Act: Inspiration

Imagining an Economy That Serves the 99%

July 13, 2018

Those who benefit most from the status quo spend a lot of money to persuade the rest of us that this – an economy that serves the top 1% — is good for us and, in fact, the best we can do.

The United States is among the richest societies ever. But despite all of its productivity, all of its abundance, and all of its potential, the US economy does not adequately meet the needs of the human beings who give it life, rely on it, and live and die by it. We can do way, way better.

To get there, we need to recognize that a kinder, more equitable, more democratic, and sustainable economy is possible.  And we need to reject the false, dismissive claim that we “can’t afford” a better economy. We can imagine and build an economy that centers the needs and aspirations of the 99%, and we can afford it.

Among the world’s rich countries, the US is the most unequal, and it’s been getting worse over time. Over the past 40 years, the incomes of the top 1% (and, especially, the top 0.1%) have soared, while most everyone else has struggled to stay above water.  Some have, some haven’t.  Since 1973, labor productivity – the market value of what the typical US worker produces in an hour – has increased by 74%, while real wages (what a worker gets paid for an hour of work) have barely budged.  13% of US residents (including 25% of African Americans and 16% of children) live in poverty. The wealth of the median African American household is about one-tenth the wealth of the median white household.  Many millions are a lay-off, a health crisis or a divorce away from bankruptcy and/or poverty. Tens of millions are without adequate health care.  Our schools are under-funded, we work too hard, and the organization of economic life – the ways in which we produce, distribute and consume stuff – has put the planet and the fate of our grandchildren at risk.

Meanwhile, the rich are getting richer, and US corporate profits continue to break records.  In 1965 the typical CEO earned about 20 times as much as the average worker.  In 2016, the ratio was 270.

The US economy doesn’t serve most of us because it is not designed to. It’s designed to generate profit – which it does extraordinarily well. Rising inequality and soaring profitability have been facilitated by 40 years of neoliberal policies – tax cuts for corporations and the rich, aggressive attacks on the bargaining power of workers, privatization, and declining corporate accountability (aka “deregulation”). The GOP has more blood on its hands than do the Democrats, but the Democrats have plenty to be ashamed of.

Those who benefit most from the status quo spend a lot of money to persuade the rest of us that this – an economy that serves the top 1% – is good for us and, in fact, the best we can do.  Our limited sense of what’s possible is no accident.

The US economy should provide us with economic security (i.e. higher wages, universal health care, retirement security, affordable housing, and much more). But more than this, the US economy should provide, support and facilitate all of the things that make our lives rich, including things that are not obviously “economic” – community, opportunities to express ourselves creatively, ample time away from work, creative work, gratifying public spaces, rich conversations, abundant opportunities to tend to our relationships, and much more.

Note well!  This roughly sketched vision is about economics! Each of the items on the short (and very incomplete) list above depends essentially on how we “allocate our resources” – our money, our time, our gear, and our imaginations.  In particular, it depends on how we choose to allocate our organizational and technological creativity.  Prioritizing human needs will make our lives better.  It may not enhance corporate profits.  That’s a good trade-off.

We are encouraged to see the economy as a force of nature, a set of “market forces” that – like gravity or the weather – are essentially beyond our control and, for all but a few experts, beyond our understanding.  We can only hope that, by its ruthless, inevitable logic (tweaked, perhaps, by a few wise experts at the Fed or the IMF) “the economy” might provide us with jobs and growth and “opportunities.” When wages plummet or jobs disappear, we’re likely to hear that “it’s a weak economy” or, perhaps, that globalization or “technology” have led to “structural changes in the economy” with which we, alas, must learn to deal. We are told, often, that we might have to make some sacrifices – lower wages, less vacation, fewer services, fewer protections, skimpier benefits, higher interest rates, etc. – for “the good of the economy.”  The economy is the master, we are its servant.

The widely held vision of the economy as a remote, fickle force of nature is of enormous economic and political consequence.  It suggests that we are powerless, that we have no choice but to accept what “the economy” – capitalism – delivers.  But the economy is, in fact, a social, historical and political creation, and so its form, its rhythms and its priorities are not “natural” or inevitable.  We can re-imagine our economy, and re-make it.

Similarly, the presumption that the economy is the domain of business and finance means that Capital’s perspective dominates our discussions of the economy.  Want to know what the economy “needs”? The media, typically, calls a banker.

We won’t have different (and better) economy until we recognize that a different economy is possible; until we begin to imagine an economy that has human need – and not corporate profit – as its primary mission.

