Friday, December 09, 2011

It's the Technology, Stupid

Within the major movement of President Obama's speech in Kansas that's the subject of the previous post, there's a more specific one that is a lesson of the past that he is applying to "winning the future."  In a way, it is what he means by winning the future.

President Obama was in Osawatomie because it was where Teddy Roosevelt made his New Nationalism speech in 1902.  It's clear by the way that Obama has known the TR speech for a long time, as it seems a source of his own rhetoric and approach--for instance in his first famous speech, to the Democratic Convention in 2004.

 TR made the speech in response to economic and social problems he saw as a consequence of income inequality and corporate domination (huge corporations called trusts.)  But both of these were partially products of the same phenomenon--one which we share now.  And it is not in itself political.  Here is what President Obama said about what TR faced:

At the turn of the last century, when a nation of farmers was transitioning to become the world’s industrial giant, we had to decide: Would we settle for a country where most of the new railroads and factories were being controlled by a few giant monopolies that kept prices high and wages low? Would we allow our citizens and even our children to work ungodly hours in conditions that were unsafe and unsanitary? Would we restrict education to the privileged few? Because there were people who thought massive inequality and exploitation of people was just the price you pay for progress."

This transition was the result of the industrial revolution; it was in essence caused by new technologies.  Those technologies allowed corporations that controlled them, and the few who controlled the corporations, to benefit greatly, while workers did not.  The economy expanded rapidly, but since workers weren't making enough to buy enough, there were severe economic downturns, called panics (there were other causes and specific events that set them off, but this was an underlying problem.)

Though TR and others in the Progressive era began the process to institutionalize economic justice that would eventually profit the entire economy, it was only partially accomplished.  The Great War expansion and other factors created a bubble of prosperity in the 1920s, though again mostly a very small percentage--the 1%--got most of the wealth and the buying power.  By the end of the decade, the stock market crash and the Great Depression of the 1930s.

"Seen in perspective, the Depression appears to have been the last convulsion of the industrial revolution creating a hiatus before the technological revolution," writes William Manchester in his sadly neglected historical masterwork, The Glory and the Dream.  The techniques of mass production, he continues, raised efficiency by man-hour over 40%.  "This enormous output of goods clearly required a corresponding increase of consumer buying power," but that didn't happen.  Workers weren't making more money, though they were being urged to spend more.  They did, on credit.  Sound familiar?  Enter the Great Depression, caused in part by a failure to respond to an economic problem caused by new technology.

"Today, over 100 years later, our economy has gone through another transformation," President Obama said, with reference to the time of the TR speech. "Over the last few decades, huge advances in technology have allowed businesses to do more with less, and it’s made it easier for them to set up shop and hire workers anywhere they want in the world."

And that's just for starters: once again, there is a gap between technological change and the response of the economy.  Now a rational politics (not to mention a discipline of economics not controlled by ideology and corporate interests) would see how this problem has recurred, and would recognize it when it happens--even anticipate it.  And act accordingly.

President Obama has recognized it (see? He just said so) and since he took office he has advocated and engineered programs to address it, some of which he emphasizes in the rest of this speech: education, infrastructure, innovation in new technologies, particularly in the globally growing sector of green energy.  These lead to tech jobs that pay well (and with wages rising globally, America becomes more competitive.)  All of these recognize that technology now defines and largely determines the global economy.  (He didn't mention programs like health care but they also contribute in increasing buying power for people as well as for businesses, not to mention, you know, health.)

But here's something else that isn't part of this speech, or even part of the public dialogue anymore.  Because the impact of new technology--so quickly obvious in the last couple of decades--has been clearly in the cards for a half century.  It went by the name of automation for awhile, and it was a major topic for economists and sociologists in the 1960s.  (My first paper in my freshman sociology class was about a book on automation and alienation.)  The larger problems were foreseen: more production, less work.  The current situation wasn't always foreseen: employed people working a hell of a lot more, tied to their jobs around the clock by computers and cell phones, while millions of others aren't employed at all.  So these academics worried about the increased leisure time.  But they also worried about the basic problem that always occurs, that had happened in the Great Depression when many of them were in school--when technology increases production and the economy expands, but not enough people have enough money to buy what's being produced. 

They went so far to seriously consider...well, you're not going to believe me.   You might believe me if I told you there is really a Hogwarts, or that Jane Austen really was a vampire.  But you won't believe this.  But it happened, it really did.  What was seriously considered, by mainstream economists among others, was something called the Guaranteed Minimum Income.  It was clear that a high tech economy could produce such an abundance that the economy would actually work better if everyone got a minimum living, so they could buy stuff.  Businesses would profit far more than supporting the Guaranteed Income would cost them in taxes.

