Category: Liberal economics

Freedom is not a punchline

Earlier I posted about what I see as the ineptitude of the Democrats and demanded that they stand for something and someone.  I think it’s only fair that I spell out what I think that is.

First, what they should stand for.  It’s simple. 

Liberals stand for liberty.

Liberals, progressives, the left, Democrats, Greens – whatever you want to call them or however you want to group them – stand for individual liberty and freedom – the right of every human being to choose his or her own life, as free as possible from all forms of coercion.  By the way, that includes the coercion of markets.  Markets can be just as coercive as governments when a person doesn’t have the resources to provide for the essentials of life.  As FDR said in 1936, “Necessitous men are not free men.”

Second, who should they stand for?  Again, it’s simple.

Liberals stand for everybody, equally.  Everyone has a right to life and liberty, not just the select or the fortunate, however that is determined.

Last night, the liberal-progressive social group I organize held an election-watching party. Rand Paul came on to declare victory in his race for the Senate, and he spoke of freedom.  The entire crowd began making fun of him and, by extension, every Republican that has cried “freedom” to score political points. 

I’m afraid freedom and liberty have become punchlines to liberals and progressives.  Instead of joking about it, we should be angry – angry that conservatives have stolen our signature belief from us.

We stand for liberty – true liberty.  And it’s about time we started standing up for ourselves.

More on economic liberty

Building on my post yesterday, I want to stress that my vision of economic liberty is aimed at individuals and families. I think if we had this framework for thinking about economic matters, the financial bailouts of the last year or so might have looked completely different.

We’ve spent a great deal of money and energy saving financial and automotive firms from failure. In a sense, the thought was that we can only help individuals and families in the economy by making sure that critical companies remained intact. We’ve developed a system – or at least a way of thinking about the economy – in which we can only help people by helping out firms.

What if we instead had made sure that the people that were part of those firms had what they needed in the economic downturn and allowed the firms, which are really just particular groupings of people, to go out of business? We could have spent trillions of dollars helping people get new skills in college, developed and funded programs that would have a genuine impact on the housing crisis, provided people with funding to move to the places where there are jobs and away from depressed areas, etc. These kind of initiatives, combined with some of the so-called automatic stabilizers like unemployment and welfare benefits, could have led to a bottom-up recovery, instead of a top-down one like is trying to be fostered now. And, of course, universal health care insurance is key in all of this, because more people might be tempted to move to new jobs, try new things, and ultimately be more productive if they knew they wouldn’t lose their health care coverage and could get proper care in the first place.

As for our current firm-centered approach, in the case of the financial sector, this appears to have been only choice in the short-term. (Sadly, the Obama administration seems committed to continuing keeping some firms too big to fail, instead of whittling them down to size.) In the cases of the U.S. automakers, I think this was much less true.

Either way, it would be great if we could come out of this current economic crisis with a different approach to our economy – one centered on true economic liberty for individuals and families.

It’s high time for true economic liberty

I want to suggest a new way for liberals and progressives to think about their arguments for government-delivered social programs – economic liberty.

It strikes me that most often we see arguments supporting everything from Social Security to health care reform framed in three ways: security, equality of opportunity, and a question of rights. These are all valuable ways to look at social programs, but I’m not sure that these frames are always persuasive to political independents, upon whom so much long-term political success depends. However, freedom and liberty are persuasive and have been so for more than 200 years.

Thomas Jefferson’s vision for America was rooted in individual liberty, and this vision was expressed economically by celebrating the “yeoman farmer,” who could sustain himself through working his own plot of land and thereby interact with other people from a position of freedom, strength, and equality. But the modern economy doesn’t permit this kind of independence. Instead of providing for ourselves, we enter into the marketplace or rely on our collective actions through governments to get the modern essentials of civilization – food and water, shelter, clothing, education, health care, energy, transportation, and security. Because we get most of these through the marketplace, we need cold hard cash to purchase these essentials, which means we absolutely need a job, which means that our economic liberty is reduced.

Think of it this way: who has more economic liberty – the average individual or household that is desperate to hold on to or get a job so that the flow of essential goods and services won’t stop, or the independently wealthy person who can work as desired and still buy everything he or she needs? Most of us live lives of quiet economic desperation, especially in recessionary times like these, and because we live in the modern economy, we can’t just go back to our farms and till our own soil for sustenance. That economic desperation is antithesis of liberty.

Liberty is an essential American ideal and goal, but when it comes to economic liberty, liberals and progressives have almost completely ceded that rhetorical territory to the right. Do a quick Google search for the phrase “economic liberty,” and you’ll find the results heavily skew toward libertarian and conservative viewpoints. Same goes for “economic freedom.” It’s not a stretch to say that the right owns this concept.

