success? Benefits to recipient countries. Benefits to USA including strategic/political. Which aid is vital versus elective v. obsolete/harmful?
- Alternatives to aid: Aid v. trade. Private charity and its limits. Etc.
- Public support and future: Why is foreign aid so unpopular? Does/should it matter? Will the need for it ever fade away?
SUGGESTED BACKGROUND READING –
- Our foreign aid budget, visualized. How much, for what, and where? Recommended.
- Our foreign military aid, visualized.
- U.S. foreign aid:
- Evaluating success can be comically obtuse and bureaucratic. If you understand any of this you’re hired.
- Global effort: Progress made on the “Millennium Development Goals.” Important.
NEXT WEEK: Lessons of the Six Day War, 50 years later.
Most of you know the broad outlines of this. Here is a pie chart showing where the federal govt (2/3 of taxes go there) spends our tax dollars. It is from the liberal Center for Budget and Policy Priorities. For a breakdown of state and local spending in California go here. For CA it’s basically 75% goes to five major activities: Education 25% + health care 20% + 10% prisons + 10% public safety + 10% welfare. In most other states the pie chart looks about the same.
Now that Trumpcare is dead, he and the congressional GOP say they will move on to tax reform. Tax reform could take many forms and end up quite different from the plans proposed by Trump and other Republican leadership, if it happens at all. (And, again, who pays how much or saves how much is not the only thing that matters about taxes.)
Still, the Tax Policy Center (a think thank) estimated how the total tax burden would change under the Trump and House GOP tax reform plans, based on what was known n February 2017. I can’t get the charts to paste into this post. So, please see this NPR summary of the main findings here.
As you would expect, even though almost all American households would see some reduction in taxes under either proposal, the rich get much, much more tax relief. According to the TPC analysis, the bottom 40% of households would get about a 1%-2% increase in after-tax income, while the top 1% of households would get a 13%-17% boost.
[Sunday key update: Trump’s tax plan contains many, many hidden windfalls for the wealthiest earners and could raise taxes on millions of families, including via the corporate tax. I’m sorry to pour it on, but truth is truth.]
And, this analysis does not even include the effects of the GOP’s proposed cut in the corporate tax rate or a “border adjustment tax.” Off the top of my head, I would guess that since a BAT would be a lot like a sales tax on imported goods, it probably would hit working people the hardest, at least in the short run before trade patterns and exchange rates adjust. To Trump, I imagine a BAT’s main appeal is that it privileges exports over imports. But, to the House GOP members tentatively supporting it, a BAT’s main appeal is that it would raise enough revenue help make room for the other tax cuts. Corporate taxes tend to be passed through to consumers, so I’m not sure reducing them would change the overall tax burden much. We’ll find out.
I’ll do one more quick post tomorrow with pie charts on what the federal government spends our tax money on.
In tax policy, taxes are “progressive” if payers contribute more as a proportion of their income than they do lower income payers. Liberals like a progressive tax structure because they believe wealthier people (1) can afford the burden more, and (2) generally benefit more from the pubic goods that government supplies (like public universities and property right protections).
How progressive is the American tax system? Not very! Yes, federal taxes are fairly (albeit not highly) progressive, as this chart shows.
So, leftwing paradise? Wrong. First, note only some federal taxes are progressive (especially income and estate taxes). Payroll taxes for Social Security and Medicare burden working people the most because they don’t apply above a certain level of income. Payroll taxes comprise almost ½ of all federal taxes paid (not shown on chart).
More importantly, about 1/3 of all taxes are paid to state and local governments. When they are included – so, all taxes at all levels – the burden of paying for government in America is basically flat as a share of income. This is because state/local taxes like sales and sin (tobacco, alcohol) taxes are highly regressive, so much so that every one of the 50 states has a regressive overall tax burden. Even California. In seven states, the poorest 20% of people pay more than four times the rate the richest 1% pay!
This chart that includes all taxes at all levels shows the flatness.
It breaks Americans into five income groups, from the bottom-earning 20% to the top 20%. It also breaks the top 20% down into the top 10%, next 5%, next 4%, and finally the top 1%. For each quintile and very top, a pair of bars compares the share of total income each group earns to its share of total taxes paid at all levels. Note how closely what most groups pay is to what they, on average, earn. The richest pay a little more than their “fair share” when measured this way, and the bottom 40% pay a bit less.
There is more to tax fairness than what I have described. And, fairness is not the only thing that matters in a tax system. More on this stuff later.