There were other benefits.  Poverty would essentially be abolished, if that means anything to you.  And therefore a lot of other social costs would decline--as poverty-borne disease and a lot of crime declined.  There would also be long term benefits.  Crazy geniuses wouldn't have to starve or get wage slave jobs--they could just create and innovate, and some of their art or science or whatever might benefit society. 

In any case, there was concern that at minimum there would be a gap between changes caused by new technologies and the ability of many people to deal with those changes, especially economically.  And that the economy itself would suffer, again. So something new--something to fill the gap--would be needed.  If not the Guaranteed Income, then something else.  This was foreseen in the 1950s and 1960s, and we've had half a century to figure it out.

So here we are, having not figured it out and having apparently forgotten we even knew the problem, in a situation that includes several important features of the early 1900s and the 1930s: a small number of extremely wealthy people, and a lot of people barely getting by or not getting by.  A few pigs, and a lot of suffering.  A dwindling middle class sunk further by credit (card) debt.  Growing unemployment, including people who will not be employable again, at least not with their current skills.  Technology increasing prosperity for some, but sinking many many others.

Oh, and one more factor, which the 60s economist didn't foresee.  They assumed that strong unions would protect workers incomes, and so would society.  They may have realized that capitalism has always depended on some form of slavery, but they thought that thanks to unions and the kind of progressive laws advocated by TR and instituted by FDR, the slaves of the future would all be machines.  They didn't realize they would at first be Mexicans and then Asians, and then de-unionized Americans. 

And you can tell how sophisticated our political dialogue is about these problems by listening to Mitt Gingrich and his plans to return to the child labor of the mid 19th century. Once again, the poor and the unemployed have nobody to blame but themselves, it's all their fault.  The necessary role of government in preventing economic collapses, and in responding to technological and other change, which was largely accepted 50 years ago, is now considered an alien ideology.  As President Obama said in this speech, this is partly a consequence of income inequality--the filthy rich and their institutions are dominating and corrupting the political system, and actively destroying the resources of institutions that they see as a threat.  Beyond the bumper sticker of greed, this is a source of the growing darkness.

Wednesday, December 07, 2011

Fair Shot, Fair Play, Fair Share

I saw headlines about President Obama's speech in Kansas on Tuesday, so I figured it must be significant since most of his speeches are ignored.  Then I heard some soundbites on cable news, which puzzled me a little: he was saying things he'd said before, maybe a little more sharply, but in somewhat the same phrases.  So why were these shows taking precious time out from their lascivious interest in Newt Romney and Mitt Gingrich?  (It wasn't much time, of course.)

The answer turned out to be in watching and listening to the whole speech (which I did on the C-Span site, but which you can do in the post below.)  It is a one hour brief for what we need to do to create jobs and revive the American economy, and why.  As part of that argument, it is about what we should not do, and why not.  It is a speech shorn of jargon, with some cliche but basically very direct and yet pretty comprehensive.

In this post I will try to outline the basic argument of President Obama's address, that combines economics with American values, as informed by history.  In a later post I'll focus on an argument within the argument, more specific but important.

President Obama began by noting that his mother and grandparents were from Kansas, but he quickly turned this into his premise: that his grandparents, who were young adults during World War II (grandfather in Patton's Army, grandmother in war plant), were able to enter the middle class, along with millions of other Americans.

"They believed in an America where hard work paid off, and responsibility was rewarded, and anyone could make it if they tried -- no matter who you were, no matter where you came from, no matter how you started out. (Applause.) And these values gave rise to the largest middle class and the strongest economy that the world has ever known...So you could have some confidence that if you gave it your all, you’d take enough home to raise your family and send your kids to school and have your health care covered, put a little away for retirement."

But over the decades, this changed, and here's as succinct a summary of what has happened to the 99% that I've seen: "But for most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success. Those at the very top grew wealthier from their incomes and their investments -- wealthier than ever before. But everybody else struggled with costs that were growing and paychecks that weren’t -- and too many families found themselves racking up more and more debt just to keep up. Now, for many years, credit cards and home equity loans papered over this harsh reality.

But in 2008, the house of cards collapsed. We all know the story by now: Mortgages sold to people who couldn’t afford them, or even sometimes understand them. Banks and investors allowed to keep packaging the risk and selling it off. Huge bets -- and huge bonuses -- made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all.

It was wrong. It combined the breathtaking greed of a few with irresponsibility all across the system. And it plunged our economy and the world into a crisis from which we’re still fighting to recover. It claimed the jobs and the homes and the basic security of millions of people -- innocent, hardworking Americans who had met their responsibilities but were still left holding the bag."

At this point is the part of the speech that made the soundbites, when the President called redressing this 'the defining issue of our time. This is a make-or-break moment for the middle class, and for all those who are fighting to get into the middle class. Because what’s at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, secure their retirement."

