In this 20th year of the 21st century, the United States of America has become a land of inequality and a sanctuary for the rich and powerful. The top 1% of earners have more wealth than the bottom 80% and the top 20% have more wealth than all those in the middle class.
America today is an economically divided nation. And, as we noted in our previous blog, those on the underside of that divide include many in the middle class, blue collar or low wage workers, gig workers and the working poor.
The Public’s Attitudes Regarding Our Economic Conditions
In spite of the hard times for these citizens, various polls have shown that there is still considerable faith in the economy, the American dream, and capitalism. (It should be noted that attitudes have become more pessimistic since the emergence of the coronavirus.)
In a Gallup poll conducted at the beginning of this year, 62% of the participants rated economic conditions as “Excellent” or “Good.” A Marist poll for NPR and the PBS Newshour in mid-July of 2019 had similar findings, with 65% of those surveyed stating the economy is “working well for you personally.”
In terms of the American dream, there are more muddled reactions. A Real Clear Opinion Research poll released in March of 2019 revealed that 27% of respondents felt the dream was “alive and well” for them compared to only 7% who said it was “dead.” Two thirds of the respondents to that poll, on the other hand, said the dream exists but is under “moderate to severe duress.”
For many Americans, there is also a positive attitude toward capitalism. According to the Real Clear Opinion Research poll, 58% of Americans “believe that capitalism as currently practiced is generally working for most Americans.” A 2019 Pew research poll disclosed that 65% of those surveyed had a positive impression of capitalism, as opposed to 42% who had a positive impression of socialism.
Although these polls overall indicate a belief in the current economic “system,” there is a caveat. In some of the polls, women, minorities, and younger adults were less positive in their responses. And, importantly, in all of the polls, Democrats were consistently less positive, Republicans were overwhelmingly positive, and Independents were more middle of the road in their responses.
This segmentation is problematic. This is especially true as the coronavirus, which has finally been recognized as an authentic concern by the administration, threatens not only its health but also its economy. This economic cratering will have an affect on all Americans but will be felt most significantly by those who have no health care insurance, live from paycheck to paycheck, and do not qualify for unemployment benefits.
This deteriorating economy, which further impacts those on the underside of the economic divide, will diminish the citizens’ belief in the American dream. That is harmful to the future of our American democracy, which is inextricably linked to the hope and ability to achieve that dream, and to capitalism, which is historically connected, although in a misunderstood way, to the nature of the American democracy.
Our American democracy is at a pivot point. A pivot point, as we define it in our book with that term in the title, is an area that must be leveraged and addressed effectively in order to effectuate and achieve positive outcomes.
This pivot point should be handled in a manner that renews the American dream and America. Some have proposed socialism as the answer for accomplishing this. Others have proposed capitalism.
In our opinion, those are false choices. The approach that we think is required is what we call a “more inclusive and equitable democracy.” Let us explain why, in our opinion, this should be the preferred alternative and course of action.
Renewing America — Not Socialism
As the inequalities of the economic system have grown increasingly evident over the past few years, many have stepped forward with a variety of socialistic type solutions. They include: Democratic presidential candidate Andrew Yang’s proposal of a universal basic income of $1000 per month for each American adult, and Italian economist Giacomo Corneo, who calls for having the government buy shares in public companies to create sovereign wealth funds, which are used to generate market gains and returns for all citizens. (Think of what the sovereign wealth funds approach would have meant back in 2008 and mean today with the markets cratering.)
While there are many proposals of this type that have and are being advanced, by far the most recognizable approach is the socialistic agenda that has been put forward by Democratic presidential candidate Bernie Sanders. Sanders’ approach includes, among other things: Medicare for all; free college tuition; paying off all student debt; and good-paying jobs generated by and guaranteed through the government.
At first glance, these concepts appear interesting. Upon closer review, however, they are the thoughts of an ideologue that for several reasons have little to no possibility of becoming a reality. Senator Sanders highlighted this deficiency somewhat in his announcement on the day after the March 10 primaries in which Joe Biden trounced him, when he declared, “While our campaign has won the ideological debate, we are losing the electability debate…”
Sanders is partly correct in his analysis. What he and his campaign is really losing, however, is not the “electability” debate but the “implementability” debate.
