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The Book of Jobs: “A Banking System is Supposed to Serve Society, Not the Other Way Around”
Forget monetary policy. Re-examining the cause of the Great Depression—the revolution in agriculture that threw millions out of work—the author argues that the U.S. is now facing and must manage a similar shift in the “real” economy, from industry to service, or risk a tragic replay of 80 years ago.
It has now been almost five years since the bursting of the housing bubble, and four years since the onset of the recession. There are 6.6 million fewer jobs in the United States than there were four years ago. Some 23 million Americans who would like to work full-time cannot get a job. Almost half of those who are unemployed have been unemployed long-term. Wages are falling—the real income of a typical American household is now below the level it was in 1997.
Domino Theory: The financial meltdown is the Depression parallel everyone notices. The more frightening parallel is everything else. (Vanity Fair) We knew the crisis was serious back in 2008. And we thought we knew who the “bad guys” were—the nation’s big banks, which through cynical lending and reckless gambling had brought the U.S. to the brink of ruin. The Bush and Obama administrations justified a bailout on the grounds that only if the banks were handed money without limit—and without conditions—could the economy recover. We did this not because we loved the banks but because (we were told) we couldn’t do without the lending that they made possible. Many, especially in the financial sector, argued that strong, resolute, and generous action to save not just the banks but the bankers, their shareholders, and their creditors would return the economy to where it had been before the crisis. In the meantime, a short-term stimulus, moderate in size, would suffice to tide the economy over until the banks could be restored to health.
The banks got their bailout. Some of the money went to bonuses. Little of it went to lending. And the economy didn’t really recover—output is barely greater than it was before the crisis, and the job situation is bleak. The diagnosis of our condition and the prescription that followed from it were incorrect. First, it was wrong to think that the bankers would mend their ways—that they would start to lend, if only they were treated nicely enough. We were told, in effect: “Don’t put conditions on the banks to require them to restructure the mortgages or to behave more honestly in their foreclosures. Don’t force them to use the money to lend. Such conditions will upset our delicate markets.” In the end, bank managers looked out for themselves and did what they are accustomed to doing.
Even when we fully repair the banking system, we’ll still be in deep trouble—because we were already in deep trouble. That seeming golden age of 2007 was far from a paradise. Yes, America had many things about which it could be proud. Companies in the information-technology field were at the leading edge of a revolution. But incomes for most working Americans still hadn’t returned to their levels prior to the previous recession. The American standard of living was sustained only by rising debt—debt so large that the U.S. savings rate had dropped to near zero. And “zero” doesn’t really tell the story. Because the rich have always been able to save a significant percentage of their income, putting them in the positive column, an average rate of close to zero means that everyone else must be in negative numbers. (Here’s the reality: in the years leading up to the recession, according to research done by my Columbia University colleague Bruce Greenwald, the bottom 80 percent of the American population had been spending around 110 percent of its income.) What made this level of indebtedness possible was the housing bubble, which Alan Greenspan and then Ben Bernanke, chairmen of the Federal Reserve Board, helped to engineer through low interest rates and nonregulation—not even using the regulatory tools they had. As we now know, this enabled banks to lend and households to borrow on the basis of assets whose value was determined in part by mass delusion.
The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to “where it was” does nothing to address the underlying problems.
The trauma we’re experiencing right now resembles the trauma we experienced 80 years ago, during the Great Depression, and it has been brought on by an analogous set of circumstances. Then, as now, we faced a breakdown of the banking system. But then, as now, the breakdown of the banking system was in part a consequence of deeper problems. Even if we correctly respond to the trauma—the failures of the financial sector—it will take a decade or more to achieve full recovery. Under the best of conditions, we will endure a Long Slump. If we respond incorrectly, as we have been, the Long Slump will last even longer, and the parallel with the Depression will take on a tragic new dimension.
Until now, the Depression was the last time in American history that unemployment exceeded 8 percent four years after the onset of recession. And never in the last 60 years has economic output been barely greater, four years after a recession, than it was before the recession started. The percentage of the civilian population at work has fallen by twice as much as in any post-World War II downturn. Not surprisingly, economists have begun to reflect on the similarities and differences between our Long Slump and the Great Depression. Extracting the right lessons is not easy.
Many have argued that the Depression was caused primarily by excessive tightening of the money supply on the part of the Federal Reserve Board. Ben Bernanke, a scholar of the Depression, has stated publicly that this was the lesson he took away, and the reason he opened the monetary spigots. He opened them very wide. Beginning in 2008, the balance sheet of the Fed doubled and then rose to three times its earlier level. Today it is $2.8 trillion. While the Fed, by doing this, may have succeeded in saving the banks, it didn’t succeed in saving the economy.