He said that some (read GOPers) propose solutions that show signs of a "collective amnesia," for their solutions are to return to the conditions that caused this economic breakdown in the first place.  He will come back to this with particulars, but he identifies the difference that is a theme of the speech, which harkens back to his "one America" speech at the 2004 Democratic convention--the speech that launched his national political career.  At this point he identifies the opposing ideology as everyone for himself.   "And their philosophy is simple: We are better off when everybody is left to fend for themselves and play by their own rules. I am here to say they are wrong. (Applause.) I’m here in Kansas to reaffirm my deep conviction that we’re greater together than we are on our own. I believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share, when everyone plays by the same rules. (Applause.) These aren’t Democratic values or Republican values. These aren’t 1 percent values or 99 percent values. They’re American values. And we have to reclaim them. (Applause.)"

Now he goes to the historic occasion: Theodore Roosevelt's speech in 1902 in this very same Kansas town in which he proposed his New Nationalism, a program that outlined much of the progressive legislation now deep in the country's fabric and taken for granted.  “Our country,” he said, “…means nothing unless it means the triumph of a real democracy…of an economic system under which each man shall be guaranteed the opportunity to show the best that there is in him.” (Applause.)

Now, for this, Roosevelt was called a radical. He was called a socialist -- (laughter) -- even a communist. But today, we are a richer nation and a stronger democracy because of what he fought for in his last campaign: an eight-hour work day and a minimum wage for women -- (applause) -- insurance for the unemployed and for the elderly, and those with disabilities; political reform and a progressive income tax. (Applause.)

The big corporations in TR's day were called the trusts, and TR was the trust-buster, and they opposed him.  Obama links their ideology to that of GOPer politicians and their corporate masters today, through the intervening history:

"Now, just as there was in Teddy Roosevelt’s time, there is a certain crowd in Washington who, for the last few decades, have said, let’s respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If we just cut more regulations and cut more taxes -- especially for the wealthy -- our economy will grow stronger. Sure, they say, there will be winners and losers. But if the winners do really well, then jobs and prosperity will eventually trickle down to everybody else. And, they argue, even if prosperity doesn’t trickle down, well, that’s the price of liberty.

Now, it’s a simple theory. And we have to admit, it’s one that speaks to our rugged individualism and our healthy skepticism of too much government. That’s in America’s DNA. And that theory fits well on a bumper sticker. (Laughter.) But here’s the problem: It doesn’t work. It has never worked. (Applause.) It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar booms of the ‘50s and ‘60s. And it didn’t work when we tried it during the last decade."

He gets specific about the Bush era:
"Remember in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history. And what did it get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class -- things like education and infrastructure, science and technology, Medicare and Social Security.

Remember that in those same years, thanks to some of the same folks who are now running Congress, we had weak regulation, we had little oversight, and what did it get us? Insurance companies that jacked up people’s premiums with impunity and denied care to patients who were sick, mortgage lenders that tricked families into buying homes they couldn’t afford, a financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy.

We simply cannot return to this brand of “you’re on your own” economics if we’re serious about rebuilding the middle class in this country. (Applause.) We know that it doesn’t result in a strong economy. It results in an economy that invests too little in its people and in its future. We know it doesn’t result in a prosperity that trickles down. It results in a prosperity that’s enjoyed by fewer and fewer of our citizens."

President Obama then recited statistics about the current level of income inequality, the largest gap between the 1% and the rest since the 1920s.  But he doesn't rely on the emotional effect.  He first makes the economic argument for why this is so damaging.  The rich spend a smaller proportion of their money.  It is what the middle class spends that generates an economy, and they can't spend what they don't have.
"Now, this kind of inequality -- a level that we haven’t seen since the Great Depression -- hurts us all. When middle-class families can no longer afford to buy the goods and services that businesses are selling, when people are slipping out of the middle class, it drags down the entire economy from top to bottom. America was built on the idea of broad-based prosperity, of strong consumers all across the country. That’s why a CEO like Henry Ford made it his mission to pay his workers enough so that they could buy the cars he made. It’s also why a recent study showed that countries with less inequality tend to have stronger and steadier economic growth over the long run."

Add to the economic, the political argument:

"Inequality also distorts our democracy. It gives an outsized voice to the few who can afford high-priced lobbyists and unlimited campaign contributions, and it runs the risk of selling out our democracy to the highest bidder. (Applause.) It leaves everyone else rightly suspicious that the system in Washington is rigged against them, that our elected representatives aren’t looking out for the interests of most Americans."

And the American values argument from before, the opportunity to make it into the middle class:

"But there’s an even more fundamental issue at stake. This kind of gaping inequality gives lie to the promise that’s at the very heart of America: that this is a place where you can make it if you try."

"It’s heartbreaking enough that there are millions of working families in this country who are now forced to take their children to food banks for a decent meal. But the idea that those children might not have a chance to climb out of that situation and back into the middle class, no matter how hard they work? That’s inexcusable. It is wrong. (Applause.) It flies in the face of everything that we stand for." (Applause.)

