Monthly Archives: December 2014

The Politics of Economic Opportunity

In the wake of recent controversies in Ferguson, many Americans are bewildered. This is because not only is it hard to determine actual facts of the Michael Brown case in the flurry of conflicting reports and opinions, it’s difficult to separate one’s political affiliations from how one looks at the situation. However, no matter what one thinks of Ferguson personally, it’s clear the tragedy there is somewhat a reflection of questionable economic policies. As many know, crime rates and social discontent are often higher in poor areas such as Ferguson. Also, by being part of the metropolitan area of Greater St. Louis, suburban Ferguson exemplifies many features of America’s densely populated areas. 

Sadly, America’s current political-economic dogma can create a cancel-out effect on issues like Ferguson. As we’ve seen, some party faithful on the left and right treat the issue like a political football thrown back and forth rhetorically from one side to the other. Ironically, this intense political rhetoric can sometimes serve to reinforce a status quo that can sacrifice truth to party dogma.

As many know, the poverty that leads to much discontent was not eliminated 50 years ago when “The War on Poverty” was declared. To some, things are maybe worse today. Why many ask, is it so hard to eliminate poverty and the social ills that go along with it?

One of the main social ills of poverty is both high unemployment and high underemployment. As economists have pointed out recently, America’s unemployment figure is actually higher than officially reported since those who’ve given up on work are no longer counted. When this is coupled with how many are underemployed, it’s clear we have many idle poor. In parts of densely populated areas like Greater St. Louis, unemployment and underemployment is high.

On a common sense level, there’s probably not a single American who doesn’t recognize the value of hard work. As many know intuitively, the sense of accomplishment that being employed can do for someone is incredible. Therefore, why is it in America that we have far too few jobs to go around?

Part of the problem with having too few jobs is that political dogmas on both sides reinforce somewhat outmoded economic theories. This is shown through political rhetoric. For instance, Democratic leaders still make overtures to the base of their party that wants more Socialism. Therefore, some Democratic leaders will employ rhetoric derisive of business and corporations to bolster support. This rhetoric serves to keep the base in line by keeping alive the hope that someday a more Socialist utopia can be realized. On the right, the Republicans try very hard to appeal to a base that’s very much interested in a total Free-Market theory that sounds great on paper, but isn’t really practiced anymore.

As we all know, not only has Communism been discredited, but also true Socialism has faded in strength since the 1980s. Along with both of those factors, totally unregulated Free-Markets are not really in vogue. Therefore, if both political parties are adhering to rhetoric espousing economic theories that aren’t totally accurate, what are we to do?

For starters, the main thing we can do as informed citizens is encourage politicians to be more honest about the fact our economy now is more reflective of Corporatism. Basically, Corporatism blends Free-Market and Socialist ideals while being neither. Therefore, Corporatism offers different challenges and opportunities. After all, major economists like Joseph Schumpeter predicted Corporatism clear back in the 1940’s. Although some view Corporatism as only a controversial theory, there’s adequate proof from a purely business model perspective, that corporations have validity. The main problem many of us have with corporations is the amount of power some corporate sectors have over the political process and government.

Regarding high unemployment and underemployment, there are pragmatic solutions to both that can be addressed if both parties become more honest about Corporatism and less rigid about adhering to older concepts. Practical solutions to high unemployment come in many forms.

One unemployment solution is to follow the lead some economists advocate and increase spending on America’s crumbling infrastructure. The increased spending could add employment. Obviously, simply applying fiscal policy will have a multiplier effect that’ll create more jobs. However, other ways to achieve this would be to actually create jobs, some temporary, and some permanent through the government for infrastructure. These jobs could target the unemployed and be used to not only provide employment, but also reduce some welfare payments. Therefore, by tying employment to ways to partially reduce welfare dependency, infrastructure spending could be done in a way that doesn’t add tremendously to debt.

If unemployment is successfully reduced, the Federal Reserve may then be tempted to allow interest rates to rise so the poor and middle class could begin saving money again through banks. As many know, interest rates are kept low to stimulate employment.

All of these factors could improve social stability by reinforcing the concept of work and responsibility, as well as saving.

Other ways to increase employment would be to streamline the byzantine and confusing regulations, taxes, and zoning laws setup in large Metropolitan areas. This process would have the net effect of promoting small business growth. In turn, this would lead to greater employment, serve to naturally stimulate the economy, and improve social stability by providing incentive for upward mobility.

All of the above are practical ideas that have been advocated by many on the right and left for years to help create more meaningful jobs. The problem with implementing these ideas has mainly been the dogma of both political parties. However…now that the threat of large-scale Socialism and Communism is largely gone for the right-wing, and now that the threat of a totally unregulated Free-Market is gone for the left, we can look at realistic economic solutions for today.

Although Corporatism offers many challenges and problems, admitting that this is today’s economic system may actually give us a starting point to make things better. Once we understand our new economic system and how it differs from the old, we can maybe start to identify how to cure systemic issues such as high unemployment and underemployment.

Hopefully, the Ferguson tragedy can mark a turning point away from problems promoted by lack of opportunity, instead of being a harbinger of things to come.