Tuesday, October 1, 2013

Beyond stagnation


source: Lane Kenworthy, Consider the Evidence blog (link)

Thirty years ago Sam Bowles, David Gordon and Tom Weisskopf published a book with a provocative title, Beyond the Waste Land: A Democratic Alternative to Economic Decline (1983). (Barry Bluestone and Bennett Harrison's Deindustrialization of America: Plant Closings, Community Abandonment and the Dismantling of Basic Industry (1984) sounds similar themes from roughly the same period.) The "waste land" title seemed perhaps a bit apocalyptic when it appeared during an earlier period of economic stress in the United States and the early expression of the free-market fundamentalism associated with Reaganism. How does it look today in 2013?

The book has a simple argumentative structure. It documents a grim view of the economic situation of America in the early 1980s; it offers a critique of "trickle-down" economics; and it provides the architecture of an alternative. Bowles and his co-authors describe their alternative as a more democratic approach to modern economic life, and it focuses on what they refer to as an economic bill of rights.

The economic conditions to which the book responds are the circumstances of slow economic growth, stagflation, and moderately high unemployment of the early 1980s.  Unemployment peaks in 1982 at over 9% -- significantly higher than the average for 1950-`965 of about 5% (22). The authors believe that the economy of the 1980s is a "slack" economy: it embodies a high degree of wasted resources due to a number of different failures of cooperation across groups and sectors. Perhaps most important within these sources of waste is the pool of unemployed workers that the economy of the 1980s was producing. Instead of putting the talent and productivity of this large population to work on productive tasks, the system excluded these workers from productive jobs. Bowles et alargue that corporations -- large, powerful business entities -- are a primary cause of this chronic situation of wasted resources and slack productivity. They describe what they call the "post-war corporate system" in these terms:

[It] was based upon relations of domination and subordination, forged into an inflexible and hierarchical structure of private privilege. (6)

And in fact they believe they can produce statistical evidence demonstrating that this system has strongly negative effects:

the costs-of-corporate-power model statistically accounts for almost all of the slowdown of productivity growth in the U.S. economy. (7)

Here is how they illustrate their theory with respect to the largest sector in the U.S. economy, the automobile industry:

The auto industry provides a graphic example of the waste burden in our economy. A quarter of a million unemployed automobile workers have been told that their layoffs are necessary to revive the industry. But much of the current competitive plight of the U.S. auto industry results from the waste built into the structure of the industry. For every worker engaged in the production of cars and trucks and buses, there are nearly two additional employees engaged either in supervising the productive workers or in selling cars.... Those salaries impose a burden borne by workers and consumers alike. (8-9)

And the costs of pursuing policies based on trickle-down economics are likely to be large, especially for the health of our democracy:

Under conservative economic policies, the near future will witness many more losers than winners. Trickle-down solutions will therefore require that more and more people be excluded from economic decision-making. (15)

So what is the democratic alternative that Bowles and colleagues advocate? It involves several important rights for ordinary citizens and workers:

  • the right to economic security and equity
  • the right to a democratic workplace
  • the right to shape our economic futures
  • the right to a better way of life

The most striking of their recommendations involves the idea of a right to a job.

Direct intervention to promote the right to a job, to promote employment security and equity, is the first requirement of any democratic alternative. (274)

What they mean by this right is that specific affirmative steps need to be taken, in managing the economy, to achieve "full employment" -- a level of employment that ensures that anyone seeking a job can find one. They distinguish between job security -- keeping the job one currently has -- and employment security -- having confidence that one will find a job somewhere in the current economy. The former demand implies economic rigidity, whereas the latter is compatible with substantial economic flexibility. They accept the point that achieving this goal will often mean creating a program of public employment.

Whenever the actual unemployment rate exceeded 2 percent in a local area, the federal government should make funds available to local governments to finance guaranteed public employment for anyone who needs and is able to work. (276)

In addition to a government-backed right to employment, BGW argue for substantial institutional reforms in the direction of ensuring greater workplace democracy. This might take the form of expanded roles for labor unions in the organization and direction of the workplace, or it might look more like the systems of works councils found in various European countries (link). They believe that greater workplace democracy is likely to increase labor productivity, as workers have a stronger incentive to work efficiently and intelligently.

These policy recommendations may have appeared difficult in 1983; they seem wildly unreal in the context of mainstream American assumptions today about the way a market economy works and the role government should play within that economy.

The picture that Bowles, Gordon and Weisskopf offer of the economy of the 1980s is bleak. But on the dimensions of slack economic growth, high unemployment, and stagnant incomes for the great majority of the working population, the evidence of the past ten years seems to be even worse. The graph at the top seems to document that reality: slack growth for low and middle income workers has persisted, and inequalities have continued to increase since 1980.

What is striking in rereading the book is how refreshing it is to find a critical view of the basic structures of the post-war economy that highlights imbalances of power and income as the key problems. It is hard to think of a serious economic analysis of our current conditions that is as honest in confronting these fundamental structural realities. And yet the solutions that BGW offer don't seem to be very promising today.

So we urgently need to pose the key question: What are the reforms within our contemporary economic institutions that can help to bring up the incomes of the bottom sixty percent of our society and help to compress the growing inequalities of income that we have witnessed in the past twenty years? How can we achieve growth with equity and a decent quality of life for all Americans? And where are the bold thinkers who can help us answer these questions?


Burk said...

There is a serious economic analysis of our current conditions that is as honest, and that is MMT economics.

Fr. said...

Lane Kenworthy's blog also has several notes showing that Americans are not less supportive of income equality than Europeans. To me, this means that the problem with the authors' policy recommendations is not that they are “wildly unreal in the context of mainstream American assumptions today about the way a market economy works and the role government should play within that economy.” That's too general a statement: the problem is with elite/government perceptions, not public opinion.