Obstacles that stand in the way of converting Sanders political and philosophical wish list into policy and practice include: its grandiose scope; the enormous cost which makes it prohibitive; virtually no congressional support, which would make it impossible to get enabling legislation passed; its appeal, limited to a populist subsegment of a subsegment of the Democratic electorate writ large, which has overwhelmingly endorsed Joe Biden’s middle of the road progressive ideas in this year’s Democratic primaries, as opposed to those backed by the Bernie Bros; and the fact that the word “socialism” is anathema to the Republican electorate and elected officials.
Sander’s proposals raise legitimate concerns and do have value as touch or reference points. But their “all or nothing at all” positioning as part of a comprehensive democratic socialist “revolution” minimizes their acceptability, at a time when targeted socialist-type initiatives or interventions are being given serious consideration to address the current economic conditions.
As E.J. Dionne, Jr. and William A. Galston pointed out in an informative Brookings Institution brief published last year, this consideration of socialism is nothing new for the U.S. The U.S. had a socialist candidate for President in the early 1900’s, Franklin Roosevelt’s New Deal in the 1930’s included socialist concepts; and the war on poverty started in the 1960’s was born in part out of socialist Michael Harrington’s book, The Other America.
In the conclusion to their piece, Dionne and Galston note that “If socialism is more popular than ever, it is still a troublesome word for a large share of the electorate.” They end it by stating:
“…decades of rising inequality and the shock of the 2008 crash have led large numbers of Americans — whether they call themselves socialists or not — to call the fundamentals of our economic system into question. The resurgence of socialism is a warning sign for those who want to preserve this system and an opportunity for those who would reform it. And, has happened before, their two causes may come to overlap.”
In that overlapping, is capitalism the answer?
Renewing America — Not Capitalism
Capitalism is a word that still has sex appeal for many Americans. And, rigid conservatives and libertarians would argue the solution to the economic divide is to let the free markets work their magic and everything will work itself out for all concerned.
Adam Smith, Scottish economist, social philosopher and the “father of capitalism” perpetrated this perspective in his classic book, the Wealth of Nations written in 1776. In his book, Smith asserted that everyone in the marketplace acted in their own self-interest but that there was an “invisible hand” that maneuvers itself to make things equal across a society.
[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity …they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.
That might have been true in Smith’s mind, and in the 18th century when he penned those words — although we seriously doubt it — but it is absolutely not true in this 21st century. Indeed, if there is an invisible hand in 2020, it is giving the majority of Americans the finger.
What the United States democracy has had — instead of an invisible hand — that has made capitalism work relatively fairly is a government and a combination of interdependent factors that have come together over time to level the economic playing field. This is the case that Torben Iversen of Harvard University and David Soskice of the London School of Economics make in their 2019 book, Democracy and Prosperity: Reinventing Capitalism through a Turbulent Century.
According to The Economist, Iversen and Soskice posit that in advanced democracies a mutually supportive democracy and capitalism are upheld by “three stabilizing pillars”: (1) A strong government that can control large corporations and labor unions ensuring competitive markets. (2) A sizeable middle class that forms political blocs to promote shared prosperity. (3) Large firms that are not very mobile.
Looking at the United States today those are no longer stabilizing pillars. Instead they are pillars of salt that have been washing away for decades.
The erosion began with Ronald Reagan’s presidency and his deregulation and reduction of the federal government’s influence over the country’s major economic players. It continued through all Republican presidents since Reagan, and with the Clinton presidency and the Third Way movement, which shifted the Democratic party from the left toward the center and closer to the Republican party in orientation.
Barack Obama came in with a somewhat more liberal agenda, promising “change we can believe in.” But after the first two years of his Presidency and the passage of the Affordable Care Act, Mitch McConnell and the Senate, with the stated intent of blocking Obama’s re-election in 2012, neutered much of what could have been a bipartisan change agenda.