That has to change. Liberals and progressives need to redefine and claim the idea of economic liberty. Universal health care is about economic security, but it’s also about economic liberty – giving people more power to walk away from jobs they don’t want and try new things. Providing for education equalizes opportunity, but it is also about economic liberty – giving people the power to achieve whatever their will and good fortune provide to them in life. And having adequate food, water, and shelter is a human right, but having those also serves economic liberty – giving everyone a stable, equal material platform from which to exercise their power in a democratic society.

As always, the trick is how to make this kind of economic liberty real. Certainly one way would be for every individual or household to earn enough wages so that they, like the independently wealthy, could buy all they need and save enough to sustain their independence. This is an attractive option, seeing as it would give everyone the ability to choose the exact mix of goods and services they want, further enhancing liberty. But it’s hard to envision this kind of distribution of wages becoming a reality.

A second alternative is all of us working together through taxation and government guarantees of the needs of life. We have already traveled far down this path through our social safety net programs and public education. We are currently engaged in a battle to expand this approach through universal health care.

Whatever the approach, the goal should be the same: the expansion of true economic liberty to all. We take it as a given as Americans that we are guaranteed civil liberties, such as freedom of speech and religion, and generations of Americans of every political persuasion have been inspired to rise up to defend and expand these liberties. Now it’s the time to build a new American consensus to demand and expand our economic liberty, and thereby ensure our security, opportunity, and rights.

Economic culture matters

Economics is a very technical subject, but it’s also a human enterprise, which means that people and their values and their behaviors – that is, culture and ethics – underlie everything.

The New York Times has an interesting article on how Norway has avoided much of the world’s economic meltdown.

First off, the country is okay because it’s a petro-state (in fact, the world’s third-largest exporter of oil, which I didn’t realize).

But there’s a cultural dimension to it’s situation, too:

Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its sovereign wealth fund, state money that is used to make investments around the world. Now its sovereign wealth fund is close to being the largest in the world, despite losing 23 percent last year because of investments that declined.

Norway’s relative frugality stands in stark contrast to Britain, which spent most of its North Sea oil revenue — and more — during the boom years. Government spending rose to 47 percent of G.D.P., from 42 percent in 2003. By comparison, public spending in Norway fell to 40 percent from 48 percent of G.D.P.

“The U.S. and the U.K. have no sense of guilt,” said Anders Aslund, an expert on Scandinavia at the Peterson Institute for International Economics in Washington. “But in Norway, there is instead a sense of virtue. If you are given a lot, you have a responsibility.”

Eirik Wekre, an economist who writes thrillers in his spare time, describes Norwegians’ feelings about debt this way: “We cannot spend this money now; it would be stealing from future generations.”

Mr. Wekre, who paid for his house and car with cash, attributes this broad consensus to as the country’s iconoclasm. “The strongest man is he who stands alone in the world,” he said, quoting Norwegian playwright Henrik Ibsen.

Technical economic policies and factors are important, but they are always rooted in how we approach the world. For example, a market economy cannot function without a certain level of trust – trust in people, leaders, institutions, money, etc. And trust is created and destroyed by our interactions with one another.

Even the partner of the Warren Buffet (the second richest guy in the world, remember) emphasizes values as an economic condition (hat tip to Yves Smith at Naked Capitalism):

How and why do you think economists have gotten this so wrong?

I would argue that the economists have not been all that good at working concepts of good and evil into their profession. Nor do they understand, at all well, the economic consequences of bad accounting.

In fact, they’ve made a profession of driving value judgments out of the subject.

Yes. They say it’s not economics if you think about the consequences of good and evil, and good and bad business accounting. I think what we’re learning is that when you don’t understand these consequences, you don’t have an adequately skilled profession. You have big gaps in what you need. You have a profession that’s like the man that Nietzsche ridiculed because he had a lame leg and was very proud of it. The economics profession has been proud of its lame leg.

The social safety net = economic prosperity

Conservatives love to talk about how “welfare” and “entitlement” programs destroy the character of Americans by undermining their willingness to work and generate economic prosperity.

There are all sorts of problem with this view. Among them, what’s the evidence? There are plenty of rich people who could retire today with a high quality of life, but something keeps them coming to work. And if this character destruction is true, why, then, don’t we have a 100% estate tax. For gosh sake, we’re actually harming those children of rich kids by not giving them enough incentives to get out there and produce! And it’s a view that’s a bit heartless. The idea is that the suffering caused by the vagaries of life – or yes, even by people who just plain screwed up – is okay because it builds character.

But these arguments and others against don’t go far enough. They just refute the conservative viewpoint.

But this essay in the latest issue of the American Prospect goes a step further. It provides a positive economic reason to advocate for the social safety net. Our economy would be more flexible, more dynamic, and more robust if we provided people with enough shelter from substantial risks (like losing employment and health care) so that they could try out new economic undertakings and grow the economy.

