Plutocrats vs. Populists: Good Piece Until the End -- Answers are Easy

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Sunday, 03 November 2013 08:17

Chrystia Freeland has a good piece in the NYT on the rise of plutocratic politics in the United States and elsewhere and the populist opposition it has provoked. The piece makes many interesting points but then towards the end strangely tells readers:

"Part of the problem is that no one has yet come up with a fully convincing answer to the question of how you harness the power of the technology revolution and globalization without hollowing out middle-class jobs."

No, this is very far from true. There are very convincing answers to this question, it's just the plutocrats block them from being put into practice.

Topping the list of course would be aggressive stimulus to bring the economy back to something resembling full employment. This not only would give tens of millions of people more income, it would make many bad jobs into decent jobs.

In a tight labor market employers will pay someone $15-$20 hours to work as a retail clerk at big box stores or fast food restaurants or as custodians. These jobs pay very low wages in the current economy because government policy acts to limit employment. If we didn't have policy (fiscal and exchange rate policy) that reduced employment, then there would be more demand for labor and the wages in low-paid occupations would rise.

In terms of globalization, we have deliberately structured globalization so as to put downward pressure on the wages of low and middle wage earners. There is no reason, except for political power, that we could not have designed globalization to put downward pressure on the wages of the doctors and other highly paid professionals. This was a policy choice, it has nothing to do with the inherent dynamics of globalization.

Also, the high pay on Wall Street would be brought down to earth with the end of too big to fail subsidies. This policy reversal coupled with the imposition of financial speculation taxes or other taxes that would bring taxation in the financial industry in line with taxation in other industries (a policy even advocated by the IMF), would substantially reduce the take of Wall Street plutocrats.

And replacing government granted patent monopolies in the drug and high tech sectors with more efficient mechanisms of supporting innovation would also go a long way towards both reducing high end incomes and making essential medicines more affordable. These and other issues are discussed in The End of Loser Liberalism: Making Markets Progress, among other places.

Anyhow, it is bizarre that Freeland would end her piece by asserting the problem is a lack of answers. As she effectively documents, the plutocrats have managed to seize control over politics in the United States and elsewhere. There is no lack of good answers, the problem is that the plutocrats have power to stop them from being put into practice.