Reality has not only discredited the Fed but also raised questions about one of the conventional interpretations of the origins of the Depression. The argument has been made that the Fed caused the Depression by tightening money, and if only the Fed back then had increased the money supply—in other words, had done what the Fed has done today—a full-blown Depression would likely have been averted. In economics, it’s difficult to test hypotheses with controlled experiments of the kind the hard sciences can conduct. But the inability of the monetary expansion to counteract this current recession should forever lay to rest the idea that monetary policy was the prime culprit in the 1930s. The problem today, as it was then, is something else. The problem today is the so-called real economy. It’s a problem rooted in the kinds of jobs we have, the kind we need, and the kind we’re losing, and rooted as well in the kind of workers we want and the kind we don’t know what to do with. The real economy has been in a state of wrenching transition for decades, and its dislocations have never been squarely faced. A crisis of the real economy lies behind the Long Slump, just as it lay behind the Great Depression.
For the past several years, Bruce Greenwald and I have been engaged in research on an alternative theory of the Depression—and an alternative analysis of what is ailing the economy today. This explanation sees the financial crisis of the 1930s as a consequence not so much of a financial implosion but of the economy’s underlying weakness. The breakdown of the banking system didn’t culminate until 1933, long after the Depression began and long after unemployment had started to soar. By 1931 unemployment was already around 16 percent, and it reached 23 percent in 1932. Shantytown “Hoovervilles” were springing up everywhere. The underlying cause was a structural change in the real economy: the widespread decline in agricultural prices and incomes, caused by what is ordinarily a “good thing”—greater productivity.
At the beginning of the Depression, more than a fifth of all Americans worked on farms. Between 1929 and 1932, these people saw their incomes cut by somewhere between one-third and two-thirds, compounding problems that farmers had faced for years. Agriculture had been a victim of its own success. In 1900, it took a large portion of the U.S. population to produce enough food for the country as a whole. Then came a revolution in agriculture that would gain pace throughout the century—better seeds, better fertilizer, better farming practices, along with widespread mechanization. Today, 2 percent of Americans produce more food than we can consume.
What this transition meant, however, is that jobs and livelihoods on the farm were being destroyed. Because of accelerating productivity, output was increasing faster than demand, and prices fell sharply. It was this, more than anything else, that led to rapidly declining incomes. Farmers then (like workers now) borrowed heavily to sustain living standards and production. Because neither the farmers nor their bankers anticipated the steepness of the price declines, a credit crunch quickly ensued. Farmers simply couldn’t pay back what they owed. The financial sector was swept into the vortex of declining farm incomes.
The cities weren’t spared—far from it. As rural incomes fell, farmers had less and less money to buy goods produced in factories. Manufacturers had to lay off workers, which further diminished demand for agricultural produce, driving down prices even more. Before long, this vicious circle affected the entire national economy.
The value of assets (such as homes) often declines when incomes do. Farmers got trapped in their declining sector and in their depressed locales. Diminished income and wealth made migration to the cities more difficult; high urban unemployment made migration less attractive. Throughout the 1930s, in spite of the massive drop in farm income, there was little overall out-migration. Meanwhile, the farmers continued to produce, sometimes working even harder to make up for lower prices. Individually, that made sense; collectively, it didn’t, as any increased output kept forcing prices down.
Given the magnitude of the decline in farm income, it’s no wonder that the New Deal itself could not bring the country out of crisis. The programs were too small, and many were soon abandoned. By 1937, F.D.R., giving way to the deficit hawks, had cut back on stimulus efforts—a disastrous error. Meanwhile, hard-pressed states and localities were being forced to let employees go, just as they are now. The banking crisis undoubtedly compounded all these problems, and extended and deepened the downturn. But any analysis of financial disruption has to begin with what started off the chain reaction.
The Agriculture Adjustment Act, F.D.R.’s farm program, which was designed to raise prices by cutting back on production, may have eased the situation somewhat, at the margins. But it was not until government spending soared in preparation for global war that America started to emerge from the Depression. It is important to grasp this simple truth: it was government spending—a Keynesian stimulus, not any correction of monetary policy or any revival of the banking system—that brought about recovery. The long-run prospects for the economy would, of course, have been even better if more of the money had been spent on investments in education, technology, and infrastructure rather than munitions, but even so, the strong public spending more than offset the weaknesses in private spending.
Government spending unintentionally solved the economy’s underlying problem: it completed a necessary structural transformation, moving America, and especially the South, decisively from agriculture to manufacturing. Americans tend to be allergic to terms like “industrial policy,” but that’s what war spending was—a policy that permanently changed the nature of the economy. Massive job creation in the urban sector—in manufacturing—succeeded in moving people out of farming. The supply of food and the demand for it came into balance again: farm prices started to rise. The new migrants to the cities got training in urban life and factory skills, and after the war the G.I. Bill ensured that returning veterans would be equipped to thrive in a modern industrial society. Meanwhile, the vast pool of labor trapped on farms had all but disappeared. The process had been long and very painful, but the source of economic distress was gone.