Mainstream popular discussions of the economy help to stifle our imagination about what is possible, in a few important ways.

  • As noted above, popular discussions of the economy tend to see the economy as a something apart from us, with a logic of its own, and essentially beyond our control.
  • Popular discussions of the economy presume narrow measures of economic “success” – unemployment rates, the performance of the stock market and, especially, economic growth. Debates between the Right and the mainstream “left,” thus, tend to be about how best to promote economic growth and – if we’re lucky – maybe, how we might squeeze a little more humanity out of our limited resources.  (Note: this question– how to promote growth – is an important matter, about which the Right is quite wrong!  But it is too narrow of a question. This limited debate obscures many questions about the ways in which our economy might facilitate (or not) opportunities for us to live rich, fulfilling lives – beyond producing more stuff.)
  • The Right has relentlessly insisted (with meager evidence, but remarkable success) that growth is facilitated by coddling capitalists – lower corporate taxes, less corporate accountability (deregulation), and fatter profit margins.
  • Discussions about “the economy” are peppered with regular reminders that “economics is about scarcity,” and so visions of a better, more generous economy – higher wages, universal health care, family leave, well-funded arts programs in our schools, etc., etc. – are met, inevitably, with three related dismissals: (a) it would “blow up” the deficit (b) it would slow growth and/or (c) “We can’t afford it.”

The claim that “we can’t afford” a sustainable and generous economy – an economy that provides economic security, reliable access to health care, good schools, abundant opportunities for (inter)personal growth and enrichment, and more– is a lie.  This is true: an economy that prioritizes the needs of the global 99% is likely to reduce corporate profits and the incomes of the 1%. It would limit opportunities for capitalists to squeeze additional profit out of workers, communities, and the planet.  So, perhaps, they “can’t afford it.” The rest of us can.

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It’s true, of course, that we can’t afford “everything.”  But we can “afford” a much better society.  How?  A wealth tax on the very rich and a repeal of the enormous Trump corporate tax cut would liberate hundreds of billions of dollars a year.  The US spends nearly as much on defense (about $700 billion in 2018) as the rest of the world combined. Brown University’s Watson Institute estimates that the “cost of US wars” since 9/11 is “$4.79 trillion and counting.”  The explicit cost of mass incarceration in the US is nearly $200 billion per year.  The US spent $3.3 trillion on health care in 2016; twice as must per capita as many rich countries (all of which provide universal coverage!).  Among the world’s rich countries, US tax rates are near the bottom of the list.  Americans, on average, pay 26% of our income in taxes of all sorts. The OECD average is 34%.  Sweden and Denmark have higher tax rates – over 40%.  They also have generous unemployment benefits, universal health care, generous retirement benefits, and free college tuition (Danish students, in fact, are paid to attend university).  An increase in tax revenues in the US from 26% of GDP to 29% would yield about $330 billion annually.  An increase to 34% – the OECD average – would yield nearly $900 billion.   And, finally, the federal government can borrow money to invest in smart infrastructure – which would facilitate sustainable growth, and a better life for most of us.

And so, “we can’t afford it” means, more precisely, that we can’t afford a more generous economy without (a) raising taxes on corporations and the 0.1%  (b) cutting defense spending (c) rationalizing our health care and criminal justice systems (d) borrowing money to invest in smart infrastructure improvements (e) raising taxes on middle class Americans (to help pay for education, health care, social security, public spaces, and more) and/or (f) trading off some economic growth for improvements in the quality of our lives (like more time with the people and activities that we love).

I am in favor of each of these possibilities, and I would be delighted by the ways in which these resources would improve life for 99% of Americans.  Some people, surely, will disagree with me about the wisdom of these trade-offs.  Either way, the point here is this: “we can’t afford it” is a lie.

Instead of asking “What’s good for ‘the economy’?,” we should ask “What does a good society look like, and how can we organize our economy in ways that will allow us to build a society that meets our needs, hopes, and dreams?  How might we construct an economy that spreads the wealth, while prioritizing security, health, relationships, creativity – and all of the other things that make our lives rich?”

The economy is too important to be left to capitalists, the market, and the economists at the IMF.


Teaser photo credit: (Photo: Common Dreams)

Tim Koechlin

Tim Koechlin holds a PhD in economics. He is the Director of the International Studies Program at Vassar College, where he has an appointment in International Studies and Urban Studies. Professor Koechlin has taught and written about a variety of subjects including economic, political and racial inequality; globalization; macroeconomic policy, and urban political economy.

Tags: building a resilient economy, economic growth, mainstream economies, new economy