Whither democratic markets?

Thomas B. Edsall, writing for the New York Times, asks a provocative question: “Is this the end of market democracy?” While he stops short of providing an answer, he surveys the political and economic landscape to reveal sharp divisions in both the cause of and the cure for what ails us. He quotes Lawrence Summers, now back at Harvard:

Serious questions about the fairness of capitalism are being raised. These are driven by sharp increases in unemployment beyond the business cycle – one in six of American men between 25 and 54 is likely to be out of work even after the economy recovers – combined with dramatic rises in the share of income going to the top 1 percent (and even the top 0.01 percent) of the population and declining social mobility. The problem is real and profound and seems very unlikely to correct itself untended.

Focus on that last line. The problem “seems very unlikely to correct itself untended.” This suggests more of the same, rising wealth amidst a shrinking middle class marked by high unemployment—unless someone tends.

How shall we tend?

Edsall cites Jeffrey Sachs, who advocates: “a social democracy — capitalism plus a hefty dose of state support for families, education, early childhood development, higher education, and active labor market policies — can still do the job. The performance of northern Europe, around 120 million people including Germany, Austria, the Netherlands, Denmark, Sweden and Norway, provides a good illustration of this success.”

Readers of this blog will surely recognize that theme. But, as Edsall quickly points out, the Republicans, especially this current crop of presidential hopefuls, rebuke such a perceived turn toward “socialism,” exposing their ignorance, their cynicism, or both. If they are aware of the Nordic exception, they refuse to admit its lessons for fear of denigrating the U.S.A., which at all times and under all circumstances must be forever praised as the “shining beacon on a hill.”

Is the Great Divergence a sign of market failure? Not so, according to a couple of economists cited in Edsall’s piece.

In a paper published by the Council on Foreign Relations, Spence and co-author Sandile Hlatshwayo argue that the employment problems of the United States do not result from market failure. Just the opposite: the problems arise from an exceptionally efficient global marketplace. Instead of benefiting from the market, many in the United States, particularly those holding mid-level skill jobs that can be performed at lower cost overseas, are paying the costs of efficiency — the victims, in effect, of creative destruction.

All of which begs the question: What about the Nordic experience? Why doesn’t “an exceptionally efficient global marketplace” adversely impact Finland, or Sweden, or Norway as it allegedly does here? Why is “creative destruction” operating in the U.S. and not Germany and Denmark?

Edsall concludes his article thusly:

The debate over the workings of democracy, the market, technology and globalization remains unresolved. The political system instinctively avoids this debate, despite its salience and centrality, because the political costs of engagement are likely to substantially outweigh any potential gains. At an undetermined point in the not too distant future, however, as the “gale of creative destruction” blows through the heartland, the debate will become inescapable.

For better or worse, and I think it’s the latter, our political mechanisms, however defined or originated, thwart genuine tending. Edsall suggests that there are high “political costs of engagement.” I believe he’s correct. Neither side of the debate dares to address the fundamental problems of our economy, which is clearly not working for the Rest of Us. Instead the politicians appeal narrowly to their wealthy beneficiaries as they also stoke the fires of ideological hate.

In a previous post I mentioned an op-ed that appeared in the New York Times. Eric X. Li, a self-described “venture capitalist,” offered this gloomy assessment:

History does not bode well for the American way. Indeed, faith-based ideological hubris may soon drive democracy over the cliff.

I suspect that the very wealthy shrug off such premonitions. Regardless of what happens in America they will surely benefit, because their wealth allows them to exploit opportunities on a truly global scale. They are not, strictly speaking, Americans. Nor are they democratic in any meaningful sense. Rather, they are nation-neutral, just like the international economy; and they don’t give a damn about the Rest of Us, because they don’t have to. Indeed, we are a mere nuisance, at best, invisible, at least.

What I find truly pathetic is that the Rest of Us don’t seem to give a damn either. We’re as likely to chalk up our struggles to the natural order of things or the efficient operation of markets as to believe that all of this is deliberate, the continuing result of unopposed machinations funded and orchestrated by the One-percenters.

We are therefore right to condemn Congress and its corrupt politicians.* Yet, our political system was devised to give the people voice—”we the people” established a written constitution. As it turns out we are a representative democracy. Thus, we are supposed to rely on the people we elect to carry out our preferences. Therein lies the fatal flaw.

What we would prefer gains no traction, because our voice can hardly be heard over the din of unbridled capital. The folks we send to Washington elevate remaining in place to the highest priority. While they will need our votes to stay in office, how we vote is largely determined by campaign rhetoric, bought and paid for by monied interests. To assume that none of the propaganda makes a difference is to ignore what has happened in the Republican primaries. Candidates’s fortunes have risen and fallen in the minds of the voters by one slew of attack ads or another. This expensive negative shit matters.

Insofar as our “representatives” cotton to the well-heeled with impunity, there seems little prospect of crafting an alternative economy that benefits the Rest of Us—unless we dare think outside the political box. If the status quo isn’t working, we might consider something else.

All options are on the table. The debate is “inescapable.”


*  Corrupt, def.: “having or showing a willingness to act dishonestly in return for money or personal gain.”

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