The parallels between the story of the origin of the Great Depression and that of our Long Slump are strong. Back then we were moving from agriculture to manufacturing. Today we are moving from manufacturing to a service economy. The decline in manufacturing jobs has been dramatic—from about a third of the workforce 60 years ago to less than a tenth of it today. The pace has quickened markedly during the past decade. There are two reasons for the decline. One is greater productivity—the same dynamic that revolutionized agriculture and forced a majority of American farmers to look for work elsewhere. The other is globalization, which has sent millions of jobs overseas, to low-wage countries or those that have been investing more in infrastructure or technology. (As Greenwald has pointed out, most of the job loss in the 1990s was related to productivity increases, not to globalization.) Whatever the specific cause, the inevitable result is precisely the same as it was 80 years ago: a decline in income and jobs. The millions of jobless former factory workers once employed in cities such as Youngstown and Birmingham and Gary and Detroit are the modern-day equivalent of the Depression’s doomed farmers.
The consequences for consumer spending, and for the fundamental health of the economy—not to mention the appalling human cost—are obvious, though we were able to ignore them for a while. For a time, the bubbles in the housing and lending markets concealed the problem by creating artificial demand, which in turn created jobs in the financial sector and in construction and elsewhere. The bubble even made workers forget that their incomes were declining. They savored the possibility of wealth beyond their dreams, as the value of their houses soared and the value of their pensions, invested in the stock market, seemed to be doing likewise. But the jobs were temporary, fueled on vapor.
Mainstream macro-economists argue that the true bogeyman in a downturn is not falling wages but rigid wages—if only wages were more flexible (that is, lower), downturns would correct themselves! But this wasn’t true during the Depression, and it isn’t true now. On the contrary, lower wages and incomes would simply reduce demand, weakening the economy further.
Of four major service sectors—finance, real estate, health, and education—the first two were bloated before the current crisis set in. The other two, health and education, have traditionally received heavy government support. But government austerity at every level—that is, the slashing of budgets in the face of recession—has hit education especially hard, just as it has decimated the government sector as a whole. Nearly 700,000 state- and local-government jobs have disappeared during the past four years, mirroring what happened in the Depression. As in 1937, deficit hawks today call for balanced budgets and more and more cutbacks. Instead of pushing forward a structural transition that is inevitable—instead of investing in the right kinds of human capital, technology, and infrastructure, which will eventually pull us where we need to be—the government is holding back. Current strategies can have only one outcome: they will ensure that the Long Slump will be longer and deeper than it ever needed to be.
Two conclusions can be drawn from this brief history. The first is that the economy will not bounce back on its own, at least not in a time frame that matters to ordinary people. Yes, all those foreclosed homes will eventually find someone to live in them, or be torn down. Prices will at some point stabilize and even start to rise. Americans will also adjust to a lower standard of living—not just living within their means but living beneath their means as they struggle to pay off a mountain of debt. But the damage will be enormous. America’s conception of itself as a land of opportunity is already badly eroded. Unemployed young people are alienated. It will be harder and harder to get some large proportion of them onto a productive track. They will be scarred for life by what is happening today. Drive through the industrial river valleys of the Midwest or the small towns of the Plains or the factory hubs of the South, and you will see a picture of irreversible decay.
Monetary policy is not going to help us out of this mess. Ben Bernanke has, belatedly, admitted as much. The Fed played an important role in creating the current conditions—by encouraging the bubble that led to unsustainable consumption—but there is now little it can do to mitigate the consequences. I can understand that its members may feel some degree of guilt. But anyone who believes that monetary policy is going to resuscitate the economy will be sorely disappointed. That idea is a distraction, and a dangerous one.
What we need to do instead is embark on a massive investment program—as we did, virtually by accident, 80 years ago—that will increase our productivity for years to come, and will also increase employment now. This public investment, and the resultant restoration in G.D.P., increases the returns to private investment. Public investments could be directed at improving the quality of life and real productivity—unlike the private-sector investments in financial innovations, which turned out to be more akin to financial weapons of mass destruction.
Can we actually bring ourselves to do this, in the absence of mobilization for global war? Maybe not. The good news (in a sense) is that the United States has under-invested in infrastructure, technology, and education for decades, so the return on additional investment is high, while the cost of capital is at an unprecedented low. If we borrow today to finance high-return investments, our debt-to-G.D.P. ratio—the usual measure of debt sustainability—will be markedly improved. If we simultaneously increased taxes—for instance, on the top 1 percent of all households, measured by income—our debt sustainability would be improved even more.
