Progressive Capitalism

torn dollar bill

Torn dollar bill image source and license.

We’ve been looking at economic winners and losers in the zero-sum economy — particularly in the context of higher education, where cultural belief in the importance of college and post-graduate degrees on upward mobility and success in the job market is driving behavior that harms both parents (the college admissions scandal) and the economic and mental health of their children (student loan debt, general anxiety disorder, depression, suicide).

This series of blog posts is now in its third year — throughout, we’ve seen how hyper-competitive capitalism and its staunch faith in the implicit justice of the “free” market is causing other economic loses. For example:

  • the stagnation of middle class real incomes;
  • the rise of the numbers of statistically poor people in the U.S.;
  • the dismantling of compassionate social safety nets in favor of expensive, counterproductive, and humiliating replacements;
  • the rise of the “rentier” economy in which formerly public benefits have been privatized, making them accessible only to those who can afford them through the payment of economic “rents”;
  • the end of the American ideal of upward social and economic mobility;
  • the high cost of housing and the death of the American dream of home ownership;
  • the elimination of “normal” jobs through off-shoring, outsourcing, and the delegation of productivity to intelligent machines;
  • the advent of the short-term, contract-based “gig economy” with its lack of fringe benefits and its precarious prospects for sustainable income;
  • economic inequality that favors the wealthiest of capitalists at the expense of the bottom 90% (or 99%, or 99.9%, depending on your data and point of view);
  • the creation instead of an insular top-level “meritocrat” socio-economic class;
  • the new state of “total work” and the “monetization” of goods and services;
  • rising rates of career burnout, mental illness, and suicide resulting from social isolation and the vain struggle to find meaning and purpose at work;
  • the rise of corporate nation-states with economic and policy-making power that dwarfs that of many governmental nation-states;
  • the private (non-democratic) social policy-making initiatives of the wealthiest elites;
  • and much, much more.

Nobody meant economic policy to do this, but it has, for roughly the past 30-40 years. Good intentions; unplanned results.

We’ve seen that both plutocrats and progressives advocate for systemic change, while status quo inertia weighs in on the side of those who don’t see what all the fuss is about, since capitalism is undeniably the best economic option and always has been, and besides it’s still working just fine, thank you very much. Instead of meaningful discourse, we have a predominant nostalgic, populist doubling down on the neoliberal socio-economic cultural ideology that jet-propelled post-WWII recovery but finished running its course in the 1970s, while the retrenchers and the media slap those who beg to differ with the kiss-of-death label “progressive.” As a result, we’re left with incessant lobbing from one end of the polarized spectrum to the other of ideological bombs that originate in data and analysis skewed by cognitive biases, intentional blindness, and fake news . Economic policy-making resembles WWI trench warfare — a tactical grinding down of the opposition and the numbing and dumbing of everyone else. It was a bad idea then, and it’s still a bad idea now.

I had no idea this is what I was getting into when I decided three years ago to research and write about the new economy and the future of work.

It’s in the context of this toxic environment that Economics Nobel Laureate Joseph E. Stiglitz, offered his “progressive capitalism” alternative, based on “the power of the market to serve society.” Progressive Capitalism Is Not an Oxymoron: We can save our broken economic system from itself, New York Times (April 19, 2019). His article, like virtually all of the economics books and articles I read these days, begins with a long parade of evils and ends with a handful of policy ideas. His version of the former is by now quite familiar:

“Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years.

“This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.

“There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.

“We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking).

“Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities.

“Even as economic theories like information economics (dealing with the ever-present situation where information is imperfect), behavioral economics and game theory arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational, we relied more on markets and scaled back social protections.

“Politics has played a big role in the increase in corporate rent-seeking and the accompanying inequality.

“Markets don’t exist in a vacuum; they have to be structured by rules and regulations, and those rules and regulations must be enforced.

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.

“If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans.

“The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society.

“Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.

“Part of this new social contract is an expanded public option for many programs now provided by private entities or not at all

“This new social contract will enable most Americans to once again have a middle-class life.

“The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest.

“America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people.”

His point seems to be that merely reciting litanies of economic woes won’t bring about systemic relief — for that, we need to embrace an essential factor:

Paradigms only shift when culture  shifts:
new ideas require new culture to receive them,
and new culture requires new belief systems.

