Progressives Must Push

For example, the vast majority of Americans favour a public option
- insurance offered by the government, as we have for senior citizens
in the Medicare programme - yet these powerful interests are blocking it in the Senate.
This is despite the modest nature of the reform, which would not
provide free or universal insurance, but rather an additional option
that employers and individuals could buy into, with some subsidies for
those who could not afford it. The insurance companies don't want
competition, and the pharmaceutical corporations don't want another
potentially large buyer that could bargain against their own monopoly
power over the prices of patented drugs.

The United States is a
rich country, so it seems obvious that our forms of corruption are
preferable to those that plague developing countries. And they are, in
the sense that it that it is always better to be a rich country and
have rich country problems than to be a poor or middle-income country.
But if we look at the US from the point of view of its potential - and
I don't mean utopian dreams but merely what is quite feasible and
practical in the immediate or near future - it seems that we have a
very limited form of democracy.

One year after the collapse of Lehman Brothers and nearly two years into our worst recession
since the Great Depression, we have almost nothing to show in the way
of reforms that could prevent a recurrence. The financial sector is
probably more concentrated than it was before the crisis, and financial
firms are still gambling with taxpayer guarantees, and even subsidies.

Some
are doing remarkably well - Goldman Sachs, a recipient of billions of
dollars of taxpayer assistance, is expected to pay bonuses averaging
$700,000 each to 30,000 employees. The vastly over-bloated financial
industry that brought us this calamity has shrunk by only 7.7% in terms
of employment, far fewer than the percentage of jobs lost in
manufacturing (14.6%) or construction (31.6%), since the recession
began.

One reform that many experts saw as necessary to avoid
future financial disasters was to regulate the trading of derivatives -
financial instruments that are based on some other assets or values -
so that they could be traded and priced on an exchange like stocks,
bonds or commodities. Because many of these often complex derivatives
were traded outside of exchanges, financial companies were able to hide
enormous losses that only showed up when things fell apart.

But
off-exchange trading is a highly profitable business - because when
there are no market prices, there is limited competition. So Wall
Street is pushing this modest but important reform off the table as
well.

"Those on Wall Street cannot resume taking risks without
regard for consequences, and expect that next time, American taxpayers
will be there to break their fall," Barack Obama announced Monday in a speech on Wall Street. But so far, it looks like that's exactly what they are doing.

What then are we to make of the prospects for reform under an Obama administration
and a Democratic Congress? It is still relatively early in the game,
but one thing seems clear: This administration needs a lot more
pressure from the progressive end of the political spectrum, especially
the people who did the work and made the contributions that elected
this president.

Most of the pressure is coming from the right,
which is to be expected given the historic shift that the 2008 election
represented. For nearly four decades the politics of the country had
been shifting rightward, including during the Clinton administration.
Most importantly, the rules of the game have been steadily rewritten in
ways that shifted the distribution of income upward.

The latest
data that now takes us through the end of the last business cycle
(2002-2007) shows that two-thirds of the income gains during these
years went to the top 1% of the income distribution. This brought the
income share of the top 1% to its highest level since 1928. The bottom
90% got only about 12% of the income gains. This continued and
accelerated a trend that began in the mid 1970s, which was also quite
pronounced during the Clinton administration, when the top 1% captured
43% of all income gains (as compared to just 11% in the 1960s).

The
election of 2008 was a turning point, partly because the recession and
financial crisis forced swing (mostly white, working-class) voters to
focus on the economic issues and see that they were getting hammered
under Republican rule.

The current recession will reverse that
upward redistribution temporarily, as happened in the last recession,
because a lot of wealth disappears. But whether we get back on track
toward a more equitable society when the economy recovers will depend
on structural reforms. Healthcare is one such reform - and the outcome
is still undetermined - but we also need reforms that more directly
help the majority of Americans to share in the gains from productivity
growth.

For this reason it is especially unfortunate that the Obama administration has not fought for the Employee Free Choice Act,
which would make it easier for workers to recover their lost ability to
form unions in the US. The most important provision in this act is
known as "card check", which would allow employees to form a union as
soon as a majority of them had signed cards expressing their desire to
join. This, too, is in the process of being derailed.

Income
distribution is fundamental, because it is difficult to imagine social
and economic progress in most other areas, including democratisation,
education, poverty and social exclusion and crime as our society grows
increasingly unequal. It remains to be seen whether we will see
progress on this front when the economy recovers.