In spite of populist rhetoric appealing to its populist working class base, President Donald Trump and his administration stand foursquare with corporate America and the rich and powerful in using capitalism to reinforce the current inequality.
Numerous books and articles have been written over the past few years about the need to correct this and chart a new course for capitalism. Billionaire Ray Dalio, co-chair of the hedge fund investment firm Bridgewater Associates, wrote “Why and How Capitalism Needs to be Reformed.” Washington Post business reporter, Steven Pearlstein authored Can American Capitalism Survive? Why Greed is Not Good, Opportunity is Not Equal, and Fairness Won’t Make Us Poor.
And in 2019, Nobel Prize-winning economist Joseph Stiglitz issued People, Power and Profits: Progressive Capitalism for an Age of Discontent. In a New York Times article based upon his book, Stiglitz states that “Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or under-employed.”
Renewing America: A More Inclusive and Equitable Democracy
We have the utmost respect for Professor Stiglitz and his pioneering work on inequality, and are in complete agreement with him about the need for a new social contract. We see a social contract, however, not as a capitalist construct but as a governmental one, and that is why we think the answer to America’s current economic dilemma is not to relabel capitalism to make it something that it is not, but to put the focus on what we need to do, which is to recommit to making our American democracy more inclusive and equitable.
The levers that can be employed to build a more inclusive and equitable democracy include: federalism, socialism, capitalism, civic engagement and pluralism. Since the founding of this country and through the years, those levers have been pulled at various pivot points to create “a more perfect union,” granting rights to those not addressed in the founding documents and implementing measures to promote equality of opportunity.
As a sampler, consider the following pivot points:
- The Constitutional Convention
- The Bill of Rights
- The Fourteenth Amendment
- The Morrill Act and the Homestead Act
- Teddy Roosevelt’s trust-busting
- The 19th Amendment
- The passage of Social Security
- The GI Bill
- Building the interstate highway system
- Brown v. Board of Education
- Roe v. Wade
- The space race
- The Civil Rights Act of 1964
- Medicare legislation
- The Internet
- The Environmental Protection Act
- The Affordable Care Act
- The Me Too movement
This movement toward greater social, political and economic inclusiveness has been an evolutionary one. It was almost derailed by the Civil War but the North prevailed and so too did the conception of a more inclusive and equitable democracy.
As noted earlier, the movement toward inclusiveness has been slowing down gradually since Ronald Reagan was President. With the advent of the Trump presidency, it has shifted into retrograde and become almost completely regressive on all fronts.
Economically, the Trump tax cut disproportionately benefited corporations and the wealthiest Americans. Governmentally, Trump’s elevation of his executive prerogatives and appointment of extremely conservative federal judges has made the legislative branch of government increasingly irrelevant and reduced the opportunity for the “common woman and man’s” voices to be heard in the political process. Operationally, Trump’s dismantling of virtually all agencies, including the Departments of Labor, Housing and Urban Development, Education, State, and Environmental Protection, hamstrings their ability to be responsive to the American citizenry.
The list of backward steps could go on and on. But, one example drawn from America coronavirus crisis will suffice.
In November of 2018, the Trump administration disbanded the National Security Council directorate for global health and security and bio-defense — a unit that was in place, among other things, to deal with pandemics. With this unit gone, the White House had no early warning system or rapid response capacity to deal with the COVID-19 pandemic.
During the Friday, March 13 press conference, PBS correspondent Yamiche Alcindor mentioned the dismantling of the pandemic unit and asked the President what “responsibility do you take to that…”. After saying this was a “nasty question,” Trump replied “…I don’t know anything about it. I mean you say we did that. I don’t know anything about it. Disbanding, no, I don’t know anything about it…”
When Alcindor asked a follow up question “You don’t know about the reorganization that happened at the National Security Council?,” Trump shot back, “…It’s the administration, perhaps they do that, let people go, you used to be with a different newspaper than you are now, you know, things like that happen.”
