Our Possible Economic Futures

by Michael Bleiweiss

February 2011

I believe that the current economic crisis presages a fundamental shift in how the American (and possibly the world) economy operates. Since World War II, the American economy has been based on massive over-consumption by the public. This, in turn, led to matching overproduction of goods and a consequent depletion of natural resources. Now, this paradigm is coming to an end. Ever since the implementation of "trickle-down" economic policy in the 1980s, there has been a continuous erosion of real wages for ordinary working people as employers pushed down compensation relative to the cost of living. Consumers compensated for this by living beyond their means by accumulating massive debt.

The unsustainability of this life style was finally driven home by the bursting of the housing bubble and the resulting massive drop in stock prices, causing working people to feel much less wealthy. When combined with the large domestic job losses due to corporations exporting jobs to low-wage countries, this led to people feeling insecure about their future. This, in turn, led to consumers retrenching and drastically reducing spending. Layered on top of this is added a long-delayed spread of environmental awareness, leading people to try to live a more sustainable lifestyle. This has now created a positive (that is, unrestrained, self-reinforcing) feedback loop: less spending leads to less production of goods and services, which leads to fewer jobs, leading to more insecurity, which leads to less spending, etc.

At the same time, there has been an increasing concentration of wealth into fewer and fewer hands. Corporate executives have given themselves bigger and bigger paychecks until they now get about 400 times as much as the average worker in their companies (compared to about 40 times in 1980). In many cases, this even drives an otherwise profitable company into having a loss (which requires them to lay off more workers). Wall Street executives get multimillion dollar bonuses, even when they destroy other peoples' investments with speculative derivatives.

All of this brings us to a crossroads. We have two major choices of where our long-term economy can go.

In the first scenario, we continue the current corporate capitalist system where a company's only obligation is to make as much profit for its investors as possible. This has led to the current situation where huge multi-national corporations and their executives grab as much as they can, control our government, and roll over everything in their path. This will lead to our becoming a third-world country with 1% of the population controlling all of the wealth and 99% struggling to get by. We will see a permanent 50% real unemployment rate with barely subsistence wages for most of the rest.

In the second scenario, people wise up and force a drastic revision in our economic system to a more regulated capitalism where social and environmental sustainability are built into corporate charters and they are required to serve the public good (as they were before the Civil War). Anti-trust laws are actually enforced, leading to the break-up of behemoth corporations that are "too big to fail" into manageable pieces (remember that most true innovation comes from small companies). Executives receive fair compensation. And, the employment standards are revised to ensure full employment at living wages. This might take the form of a shorter work week or manageable workloads so that more people need to be employed. Universal health care can be implemented to remove the burden from employers (everyone would pay premiums into this, but they would be lower because everyone is covered).

At the same time, a rising environmental awareness, combined with increased opportunities for community participation would help people realize that they can be happy with far fewer material goods.

The entrenched powers will argue that I am advocating "spreading the wealth." This is absolutely true -- those who create the wealth through work should be fairly compensated for their labor. Also, study after study has shown that the healthiest societies are those where the difference between the richest and poorest is least. The economically healthiest time in our history was between 1945 and 1980, when an average family could live comfortably on one income and the wealthiest Americans were not obscenely so.

Now is our opportunity to effect real social change into a truly sustainable and fair economic system. We need to agitate for the change we voted for in 2008 that favors people who work for a living instead of the same old system designed for the rich and large corporations.