The private sector by itself won’t, and can’t, undertake structural transformation of the magnitude needed—even if the Fed were to keep interest rates at zero for years to come. The only way it will happen is through a government stimulus designed not to preserve the old economy but to focus instead on creating a new one. We have to transition out of manufacturing and into services that people want—into productive activities that increase living standards, not those that increase risk and inequality. To that end, there are many high-return investments we can make. Education is a crucial one—a highly educated population is a fundamental driver of economic growth. Support is needed for basic research. Government investment in earlier decades—for instance, to develop the Internet and biotechnology—helped fuel economic growth. Without investment in basic research, what will fuel the next spurt of innovation? Meanwhile, the states could certainly use federal help in closing budget shortfalls. Long-term economic growth at our current rates of resource consumption is impossible, so funding research, skilled technicians, and initiatives for cleaner and more efficient energy production will not only help us out of the recession but also build a robust economy for decades. Finally, our decaying infrastructure, from roads and railroads to levees and power plants, is a prime target for profitable investment.
The second conclusion is this: If we expect to maintain any semblance of “normality,” we must fix the financial system. As noted, the implosion of the financial sector may not have been the underlying cause of our current crisis—but it has made it worse, and it’s an obstacle to long-term recovery. Small and medium-size companies, especially new ones, are disproportionately the source of job creation in any economy, and they have been especially hard-hit. What’s needed is to get banks out of the dangerous business of speculating and back into the boring business of lending. But we have not fixed the financial system. Rather, we have poured money into the banks, without restrictions, without conditions, and without a vision of the kind of banking system we want and need. We have, in a phrase, confused ends with means. A banking system is supposed to serve society, not the other way around.
That we should tolerate such a confusion of ends and means says something deeply disturbing about where our economy and our society have been heading. Americans in general are coming to understand what has happened. Protesters around the country, galvanized by the Occupy Wall Street movement, already know.
Comments
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117 Comments so far
Show AllSomehow I doubt that a policy which continues to ignore manufacturing, and primarily emphasizes a "service economy", will be the real answer. It would guarantee continued giant trade deficits as we import our goods from overseas ...
My father was a child during the depression and he and his family starved. He told me they would watch news reports about farmers burning food because they could not sell it...at 93 he still talks about piles of oranges and of butchered hogs set on fire as he and his hungry siblings watched.
I respectfully remind that not all cultures jack up prices of food when there are scarcities. Some share: some at least try and make sure that the children do not suffer.
There is no law of the universe that says food prices must go down when there is enough (destroying the farmers) and up when food is scarce. This is the consequence of speculation and profit seeking, not production for human need.
Now is a good time to re-consider how we manage resources.
Dmadrone
I think you would very much enjoy the article by John Ruskin that I mention below:
"Unto this Last"
Mike
====
Dmadrone, certainly we do not do a great job of managing resources, but your supply/demand ideas do not work in the real world. As a farmer I will work extra hard to produce a large crop if the financial incentive is high, but why would I or any other farmer make that extra effort to achieve a bumper crop if there were no reward other than a pure altruistic sense of satisfaction? That sense of satisfaction would grow old when the farmer starts thinking he's missing time with his family or time for other things of interest.
There used to be price supports and (government) stored surpluses didn't there? Have those gone away?
with agribusiness in charge of most of the acreage, price supports or paying farmers to take acreage out of production of commodities when there is a glut have not done anything other than enrich the multi-nationals in the business
RVingRetiree, commodity price supports are set far below today's commodity prices. Many commodity prices would have to fall by 2/3 to trigger government price supports. The government ended their reserve (stored surplus) policy back in the 1980s with the "Freedom to Farm Act." Without those reserves prices are now far more volatile. I guess one good aspect of this is that lately everyone in the world is encouraged to grow more food, even if only a tomato plant on the deck.
My Dad grew up on a farm in the 1890's, and worked as an agri-scientist until the 1960's. He said we always had a farm problem until they in fact did solve it (by the 1950's or so). Sounds like he'd say we have a farm problem again from what you say. Or maybe you feel it's better now because prices are high, but that saps strength from the rest of the economy via inflation eventually, so it comes back to bite in that and other ways ...
Having that government grain reserve was comforting. It mitigated the effects of a severe crop shortage. We do have better genetics now, especially in corn, to withstand a great deal of crop stress and still make a decent yield. Those higher grain prices also have included higher crop input costs. It has always been true that higher prices cure higher prices, i.e. higher prices encourage greater production which always has eventually brought about deflation in grain price and input costs. Ethanol and bio-fuels have kept the pendulum swinging toward strong prices. If crop weather remains decent then I think we are finally destined to have the highest prices behind us.
Lets give the farmer a break. He pays for the "energy" that goes into producing. To give away what he has produced will work for maybe a year but not longer.
The problems is THE GOVERNMENT. Just check the military budget to see where a huge part of the problem lies.
I applaud your comment Dmadrone. I've been thinking the same thing for years. We are backward when it comes to shared community. Our culture is so anti-humane.