Systemic change requires cultural change — remodeled institutions and revised social contracts that tether ideas to real life. Trying to patch policy ideas into the existing socio-economic system is like what would happen if a firm were to abruptly change its products, services, and strategic and marketing plans without bothering to change its mission statement, values and beliefs, and firm culture.

Like that’s going to work.

Coming up, we’ll look beyond policy bombs to the higher ground of revised cultural beliefs, starting with next week’s search for the “public” that’s gone missing from the Republic.

Economic Darwinism

social darwinism

The 19th Century’s Gilded Age of the Robber Barons came hot on the heels of The Origin of the Species. Little wonder that…

 “Soon, some sociologists and others were taking up words and ideas which Darwin had used to describe the biological world, and they were adopting them to their own ideas and theories about the human social world. In the late nineteenth and early twentieth centuries, these Social Darwinists took up the language of evolution to frame an understanding of the growing gulf between the rich and the poor as well as the many differences between cultures all over the world.

“The explanation they arrived at was that businessmen and others who were economically and socially successful were so because they were biologically and socially “naturally” the fittest. Conversely, they reasoned that the poor were “naturally” weak and unfit and it would be an error to allow the weak of the species to continue to breed. They believed that the dictum “survival of the fittest” (a term coined not by Charles Darwin but by sociologist Herbert Spencer) meant that only the fittest should survive.”

Social Darwinism in the Gilded Age, Kahn Academy

The result was Social Darwinism:

“The term ‘social Darwinism’ refers to the deterministic philosophy of Englishman Herbert Spencer that applied, to humans and markets, Darwinian biological and evolutionary concepts of natural selection.

“Spencer offered his philosophical defense of individualism and laissez faire in Social Statics (1851). He coined the term “survival of the fittest” in Principles of Biology (1867), arguing that human progress resulted from the triumph of superior individuals and cultures over their inferior competitors; poverty was evidence of inferiority.

“Anything that interfered with the self-improvement of superior individuals or markets was to be resisted. What came to be called “social Darwinism” was used to argue for unrestrained economic competition and against aid to the unfit poor. The state was not to hinder the strong or assist the weak, interceding only to protect individual freedom and rights. “

Capitalism and Western Civilization: Social Darwinism, National Association of Scholars

Social Darwinism has since been widely discredited in academia, but Pulitzer-prize winning economics columnist and professor of public affairs Steven Pearlstein was dismayed to find it alive and well in current hyper-competitive, zero-sum economic policy, as revealed in numerous studies showing that certain genetically inherited traits play “an outsized role in determining economic success.” The list includes intelligence, personality, height, and good lucks, all of which statistically affect income and likelihood of being favorably judged on leadership qualities. Add parental nurturing practices — such as those of the new “Meritocrat” economic class we’ve been looking at — and “whether it’s by way of the genes we inherit or the circumstances in which we are raised, the parental lottery is more important than ever in determining economic outcomes.” It’s Time To Abandon The Cruelty Of Meritocracy, The Guardian (Oct. 13, 2018).

Pearlstein concludes that the luck of the genetic and nurturing draw “must always play a significant role in who achieves economic success” and that “we must also acknowledge that there is a point beyond which the consequences of the parental lottery can never be overcome.” Disconcerted by his own findings, Pearlstein calls for remedial action:

“No matter how hard we might try to make it otherwise, there is a fundamental and irreducible level of unfairness to market competition, one that undermines the moral legitimacy of market outcomes and provides a justification for taking reasonable steps to make them more equal.

“Because of heritability and upbringing, there can never be genuine equality of opportunity. More socialist countries in Europe and Asia have gone a long way toward equalizing access to healthcare, education, nutrition, childcare and even disposable income, and yet they have not come close to eliminating the transmission of family advantage or disadvantage. Surely we should do more along those lines to equalize opportunity in the United States?”

It’s Time to Abandon the Cruelty of Meritocracy

Economics Nobel laureate Joseph E. Stiglitz offers an alternative to economic Darwinism which he calls “progressive capitalism.”

“Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years. This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.

“But things don’t have to be that way. There is an alternative: progressive capitalism. Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society.”

Progressive Capitalism Is Not an Oxymoron: We can save our broken economic system from itself, New York Times (April 19, 2019)

More next time.