The speech turns towards the positive agenda needed to create a better future.  He outlines this approach through three concepts: "... in America we are greater together -- when everyone engages in fair play and everybody gets a fair shot and everybody does their fair share. (Applause.)"

The "fair shot" involves making it possible for Americans to compete in the world economy, not by a race to the bottom (the low wage economy envisaged by GOPers, all too bluntly articulated by their presidential candidates) but a race to the top, to innovation, and high skill, high wage jobs.  (I'll have more to say about this section of the speech later.)  Government, as an expression of "we're all in this together," has its role in supporting education and fairness for individuals and families, but also in a larger sense, in creating a national economy that can compete.  As through infrastructure--here the President makes the argument for infrastructure spending not only as a win-win for meeting known needs and employing idle workers, but for competitive advantage among nations quickly improving their infrastructure to create better efficiency for businesses. 

He correctly identifies this position as one that's been mainstream throughout American history, and certainly since the Great Depression.   "But as a nation, we’ve always come together, through our government, to help create the conditions where both workers and businesses can succeed. (Applause.) And historically, that hasn’t been a partisan idea. Franklin Roosevelt worked with Democrats and Republicans to give veterans of World War II -- including my grandfather, Stanley Dunham -- the chance to go to college on the G.I. Bill. It was a Republican President, Dwight Eisenhower, a proud son of Kansas -- (applause) -- who started the Interstate Highway System, and doubled down on science and research to stay ahead of the Soviets."

But to do this requires spending, and to pay for it requires the second factor: fair share.  The wealthy must pay their fair share.  This section of the speech isn't new, but it is a succinct summary of what he's been saying, and again it's folded gracefully into the complete argument. "We have to ask ourselves: Do we want to make the investments we need in things like education and research and high-tech manufacturing -- all those things that helped make us an economic superpower? Or do we want to keep in place the tax breaks for the wealthiest Americans in our country? Because we can’t afford to do both. That is not politics. That’s just math." (Laughter and applause.)

His comparison of the Clinton and Bush years, which he also often makes, is more deftly elaborated:

Now, so far, most of my Republican friends in Washington have refused under any circumstance to ask the wealthiest Americans to go to the same tax rate they were paying when Bill Clinton was president. So let’s just do a trip down memory lane here.
Keep in mind, when President Clinton first proposed these tax increases, folks in Congress predicted they would kill jobs and lead to another recession. Instead, our economy created nearly 23 million jobs and we eliminated the deficit. "

Contrast this with what he said earlier in the speech about the Bush era approach: "Remember in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history. And what did it get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class -- things like education and infrastructure, science and technology, Medicare and Social Security."

Then comes the third element: "Finally, a strong middle class can only exist in an economy where everyone plays by the same rules, from Wall Street to Main Street."  Here he makes his best case so far for the regulations his administration has put in place to control Wall Street and to protect consumers.  But just as importantly, he articulates the rationale for this kind of regulation:

"Some of you may know, my grandmother worked as a banker for most of her life -- worked her way up, started as a secretary, ended up being a vice president of a bank. And I know from her, and I know from all the people that I’ve come in contact with, that the vast majority of bankers and financial service professionals, they want to do right by their customers. They want to have rules in place that don’t put them at a disadvantage for doing the right thing. And yet, Republicans in Congress are fighting as hard as they can to make sure that these rules aren’t enforced."

Discussing the banks, he makes some politically blunt statements:"We shouldn’t be weakening oversight and accountability. We should be strengthening oversight and accountability... The fact is this crisis has left a huge deficit of trust between Main Street and Wall Street. And major banks that were rescued by the taxpayers have an obligation to go the extra mile in helping to close that deficit of trust. At minimum, they should be remedying past mortgage abuses that led to the financial crisis. They should be working to keep responsible homeowners in their homes."

President Obama then broadened beyond these arenas to talk briefly about individual and family responsibilities, but also about the responsibilities of businesses to their communities (a very Dickensian Christmas theme.)  He brought it back to TR and his main theme:   "We are all Americans,” Teddy Roosevelt told them that day. “Our common interests are as broad as the continent...” We still have a stake in each other’s success. We still believe that this should be a place where you can make it if you try. And we still believe, in the words of the man who called for a New Nationalism all those years ago, “The fundamental rule of our national life,” he said, “the rule which underlies all others -- is that, on the whole, and in the long run, we shall go up or down together.” And I believe America is on the way up. (Applause.)

President Obama's address on the American economy, in Kansas on Tuesday.  For those who want to get beyond the soundbites, as well as the analyses in the next few posts.

Monday, December 05, 2011

The Dreaming Up Daily Quote of those uneventful times that seem at the moment only a link between past and future pleasure but turn out to have been the pleasure itself."

F. Scott Fitzgerald
Tender is the Night