Dmadrone, I am wondering how your father "watched" news reports during the depression. I never watched a TV program until 1952, because TV was not available to me, in the Seattle area, until then. I was born in 1939, at the end of the depression. Now I can imagine that your father and his siblings saw it at a movie house as a newsreel, but if they were starving, why did they spend money on movies? Perhaps you could clarify.
The low/no interest rates offered to the banksters which then use the money to speculate in the commodities market and this drives up agriculture prices. Until the reality of COUNTERFEIT DEBT, created by the banksters, with the interest paid on COUNTERFEIT DEBT is funded by the forced contributions, withholding taxes, of USAn labor. As for the great depression causes which was also engaged in COUNTERFEIT DEBT. The money supply available was insufficient to cover the amount of debt largely due to COUNTERFEIT DEBT. Result, the great depression.
The Problem with manufacturing is this.
In the 1930s a small portion of the world was Industrialized. Post WW11 most of the traditional Industrial economies had been devastated by war.
Today there is OVERCapacity in manufacturing worldwide by orders of magnitude. In order to manufacture those goods MARKETS are needed to CONSUME them. This means Global Competition for the same Markets which would very likely lead to more Miltary action for those markets.
More importantly it means Global competition for ever limited resources and the destruction of ecosystems for those resources.
Mr Stiglitiz still supports the Consumer economy under an economic system that has Capitalist class and a worker consumer class. THAT system is fundamentally unsound.
If the United States had a trade surplus in manufactured goods all it would mean is someone else has a deficit and a very large one and we have to begin to understand that all mations of this earth are in this together.
RVingRetiree--The answer is in the article. Financing a massive binge to repair the nation's infrastructure is really the ticket. What most people see as the government borrowing a lot of money and spending it on bridges and roads and then when it's done it's fixed is only part of the story.
When, for example a state's department of transportation takes out a bid on road repair of interstate then a lot of things happen. Crews are hired and equipment is leased or subcontractors show up with their own equipment. The work crews will wear out boots, gloves, and work clothes that will need to be replaced. They will eat at local eateries, sleep at local hotels and motels, and visit local supermarkets, the whole while spending some of that paycheck at various locations along the repair route. Local economies are stimulated and so on.
Massive infrastructure repair, replacement, and new projects across the nation will require vast amounts of concrete, steel, and facilities to manufacture the necessary supplies and equipment needed for projects. A national high speed passenger train service along with a conversion of fossil fuel transportaion to electric powered transportation will require brand new infrastructure to be built. All of this will stimulate the economy, make jobs, and increase the spending of educational dollars as work forces will need to be educated and trained.
Such a focus on what is needed will help pull our cookie out of the fire. If we continue any further in the direction we are going we will collapse not only the global economy which will draw all of us into a stupid senseless war, but will also collapse the environment and that will be the demise of many vertebrates including humans. My grandchildren deserve more of a chance then this.
rhb
While I think highly of Joseph Stiglitz - a much more basic and understandable way of thinking about what an economy is - and is not - is required.
And I do not find that way here, in this article.
"What Matters?", a collection of essays by Wendell Berry, and Foreword by Herman Daly - does represent a new, and at the same time, and old way of envisioning a true and functional economy.
For those willing to work hard, John Ruskin's nineteenth century classic "Unto this Last", available for free on the Internet - will add extraordinary depth to Wendell Berry's "common sense" approach.
Merry Christmas from me and my family in Calgary !!
========
The problem is that Slick Oily and the republicratic party are hell bent on preserving the old economy! Because that is where all of their dreams and schemes for power and wealth are centered! And we just don't fit into their plans for power and wealth! So tough shit America, they are still bleeding you dry!
"We knew the crisis was serious back in 2008. And we thought we knew who the “bad guys” were—the nation’s big banks, which through cynical lending and reckless gambling had brought the U.S. to the brink of ruin."
I guess Sen. Levin was right. The deficit/debt isn't caused by the wars! It's the banks, per Stiglitz. But, don't the banks (now openly) collude with the for-profit MIC industries, vis-a-vis the rigged stock markets and massive currency markets rigging, not to mention the takeovers of independent sovereign countries through focused financialization and accounting fraud schemes, including the US BTW, to provide all those assets needed to actually have wars, whether bomb-throwing or debt-drowning?
The Point: The banks are bad and outright mafias. But, sorta like the video about singling out "teh gays for everyone's malaise," it would be highly misleading to single out the banks as the cause of the world's economic malaise. There are quantifiably large industries working in tandem WITH the banks in this effort, notably those that belong to those thingies called "stock/currency/commodities markets," and one very, very, very large industry is the multi-national for-profit MICs in that venue (and pharma/medicine, energy, etc, etc, etc.)
{BTW--NO, NO, NO--teh gays are NOT like mafiosa banks. Rather, trying to tie into another story on CD, albeit not in absolute and total equivalency.}
It is unfortunate that in a corrupt and stupid society like America a person of integrity and intellifence like Stiglitz is completely marginalized.