Now, being a good liberal, I would want to put some studies and numbers behind this notion. How much additional economic growth would be created if people were more free economically speaking because they didn’t have to live in the “quiet desperation” of losing their health care? That’s an interesting liberal economic research project.

Update: Here’s a link ($) to a WSJ article comparing the social safety nets of Germany and the U.S. and the various trade-offs and impact of the two systems. The WSJ still does some excellent journalism.

Save the people, not the corporations

There’s a lot to chew on in the discussion over at the New York Times “Does the U.S. need an auto industry?“

I was struck by a couple of passages.

This from Roger Simmermaker, a union official:

We need a U.S. auto industry because American companies employ more American workers; support more retirees, their families and dependents; pay more taxes to the U.S. Treasury; have a much higher domestic-parts content in their vehicles, and operate far more factories in America than foreign-owned companies.

If the Big Three fail, the American taxpayer will be paying the pension and health care costs for the affected workers and retirees.

And this from economist Robert Reich:

The United States needs an auto industry because automobile jobs are good ones. They pay higher than average and provide good benefits. But that doesn’t necessarily mean we need General Motors, Ford and Chrysler. The American auto industry is not the Big Three. It’s Americans who make automobiles.

Foreign-owned automakers, producing cars here in the United States, now employ — directly or indirectly — hundreds of thousands of Americans. And at the rate the Big Three are shrinking, even as they’re bailed out, foreign automakers may soon employ more Americans than the Big Three do.

I think that both of them make the point that we need strong and vital industries here in the U.S. But I tend to side with Reich.

I’m not sure it makes sense to discriminate in a company’s favor simply because it is headquartered in the U.S. Think of this from the perspective of the U.S. automakers. They desperately want to sell their cars overseas. General Motors has focused on building its presence in China because of the possibilities of that market. If we’re going to insist that we simply “Buy American,” then other countries have the exact same right, to the detriment of American companies doing business overseas.

At the same time, though, we need to do everything possible to guarantee to the people of America a decent living and a decent shot at life. In economics, there can be win-win scenarios. But there are also win-loss scenarios. And it’s absolutely the case that lower-income earners have gotten the shaft out of the way globalization has been designed so far.

So what we need is a redefinition of what it means to be a U.S. economic citizen. And I don’t think our identity as economic citizens needs to be tied to a specific industry, or even a specific firm, like GM.

Chrysler’s bankruptcy

A sad day. Both I and my wife have many connections to Chrysler, Detroit, Michigan, and many other places supported, in part, by Chrysler. Many friends, acquaintances, and family members will get hit hard.

The Detroit News has a quick summary of the impact of the bankruptcy filing designed to save the company:

The Obama administration says the bankruptcy of Chrysler LLC should not affect “ordinary” operations of Detroit’s No. 3 automaker.

But Day One of Chrysler’s Chapter 11 era was anything but ordinary — two top Chrysler executives said they will leave, nervous suppliers refused to ship parts and Chrysler said it will shutter most plants during bankruptcy and disclosed plans to close six U.S. factories as part of its restructuring, including three in Metro Detroit by 2010.

“Once you pull the bankruptcy trigger, there’s no such thing as business as usual,” said Aaron Bragman, a Troy-based auto analyst with IHS Global Insight.

Nothing really all that good for anyone in Detroit or Michigan, although I suppose it beats a straight-out liquidation.

But I have to admit that I’m conflicted by this.

There is nothing new about car companies failing or getting absorbed by other automakers. That’s been happening for the entire history of the car industry. (Chrysler itself absorbed American Motors in the 1980s.) This also happens throughout our economy. I believe there is a value to this kind of economic churn. It’s how we free up the resources to create the new things we want and need. So, I don’t find myself fretting about the disappearance of the organization called Chrysler itself.

No, I’m far more worried about the human suffering that will result from this. A great many people will see their prospects in life quickly and permanently diminished. In the short-term, many people will struggle to provide themselves with the essentials of modern life – like food & water, shelter, adequate health care, and having the resources to educate their children. In the medium-term, many of these people will struggle to find a new economic life – because of the poor economy in general, but more specifically because of the housing bubble bust. It’s hard to leave Michigan – or any state or town where a Chrysler-related employer is located – if you’re underwater on your mortgage. (The Census Bureau recently reported that fewer people are moving nowadays, with large economic consequences.) In the long-term, some people might recover, but it’s unlikely that many of the unionized workers will find anything remotely like what Chrysler provided.

I’ve said this before. Liberals shouldn’t worry much about saving organizations. Economic churn is a good thing. But liberals should fight with every ounce of energy to make sure that people – actual human beings – don’t get flattened along with an organization.

It’s time for health care reform. It’s time for retirement reform. It’s time for educational financing reform. And, most importantly, it’s time for wage reform.