October has been a big month for truth-telling about the economic mess we are in.
Media headlines don't accurately portray our economic predicament for several reasons. A large contributor is the emerging story that mainstream economic theories that originated from the University of Chicago are now suspect because billionaires used philanthropy to dictate what the economics department published rather than truly scientific thought. I'll talk about the vulnerability of our institutions another day, but for today let's paint the picture of the mess we are in.
GDP is only a measure of true economic growth when distribution of the growth is considered. Meaning, who prospers when the economy grows?
When GDP was originally created to be the metric, it was assumed that GDP growth was correlated across the distribution of incomes. As we've recently experienced, it isn't. The Washington Center for Equitable Growth re-ran the numbers applying a distribution lens and you can see how economic growth was mainly in the upper percentile, skewing the GDP number. They now propose a GDP 2.0 including the distribution of the growth across income brackets which would more accurately visualize who prospers when the economy grows.
Stories have been trickling out for years describing how the economy feels rigged, but there hasn't been a solid data...until now. Recent generations are less likely to earn more than their parents and millions of people in poverty becomes a national security threat. Solving income inequality by providing a good standard of living across the income bands is a common shared goal not simply because it's the moral thing to do, but also because it starves off populism which was the lesson we were supposed to learn from World War II.
Poverty causes a surge in populism, which is when figures like Hitler or Trump become attractive as leaders with a promise that they alone will solve the problem. The problem for us to solve is a public policy one where our economic policies have been slowly captured to redistribute wealth upwards over time. We are due for a major systemic economic policy correction similarly like when the New Deal was designed to do between 1933-1936.
Economists have been publishing books like mad this month with more truth about our economy and paving the way to systemic economic policy changes that will reverse the harm delivered over my lifetime.
First, Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream by Aaron Glantz details the aftermath of the housing crisis. A small cohort of wealthy crooks earned their billions in a massive wealth transfer. These crooks are now in charge of our government agencies responsible for the treasury and housing of Americans.
Furthermore, the tax bill of 2017 strapped America's government with more debt than when Obama's administration started has left our government with less tools to soften the next recession effectively stealing the future away from an entire generation of Americans.
Next, The Triump of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanual Saez has been making the rounds in policy circles because of the jaw dropping statistic that we've returned to Guilded Age levels of inequality not seen since the robber baron days of the 1920's. This reality cuts through the heart of the promise of the American dream (social mobility) that if you work hard, you will be rewarded with a decent home and job.
Next, Goliath: The 100 Year War between Monopoly Power and Democracy by Matthew Stoller explains how concentrated power - whether at the hand of a military dictator or robber baron - was understood by the founders of our country to be autocratic and dangerous to individual liberty and democracy. We seem to have forgotten the context of the 1930's, when the Great Depression was caused by financial concentration at the hands of a few who misused their power (the kind described in Aaron Glantz book above) induced a financial collapse.
This was the historical context of the New Deal; to return power and economic footing to everyday Americans and prevent the future occurrence of financial concentration by abusers.
One more truth that has been made even more obvious lately comes from last year's Winners Take All: the Elite Charade of Changing the World.
Anand's hypothesis that the wealthy use philanthropy as reputation washing to cover up the harms they cause and avoid changing the systems that unjustly made them wealthy at the expense of others, seems to be everywhere now. Whether it's the college admissions scandal, or the housing crisis aftermath, or money laundering through real estate and anonymous companies - by accepting philanthropy as an acceptable alternative to rewriting the tax rules to a just and equal system where labor is rewarded more heavily than capital, we continue down this path towards authoritarianism.
Lastly, The Great Reversal out today, is the last piece of this puzzle concluding that American markets have given up on healthy competition. He explains that most sectors are more concentrated than 20 years ago and lobbying and campaign contributions have defanged anti-trust regulators. He argues for the government to return to what it best did: keeping the playing field level for competition.
I was asked earlier this year how this impacted me directly and why do I care?
I reflected on this and it comes down to this. My personal lack of choices and freedom to be independent is a domino downstream from these crimes. My husband and I have worked hard but have had to uproot ourselves from our communities several times to reach an iota of stability that was available to our parents generations for less effort. The prices of houses skyrocketed to a place where a home is no longer a vehicle to financial freedom but rather an anchor of a cost that we will bear most of our lives.
I spent the summer digging into my personal ancestry to better understand the opportunities and choices my ancestors made in the context of what was happening around them in the 20's and 30's. Knowing where my ancestors were in the context of these profound historical moments was enlightening to understanding their life choices and who they were when I met them.
I ended up here: We do have free will to move around within the system, but there are profound limitations to personal freedom and an understated threat to national security when the economy is captured by a crooked few.
We can do our best to make lemonade from lemons, but working people need more power to determine our own fate - if America is to live up to the promises made on paper.