It would be nice to think that maybe the OWS movement might pick up on some of Stiglitz's ideas, to try to craft an agenda that moves beyond protest towards specific reforms.
Professor Stiglitz succinctly outlines a workable policy for economic recovery in Amerika. Unfortunately, the greedy-rich and their politicians have no incentive to end the 30-year-old vampire system that sucked the life out of a formerly robust US economy. Instead of planning for future growth by investing in education, infrastructure and creating a fiscal policy that encourages small-business growth, right-wing oligarchs and sell-out whores in government are content to continue on a path that widens the gulf between the plutocracy and the peasants.
"Today, 2 percent of Americans produce more food than we can consume."
If that's the case, then why are there hungry Americans?
The line makes it sound like each and every one of us eats three meals a day in portions larger than we can handle!
I think the line is just a capitalist's excuse to take food from the mouths of the citizens who produced it so it can be sold at a profit to foreigners.
"You (average American) have too much, more food than you can eat! Here, let me take most of it and sell it for profit to people in other countries who really need it (Dubai, Israel, etc.) Those poor starving foreigners have nothing!"
I'm getting tired of that tune.
We currently have so much food that we have to burn some of it (ethanol).
Well lucky you!
Try sharing some of it with the less fortunate instead of wasting it on your precious automobile!
FOOD PLENTY vs. SHORTAGE ............................................................................................
The problem is not food production. The problem is food distribution and cost. About twenty percent of the cost of food is in transportation. We get oranges flown in from Peru as an example. It takes a huge amount of fossil fuel and toxic agricultural chemicals to raise, process, and transport our food crops. We need to have local (“lacavore”) production and consumption. Each community needs to grow as much of its food as possible on “farmsteads” and distribute it locally by using farm stands, farmers' markets, food co-ops, CSA's, barter exchanges, and by using neighborhood distribution centers from local residential garages, church basements, NPO buildings and similar, low-cost locations................................................................................................. .....
We need new generations of “farmsteads” in rural lands and “farm plots” and “victory gardens” in every urban front and back yard. There are plenty of freeway and highway side yards and medians which can serve to grow local grain and hay crops. The areas can be delineated and protect from fast traffic by using “K-Barriers”. There is no reason why freeway and highway “landscaping” cannot also produce food crops, such as berries, pomegranates, and root crops.............................................................................
The farmsteads can serve several needs. They can produce a wide variety of crops and meat and milk animals, poultry eggs and meat, fish meat and meal. They can serve as homeless shelters and provide food and shelter for the “unemployed” singles and family units. The can support community schooling of which charter public schools can be a part..............................................................................................................................
The real problem is that we have many “complainers” and few willing to put their minds, labor and resources to work to solve our many societal problems of equitable distribution of what we workers produce by our own sweat and use of our own resources. Comments and commitments are invited...........................................................
Jim Miller,
jimmiller5417 – at – gmail.com
Don't think Stiglitz's idea of stimulating consumption in the American middle class is the best way to preserve the planet (although it might provide more jobs). We need to plan an economy that is built around human needs and environmental constraints rather than concentrate on infrastructure improvement, stimulus measures, and ways of compelling banks to lend. That implies regulations that compel corporations to pay the real costs of their products and as well as a new attitude towards work that has workers spending less time at the job in exchange for the necessities of life (plus an incentive for excellence). Jobs shouldn't be about being able to buy more but should be about providing the means for participation in the world community. It's time to stop thinking about economics in such narrow terms as Stiglitz does.
Thank you, drosera. I was really suprised that someone who has always seemed as embedded in reality as Stiglitz would think that growth is a sollution.
And especially thanks for your comment on jobs. I cringe every time I hear the creative, vital, amazing people i know referred to as workers: as though the shining miracle of their lives should be subsumed to fifty or sixty years of whatever work the corporations see fit to give them, their own talents and gifts be damned.
Twenty-five hours of "work" a week is plenty of time to earn the necessities of live. The rest of the time can be used to enjoy life, empower those at the bottom, and do the creative acts that our species is so good at. Job sharing is the route to that end--and it is being practiced in Germany now. We are so used to the idea of a lazy underclass in the US that we refuse to acknowledge most people are happy to work for a reasonable wage under decent working conditions for 25 hours a week. It is easier to call the poor slackers and "punish" them with unemployment pittances, lousy or no medical care, and food stamps. That way we can lord our superiority over them.
drosera and dmadrone, Stiglitz pointedly states that it is time to move from a manufacturing economy to a service economy. For instance my daughter is an occupational therapist helping others cope with physical problems. My son manages an equipment rental outfit that allows a person to afford an expensive piece of equipment for a short time. There are a great many services required in our complicated society. Serving each other is a good plan.
