There’s nothing original here (and apologies for the less-than-clever subject). I just wanted to do a drive-by and point out/quote approvingly a couple good posts from David Ruccio about Paul Krugman’s role of inequality and the crisis. First,
Krugman’s clearly in trouble, and his mainstream economics training is not much help. So, let’s offer him some assistance: First, he needs a theory of inequality, a theory of value that explains the conditions and consequences of the growing gap between wages and productivity. Call it a theory of exploitation. Then, he needs to trace the effects of growing exploitation on both wage-earners (who go into debt to maintain consumption) and profit-takers (who funnel one portion of those profits into the salaries of managers and another portion into new financial instruments). Call it a theory of financial fragility based on capitalist exploitation.
Then, after reviewing some a new CBPP report, Ruccio concludes that the tax code is not a sufficient mechanism to address inequality:
So, if we want to understand the links between inequality and capitalist crises, we need to start by analyzing the growing gap in the distribution of income prior to the onset of the crises. And if we want to eliminate that gap and avoid the next crisis, we have to move beyond the class structures of capitalism that created them in the first place.
Also, unrelated, Ruccio has a nice post on the anti-blog essay that has gotten so much attention the last few days. I’ll just chime in that I feel perfectly inadequate at doing anything other than questioning, but that there is real value in that, and other bloggers who do the same should keep it up. I’m aware that I often go well past the questioning stage and into providing answers, but it’s usually just thinking out loud. I’m guessing this is the same for many other bloggers too, who are seeking some sort of discourse. The more bloggers we have, the wider and more heterodox the discourse can be.
Finally, I’m vacation-blogging from Germany, so I’ll have a few thoughts tomorrow based on anecdotal observations from the country. Sneak preview: the landscape, citizenry, and architecture are way more awesome than the deficit hawks at the top of their government.
The gap surely is a worthwhile subject for discussion. I suspect the gap can be moderated by direct means, for instance eliminating FICA, which falls most heavily on the lower-paid employed, and by raising the minimum income for federal taxing.
Further, the federal government can pay more for such programs as Medicaid, food stamps, “affordable” housing, etc.
Although such direct transfer efforts might help close the gap, we still are left with the most important cause, which I suspect is education. If all education, from kindergarten to advanced degrees were free to everyone, this together with the above-mentioned transfer payments, might greatly diminish the gap.
This still leaves one question for discussion: Although many, if not most, people may find the gap morally objectionable, is it economically objectionable? That is, would an economy grow better, and would a population live better lives overall, if there were little or no gap?
Rodger Malcolm Mitchell
Good points on education, although someone will still have to do low skilled jobs. I think for your last question the answer depends on the how, and that’s beyond my scope. Rodger, I’m curious about your thoughts on these posts (unrelated): http://www.tinyrevolution.com/mt/archives/003326.html
And
http://www.interfluidity.com/v2/871.html
Nick, re. “tiny revolution,” I’m not much for conspiracy theories. The author begins in the right direction (“Money is not real”), then goes on to talk about debt as though it were real. I don’t think he really understands.
First, money is real for countries that are not monetarily sovereign, i.e the EU. It’s also real for Illinois and Chicago. Money is not real for the U.S.
I like Warren Mosler’s analogy: To encourage your child to behave you say, “Each day you are good, I will give you a slip of paper with the word ‘GOOD’ on it. When you collect five slips, you can trade them one night of staying up late or some other reward. You can’t use the same slip twice, so I’ll tear up the slips you use. Meanwhile, I will post a record of all the slips on this whiteboard.”
The father is the U.S. Treasury. The slips of paper are dollars. The child is all of us. The whiteboard — the record of slips created — is the federal debt.
Now, is there any problem with the whiteboard (aka the deficit) showing 10? 100? 1,000? 100,000?
Is there ever a time when the father will have to say, “I’m running short of slips of paper, so you’ll have to give some back (aka taxes)?”
Meanwhile, if the child is to increase its ability to buy things, Father will need to keep printing GOOD slips, and marking them on the whiteboard.
As for interfluidity, I’m not sure, but it may be a complex, convoluted way of saying the same thing — maybe.
Rodger Malcolm Mitchell
Mosler’s analogy is good. Waldman’s post is a step forward bc it puts this stuff in econospeak, meaning it may have more of an impact.