Robert Reich served with distinction in the Ford, Carter and Clinton administrations. Writing for the Huffington Post, he sets out his prescription for the economic ills of the present day.
First of all, the diagnosis:
- "The world's productivity revolution is outpacing the political will of rich societies to fairly distribute its benefits. The result is widening inequality coupled with slow growth and stubbornly high unemployment."
There are at least five contentious assumptions in that statement, but let’s get on to the proposed treatment. The good news is that Reich is not a vulgar Keynesian:
- "…more Keynesian stimulus won't help solve the more fundamental problem. Although added government spending has gone some way toward filling the gap in demand caused by consumers whose jobs and incomes are disappearing, it can't be a permanent solution. Even if the wealthy paid their fair share of taxes, deficits would soon get out of control."
What we do get, however, is a classically Keynesian appeal to the Great Depression and its aftermath:
- "During the Depression decade of the 1930s, the nation reorganized itself so that the gains from growth were far more broadly distributed… By the 1950s… Social Security, unemployment insurance, and worker's compensation spread a broad safety net. The forty-hour workweek with time-and-a-half for overtime also helped share the work and spread the gains, as did a minimum wage… This time, though, the nation has taken no similar steps."
So what steps does he suggest for the current situation?:
- "…a larger Earned Income Tax Credit, whose benefits extend high into the middle class… a 35-hour work week… Medicare for all… empowering workers to get a larger share of corporate profits… a public educational system – including early child education – second to none…"
If America could afford to do this sort of thing in response to the Great Depression, then what is stopping it today? Is it just a lack of political will, as Reich suggests? Or might there be some rather more fundamental differences between then and now?
Yes, the post-war private sector did grow strongly – despite having to pay for an expanding welfare state. But where else was all that business-led investment going to go? The smoldering ruins of Europe? Stalin’s Soviet Union? Mao’s China? Nehru’s India?
It really is a different world these days – and not a very Keynesian one.