In his op-ed, “Letter From Flint, Michigan,” James Boyce, economics professor, explains how Flint transformed from the American dream into a disposable city. He places the blame not just on General Motors, but also a series of, what he calls, monumental public policy failures: massive foreign borrowing, the failure to grow Medicare into a nationwide single-payer health care system and the “white flight” to the suburbs.
What can we learn from Flint’s failures? According to Boyce, that the public good should never be sacrificed for our own “private goodies.” And, “When we elevate consumption above citizenship, we imperil not only our democracy, but in the end our economy, too. ” (Truthout, 8/31/10)
Koch Industries, cited last spring as one of the top 10 air polluters in the U.S. in a report issued by the Political Economy Research Institute, is among 2,000 companies that will be reimbursed 80 percent of the cost of health insurance for early retirees, according to the Obama administration. David and Charles Koch, the owners of the company, were reported by The New Yorker to be bankrolling political opponents of Obama, including the “tea party” movement. (USA Today, 8/31/10)
Robert Pollin, economics and co-director of the Political Economy Research Institute, writes a column about the collapse of Wall Street and what he calls the return of reality-based economics. He says history shows that unregulated free markets undergo periodic booms and busts that can be moderated by government intervention of various types. (Monthly Review, September 2010)
As with Minsky, Sweezy and Magdoff also did not develop a fully adequate framework for understanding financial bubbles and crises. There are significant holes and deficiencies in both approaches that need to be worked through by other researchers, as is true with all meaningful research programs. But this brings up a larger question: why, over the past thirty years, were something on the order of 90 percent of professional macroeconomics economists working on aspects of the Friedman/Lucas framework, while less than 1 percent was developing the Minsky/Sweezy approach? Cassidy, unfortunately, ignores this question, perhaps because the answer is obvious. Whatever its failings in terms of intellectual coherence or relevance, the Friedman/Lucas model—and neoliberalism more generally—does an outstanding job serving interests of big business and the rich, while the Minsky/Sweezy approach challenges the legitimacy of free market capitalism and its beneficiaries. This is especially true when you make the one small adjustment to the Friedman/Lucas model, which is the key innovation of neoliberalism, as opposed to classical liberalism. That is, neoliberalism is all for allowing the free market to rip, including especially on Wall Street, but also will not hesitate to embrace government bailouts when the inevitable financial crises emerge. Seen in this way, Wall Street bailouts are not only absolutely needed for keeping capitalism afloat; they are also central for maintaining the legitimacy of mainstream, pro-business economic theory.
Cassidy ends How Markets Failwith a call to arms: “Before the political will for reform dissipates, it is essential to put Wall Street in its place and to confront utopian economics with reality-based economics.” However, throughout his long, careful study, he never focuses seriously on how we might translate the insights of reality-based economics into a workable set of policies and institutions that can both rebuild stable financial systems and, more fundamentally, begin again to advance the historic project of creating sustainable democratic, egalitarian economies. This is a gap that will obviously need to be filled by a wide range of reality-based economists, alongside citizens unwilling to serve as patsies for either the grand schemes of Wall Street or the outlandish propositions of utopian economics.
Arindrajit Dube, UMass Amherst economics professor, has joined IZA, the Institute for the Study of Labor, as a Research Fellow. IZA is an international research center in labor economics focused on original and internationally competitive research activities in all fields of labor economics, development of policy concepts and dissemination of research to the scientific community and to a wider public.
Catherine Haskins’ (2010 PhD) dissertation, “Household Employer Payroll Tax Evasion: An Exploration Based on IRS Data and on Interviews with Employers and Domestic Workers” has recently received national attention. Haskins finds that nanny tax evasion is on the rise, leading to both budgetary and societal concerns. In last 15 years, the number of households paying the 15.3% tax (which is withheld for Medicare and Social Security) has decreased by more than half. Just as concerning, workers who are paid under-the-table are not eligible for unemployment insurance, workers’ compensation, or access to Social Security and Medicare. (New York Times, 8/30/10; NPR, 8/19/10; Johnston’s Take 8/16/10)
Nancy Folbre, economics, writes in the Economix blog at the New York Times about under-the-table employment of nannies and other household workers and how little is known about this part of our economy. Folbre is also quoted in a story about the stigma of being a housewife in a world economy where many women now work and take care of household chores. (New York Times, 8/30/10; Times of India, 8/29/10)