The level of ignorance and arrogance that President Trump displayed in the two answers is absolutely astounding. They confirm the worst impressions and suspicions regarding his presidential and leadership incompetence.
Some have referred to the re-election of Trump presidency as an “existential threat.” At first, we felt that was an overstatement.
Then, after reflecting on this situation, and his self-centered and negligent performance on so many issues that matter to average citizens during his tenure in office, we concluded that his re-election is an existential threat — an existential threat to America’s inclusive and equitable democracy and to the tens of million citizens on the underside of America’s social, political and economic divide who are disenfranchised today.
Therefore, an essential requirement for making the “system” work in those citizens’ best interest must be to replace Trump as President. Another essential requirement must be to develop a comprehensive plan to be used to guide the construction and implementation of a more inclusive and equitable democracy for the United States of America.
The preamble to that plan should define the parameters of a new social contract similar to that envisioned by Joseph Stiglitz. It should also spell out the measurable goals and the responsibilities of all of the key groups (e.g., public sector, private sector, non-profits, citizens, etc) to be involved in the plan implementation.
The plan itself should specify the strategies to be implemented to achieve the goals. Fortunately, those strategies will not have to be created from scratch.
This need has already received much attention and solid recommendations from analysts and thought leaders such as Joseph Stiglitz, Steven Pearlstein, Abhijit V. Banerjee and Esther Duflo; Ann Case and Angus Deaton; and, Nicholas Kristoff, and Sheryl WuDunn. Scholars at organizations such as the Brookings Institution, the American Enterprise Institute, the Economic Policy Institute; the Cato Institute and the Center for American Progress have also produced reports and work that can be drawn upon for input.
As part of this analysis and planning, it would be well worth dusting off and looking at an important report titled Opportunity, Responsibility, and Security: A Consensus Plan for Reducing Poverty and Restoring the American Dream, produced by a nonpartisan working group from the conservative leaning American Enterprise Institute and the liberal leaning Brookings Institution in 2015.
The strategies and ideas for creating a more inclusive and equitable democracy are there in abundance. Some of our own and those of others that we would put on list for consideration in drafting a comprehensive plan include: a consumption tax allocated toward this area; redoing the tax plans of the past that have benefitted primarily big businesses and the most wealthy to make them more equitable; development of more good-paying jobs through governmental supplements; giving workers a stronger voice in the workplace; financial support for small business start-ups and entrepreneurs; guaranteed government loans for struggling small businesses, which may have difficulty paying back loans going forward; initiatives directed at regions and rural areas that are lacking in economic development; infrastructure rebuilding jobs; national service jobs in areas of high unemployment; child support for single working mothers; and meaningful skill development that is related not to training but to guaranteed job placement and on-the-job training as opposed to classroom work.
Finally, this plan must be developed based upon a complete and careful situational assessment of the impact of COVID-19 on the American economy and those who were on the underside of the American economy before this calamity struck the U.S. The President, Congress and the federal government are putting forward a variety of measures to deal with the economic and health consequences of the pandemic. These are all important and necessary actions. As, John Cassidy notes in a recent New Yorker article they along with other measures should be put into a proper coronavirus stimulus package to maximize their effect.
A potential downside that must be avoided at this juncture is to believe that the stimulus measures designed to address this immediate condition and short-term needs will be sufficient responses for those with long-term needs. The truth is that those on the economic underside never really recovered after the recession of 2008, and many have been surviving at or near the economic brink for decades.
In conclusion, when the coronavirus crisis started America was a land of enormous inequality and a sanctuary for the rich and powerful. It will return to that status when this crisis ends. The one difference will be that it is probable that many of those on the economic, social and political underside will be much worse off when it ends than when it started.
This makes putting a comprehensive plan for creating a more inclusive and equitable democracy in place and implementing it rapidly even more critical than it was at the outset of this crisis. The need for renewal will be greater. But, so will the payoff. That’s so because it will help to make America America again sustained by the dreams and deeds of those who are finally brought into the economic, social and political mainstream.