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World facing failure of economics

Actions by the US financial community precipitated a global recession and only barely avoided a global depression in 2007.

Now, a full four years after the near total economic collapse, the developed world remains mired in a worldwide recession with little sign of improvement. For America the question is: What do we do now?

Listening last night to the ninth or twentieth Republican debate (there have been so many); the topic of economics framed the exchanges. But frankly the candidates all offered the same economic solutions, solutions that have not worked and generate no confidence that they will work in this economic climate.

According to all Republican presidential candidates we should end the recession and return to prosperity by three actions; first, cut spending; next, greatly reduce all regulations that hold back business; third, cut taxes on the “job creators.”

These solutions are philosophically supported by the works of Milton Freedman and Friedrich Hayek, economists who argued for capitalism as characterized by isolated individuals exchanging products and services in free markets.

The counterpoint to this approach is the economic capitalism of John Maynard Keynes, a view that suggests capitalism is the only economic system that can work, but the system requires constant tinkering and adjustment by government.

But neither of these approaches is global in nature, that is, responsive to economic growth in China, potential default in Greece, the impact of currencies manipulated by our competitors, and the relevance of worldwide debt that seems insurmountable.

Our solutions seem both more reflective of the past than the present, and wholly unable to address the complexities of an economic world in constant flux.

Keynesianism is flawed by the reality that it may be government spending itself that requires intervention, and the economic vision does not allow for that factor.

Hayek and Friedman posit an idealized situation as a constant … that markets will always remain free and competitive (they do not); that the capitalistic approach they advocate will work universally against competitors who steal our intellectual property, rig their currency, and lead national goals to dominate certain markets; and that the excesses of capitalism (many which are well known from our own history) will “work themselves out” in the marketplace.

Both approaches are flawed and both are non-responsive to the more complex world economic environment we now face.

So listening to the Republican economic arguments last night was not unlike having sixth graders recite back what their teacher asked them to memorize for a test, nothing new, and nothing that will bring different results from the past failures.

This is not to say that the Democratic arguments will resolve our economic concerns, were they to do so we would have already seen the results in our economy.

Rather, the problem we face is the need for innovative approaches to the economics of our time, solutions that are variable to the moment, flexible to the circumstances, and responsive to re-affirming the American idea that an economy that lifts all boats is far better than an economy that lifts only a few boats.

If we value an economic model that believes in a strong middle class, in opportunities to rise to success, and in an environment where fairness undergirds policy, then we need to first assert those principles and then shape the economic model to address those values.

Today we have no such model and, as a result, our society has skewed towards a small group of citizens accumulating a great deal of our wealth, more than ever before in our history.

Americans have always been innovators, and today we need a new innovative spark to re-invent what has become a flawed American Dream.

 

Jim Crawford is retired educator and political enthusiast living here in the Tri-State.