Robert Reich, writer, teacher, and secretary of labor under the Clinton administration, explores America’s economic malaise in his book
Aftershock: The Next Economy and America’s Future.The problem, as he sees it, is deeply ingrained in society, and goes much further than the transitory upheavals of the last few years. True enough, there has been some shocking events in the financial world: risky practices by commercial banks, excessive and reckless lending, a real estate price bubble, trade imbalances with China, and the loss of jobs to foreign countries, among others.
But the fundamental issue is the skewing of the distribution of wealth in the country since about 1980. More and more wealth accrues to the top few percent of the population, while the middle class has dropped behind, in relation to growth of the GDP. As Reich says, he could approach this from an ethical or moral stance, but instead he focuses on the clear economic hazards this presents. At the top end, excessive wealth can, and as he points out, has created inflated price bubbles in differing areas of the economy. Lack of income in the middle class not only causes personal hardship, but ultimately affects all. It leads to a lack of demand, causing a slowdown in production, and hence increased unemployment.
Those that are not earning cannot pay taxes, and this combined with the current tendency to avoid taxing the affluent, means not enough resources available to fund essential societal goals. Tax dependent services whither, and in response the wealthy tend to fund their own private alternatives, further polarizing society.
The US saw some of its best time during the 1950s and 1960s. The two salient points here are during those times income inequality was at a minimum, with a robust middle class, and taxation was genuinely progressive. Since then of course jobs have been lost to globalization and also to automation, but Reich makes the point that the actual number of jobs available overall hasn’t changed that much. Some types of jobs have also been added, and productivity has continued to climb. But even while more wealth is generated, average wages have declined. The reasons for this ongoing disparity have a lot to do with the concentration of financial, political, and media power in the hands of the very wealthy.
Reich offers a number of solutions to this situation, including a far more progressive tax system that includes a “reverse income tax”, or stepped payments to those with very low income. He also outlines a completely redesigned unemployment insurance system, education vouchers based on income, a true system of medicare that supercedes private profit, and not least, strict limits on campaign financing, with proceeds going into a blind trust.
Reich believes that the system as it stands is unstable, and will not continue in its present form but will change- one way or another. The problem may be catalyst for progressive legislation- or provoke an extreme political backlash.
http://www.amazon.com/Aftershock-Next-E ... 858&sr=1-2
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