Saturday, April 15, 2006

Flexibility and Intolerance, Part Deux

by Tom Bozzo

A companion point of sorts to the recent discussions is that while there's plenty of reason to think that there are dynamical processes that drive individuals into ruts and/or which transform seemingly small and random disagreements (e.g., over details of trinitarian Christian doctrine) into highly persistent intergroup differences, what I'll call for want of a better term "free" market logic demands the utmost in flexibility. Because to be otherwise foregoes all sorts of positive sum interactions, which by the way you can't refuse even if you want to.

I've been engaged in discussions from the left (if not that far left, relative to me) on why economists are so feckless at stemming the privileged classes' resource grabs and from the right on why I don't just lie back and enjoy what the lately prolific Billmon calls the "supply side utopia." Indeed, Why People Think The Economy Sucks is a pretty good anti-utopian primer, and puts a solid finger on the first problem:
I have no quarrel with corporate profits, particularly if I get to keep some of them, but a situation in which all the benefits of productivity growth flow to capital, and none to labor, not only defies the standard economic textbooks, but probably isn't politically sustainable for long – at least, not without some help from guys like General Pinochet.

Why is this happening? New technologies, skill shortages, outsourcing, downsizing, the decline and fall of the union movement, changing social norms and expectations – or as John Snow might put it, learning to "trust the marketplace." Any of the above, all of the above.

It's sobering to think that what we've seen so far may be just the beginning of our journey back to the good old days of the Robber Barons...

Given the current power structure and the elite consensus that globalization can't be stopped, or even slowed, the solution isn't obvious, at least not to me. [emphasis added]
The first step, then — easier said than done — is to re-learn that firms and markets are institutions that should serve us, and not in the present sense.
I didn't say you should just lie back and enjoy it....

There are legitimate worries about the economy for the long term:

1. Health care
2. Gas prices
3. Deficits
4. Iraq et al.

These four reasons, especially one and two are probably why more people don't rate the economy as good.

But you have been implying that job growth isn't good enough or that the economy isn't that good or that the recovery has been substandard, when the economy is booming right now. I think the current post is better, because you focus on the long term. But, all four on my list are harming the economy because of uncertainty. If we had a plan to get out of Iraq, an actual plan to get rid of the deficit/debt, an actual forward-looking strategy for energy independence (short-term this should include much more nuclear energy, until a better alternative comes along), and if we had an actual plan for dealing with health care (hopefully not a gov't run solution), then we'd be in pretty damn good shape.
Bryan: Apart from my greater willingness to tolerate a government-run health care solution and my ongoing point that the job growth is just cyclical catch-up, you'd be surprised to know how much we agree over the points you raise.

I do think that for the moderately well-to-do, #'s 3-4 are more important over the long haul, but that's not most people.
For gas prices, I have to send you back to National Treasure #2, Tom Toles.

Bryan - I'll state it outright: job growth isn't good enough, wage growth isn't good enough, and the recovery has been substandard for anything post-WW II. The decline in the unemployment rate is because people are not looking for jobs, and the profits are not being distributed in a way that supports economic growth. (Yes, the link is a data point, but that's $98MM that XOM (1) won't be giving to its shareholders; I could use the money and (2) money that won't be going toward research.)
Ken, thanks for making the standing points I was too tired to make last night. Great Toles cartoon, too.
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