"We need to plan an economy that is built around human needs and environmental constraints rather than concentrate on infrastructure improvement, stimulus measures, and ways of compelling banks to lend."
I don't understand why this is this an either/or scenario? Can't we concentrate on infrastructure improvement, stimulus measures and lending built around human needs and sustainability?
Laws of conservation would suggest that real costs of production always equal the value of production. But perhaps more if we think in terms of opportunity costs. For instance, the money spent on a bomb might provide lifesaving surgeries for several individuals.
Your essential point though is critical. How do we prioritize and regulate an economy for the true long-term benefit of our greater human family and Mother Earth?
How do a billion or so survive on pennies, while a very few want for absolutely nothing (materially)?
You are so right. It is time to stop thinking about economics in such narrow terms. It's time we start thinking in terms of 'humanomics', and wherein the greatest of human endeavors is also our greatest asset, the best of our human qualities, our capacity for caring? (ie. caring economics)
I hear what you are saying. Still, I think the approach you touch upon- a change from the notion of unlimited and unsustainable economic growth to one that respects human values and the balance of nature, can be complementary to the approach Stiglitz outlines- an intelligent public investment in infrastructure, education, renewable, energy, etc. Stiglitz fully understands that it is the corporate/government axis and the usurpation of democracy that is preventing constructive change.
The government has shown that it listens to the bankers and big corporations and pays no heed to the wishes of ordinary working people.
Stiglitz speaks for the rest of us, but he is not favored by big business so it will be surprising if the government takes his advice now. He has been giving the same advice for several years and it has been ignored by successive governments.
I recall many years ago explaining to a young free enterprizer during a recession in the early 1980's, that unlike the weather, financial crises don't just happen but are caused; caused by those who want them to happen. Financial shocks are a good way of getting more control over working people and the unemployed.
Financial crises go hand in hand with the expansion of the prison system. Both are good for the people who cause them as are breaking up the occupy movements rather than responding positively to the issues addressed by them.
I believe your thinking is too simplistic. Many humans will try to take advantage of any kind of "shock." As they said on Seinfeld everyone wants more 'hand' (control). Policies are enacted for many different reasons. With all policies some benefit and some lose. One interesting thing happening here in Minnesota is the poor "attendance" in our jails. Quite a few were built in the last decade and now many are holding but a small fraction of capacity.
"implosion of the financial sector"?
What implosion?
Implosion implies "collapse". But there was no collapse of the banking system -- and, despite all the dire warnings from folks like Geithner and bernanke who said either you give the banks money or face Great Depression II -- it is doubtful that there ever would have been an "implosion" of the financial sector, even without the bailouts. (economist Dean Baker has made this very point)
Sure, some very big banks (the ones most deeply involved in speculating on derivtaives) would have gone belly up. But so what? That's how it should be. Lots of smaller banks who had done things right would have survived and the financial system would be in much better shape now as a result.
Instead, we have even bigger banks with no disincentive to do the very same thing again.
Some "implosion"
The banks are making money hand over fist and giving out bonuses like there is no tommorrow (which there may very well not be).
One point JS and his ilk tend to ignore:
The Age of Over-Consumption is ending.
We The 99% are sick of working at Walmart just so we can afford to shop at Target. We're sick of being called 'consumers' instead of people. We're sick of buying more of the same crap we don't need. And we're sick of living in a dog-eat-dog society, the inevitable result of which is a few fat dogs, and millions of dead and wounded ones.
We don't need a 'new economy.' We need to articulate how the non-consumption-based New American Way is gonna work, and start that system working ASAP...
frank, you did not pay attention. Under the main headline: "must manage a similar shift in the “real” economy, from industry to service." In other words, we need to consume services in increasing amounts, and decrease consuming WalMart stuff.
Roosevelt's farm policy was to help slow down but still ease farmers out of agriculture, a process that was as inevitable as it was necessary thanks to the ever increasing productivity of those farmers large enough to afford the machinery to do so.
More bunkum from economists, they guys whose whoring for the capitalists led to this depression. Economists factored people out of their equations. Now we are expected to believe another nonsense theory of growth that factors the environment out of their equations. Bah Humbug.
What could eliminate stock markets, CEOs with deep pockets, curb recessions, depressions, banksters, gangsters, fools, ghouls and prevent these and other unsavory types from gaining power over the people?
A socialist government, with a centrally controlled economy, staffed by honest people.
Honest people and benevolent dictators are rather rare this millenium. Randomly picked candidates (3-5), voted on for Position/Office after debates, etc. with their Pensions tied to later Vote, maybe? Vote NOA OK and repeat till you get one w/IQ>shoe size.
Democratic Socialism of some sort; end to Capitalism, a flawed fantasy of greed expounding infinite growth; only a real turn back to nature, spirituality, love might do it. Wake up call comin is gonna be ugly 'for it bets better, wakey wakey it's 2012
Excellent analysis by Stiglitz – BUT – he didn’t address:
- The giant fraud perpetrated on the American people – lowering taxes on
corporations & the 1%, will provide incentives for investments & job creation
- The real effects of deregulation & the imperative to prosecute the speculators
- Need for radical transformation of the tax codes
- Shift to a service economy has created low-wage jobs
- Investing in education for research, etc. - in what areas & how many jobs
will be created?
- etc.
thank you for mentioning the tax code..back in the 80's there was a dramatic shift to favoring debt over equity..this is when hostile takeovers followed by asset stripping came into vogue so that it was more lucrative to buy a company and load it up with debt, sell it off in parts and then leave it stranded to descend into bankruptcy..the early vulture capitalists were lionized and look where that has gotten us
Reaganomics, which used the econometric formulas created by scientists, engineers and mathematicians, is still with us. Now I question Reagan's ability to comprehend econometrics since he had an incapacitated mind due to Alzheimer's,The exotic math formulas of double back bending supply curves, calculus, yea Reagan with his incapacitated mind at 71 years old didn't have a clue. It is Reaganomics that still dominates the USG mindset and we wonder why it has resulted in the current economic/financial collapse a system which is the result of an incapacitated mind, Reagan's. Econometrics does not take human behavior into account because it not quantifiable. The whole econometrics system has to be called into question.
This well written article explains our current economic system well. We, the 99% must be the change we want to see in the future. We have to organize against this oppressive situation. A good place to start is to...oh, hell...it's overwhelming
"A Banking System is Supposed to Serve Society, Not the Other Way Around"
Nothing new here! Karl Marx said this a long time ago.
He believed as did other writers of his time, that industrial capital would overtime subordinate financial capitalism to it’s needs. I guess he was little optimistic on that count. And overtime industrial capitalism would take what he believed to be a natural course and evolve into socialism. Overly optimistic again.
What he did not anticipate, is that powers of financial capitalism would launch such a strong counter attack against the natural course of economies to move towards socialism. Another words towards long term government planning, vs. short-term gain financial sector planning, which is proving to be quite destructive.
But power is, as power does, and the people be damned.
"Marx believed as did other writers of his time, that industrial capital would overtime subordinate financial capitalism to it’s needs.' Maybe so but Lenin was very aware of the dominance of financial capital:
"Thus, the twentieth century marks the turning-point from the old capitalism, . . . from the domination of capital in general to the domination of finance capital. "
" . . . the “business operations” of capitalist monopolies inevitably lead to the domination of a financial oligarchy."
" . . . A monopoly, once it is formed and controls thousands of millions, inevitably penetrates into every sphere of public life, regardless of the form of government and all other 'details.' "
"Finance capital has created the epoch of monopolies, and monopolies introduce everywhere monopolist principles: . . .The most usual thing is to stipulate that part of the loan granted shall be spent on purchases in the creditor country, particularly on orders for war materials, or for ships, etc. "
I find it important to reread this valuable work every couple of years. "Imperialism the Highest Stage of Capitalism" online at:
http://www.marxists.org/archive/lenin/works/1916/imp-hsc/
Very good article and well written. I might add that I think that the people feel that they have been cheated. That dishonesty is the mean of the day. Those that have been dishonest and have cheated the public are given raises. They should be in jail. It was like Talib said that we need to go back to the laws of Hammurabi...where if someone built a bridge in Roman days that he would have to sleep under it for a month. He said that today, those that destroyed the economy are living high on the hog. In the London Financial Times today there is an article about a $77 million dollar fine that was levied against GE. They listed the other banks that had been fined for their bid rigging of the Muni market. I do believe that all the banks that had been listed that did this were on the TARP fund. Our tax payers bailed them out. And now, I am sure, our tax payers dollars are paying the fine. On top of that there was a man on CNBC the other day that was asked if GM was going to pay back their loans of $45bill that were part of the TARP money and he said no. They paid some back but think of all those jobs that GM saved. He said 2million jobs were saved because of GM. To me , that is outrageous. So, we have been cheated and then these charlatans are able to get up in front of national TV and say so what...have a good day. I do know one thing. I will never ever ever buy a GM product.
The USAn taxpayers FORCED CONTRIBUTIONS, WITHHOLDING TAXES, also pay for the bribery necessary for the banks to bribe the politicians and all the others. Not to mention that the FORCED CONTRIBUTIONS ALSO PAY the interest for the COUNTERFEIT DEBT created by the banksters.
The USAn taxpayers FORCED CONTRIBUTIONS, WITHHOLDING TAXES, also pay for the bribery necessary for the banks to bribe the politicians and all the others. Not to mention that the FORCED CONTRIBUTIONS ALSO PAY the interest for the COUNTERFEIT DEBT created by the banksters.
A very good, albeit long, explanation if one has the stamina and determination to try to understand what's happened. I agree, the OWS movement gets it!