Tag Archives: economic theory

Elections and the Promise of Democracy

Economics, In the News, Politics, Theory and History, , , , , , , , ,

Each year at election time we’re reminded several things about the nature of life in a Democracy. For some, a wide range of emotions accompanies elections. These emotions run the gamut from sheer elation if their political side wins, to dismay at the imperfect nature of politics if one’s on the losing side of the political equation. However, no matter the variety of emotions that hit us at election time, it’s clear that for all its faults, Democracy is the best political system. A quick glance at life in a totalitarian regime can give proof to that.

Democracy’s strength lay in how it allows for a filtering of ideas from several levels of society. And yes, although Democracy is often diluted by special interests, it needs to be noted that some special interests actually represent issues important to us all.

Since America’s form of government is technically known as a Constitutional Republic, there’s debate as to whether one should refer to it as a Democracy. As a compromise, some call it a Representative Democracy. After all, as voters we elect representatives to do a majority of legislative decision-making. In a true Democracy, voter referendums may be more common and simple majorities could determine many more aspects of modern life.

In modern America, the political process has changed much the past twenty years. Due to proliferation of new media and a consolidation of existing media outlets, a much different mindset exists now. On many issues media and political elites now aggressively use their skill and savvy to rally the masses to perceived victories. Although this aspect of populism has been with America from the days of William Jennings Bryan in the late 1800’s, the skill, power, and sheer repetition of today’s media arena has heightened political intensity.

Obviously, the advent of the quick-hitting verbosity of social media can give modern politics a more intense feel than in the past. When the bullet point mindset of social media is applied to today’s complex political issues, emotional reactions can erupt due to the fact issues are often shorn of their complexity. Also, by using closed-ended bullet point language that talks sometimes of absolute defeat of political foes, modern day political operatives and politicians may be giving rise to an all or nothing dogma that used to be mostly the province of monarchies and totalitarian regimes.

In line with this, it’s been recently noted by many that the ability to civilly “agree to disagree” is being lost in America. Since many individuals and political operatives now perceive political stakes to be so high, there’s a strong sense of activism on many levels that encourages intense loyalty and at times retribution for things that used to be allowed to slide in the past. Some feel this type of activism is leading us away from reasoned debate and more into a react first, and think later, mindset. As result, a new kind of political segregation is arising in America. This newer trend seems to be resulting in fewer marriages and friendships between opposite political ideologies.

As most of us know, countless issues of modern life are now incredibly complex and defy categorization as a bullet point. In a world that runs the gamut from complex economics, to high level scientific-technological issues, to the ever-growing legalisms evident today, it’s clear that using bullet point explanations with some issues may be taking the easy way out.

Seemingly lost in today’s political-media frenzy is the sense that government sometimes functions best when a compromise is struck between opposite interests. Although political deals are often struck these days, most political operatives and politicians are afraid to explain the reasoning behind their deal making to the public at large. Therefore, since many voters perceive a lack of sincerity, the tag of RINO-Republican in name only, or DINO-Democrat in name only, is attached to a politician who refuses to explain their motives to the electorate.

Unfortunately, diluting political issues to bullet points and embracing a more emotional approach to governing can potentially contradict the checks and balances our Founding Fathers had in mind. This is the situation America faces today.

To counteract the emotionalism of today’s politics, one can look at what it was like to live in pre-Democracy times before the 1700’s. Although Democracy had been tried for a while in ancient Greece and Rome, it didn’t become a standard for governments until the 1800’s. If one goes back to reading what life was like then, and if one looks at the issues Enlightenment political theorist John Locke faced, it’s easy to see that Democracy is not a gift to take lightly.

If we sincerely look at the struggles mankind faced to reach the Democracy threshold, one comes away with a renewed awareness that Democracy is not just a vehicle to use for vanquishing a political foe, it’s more importantly a tool used to free all mankind from some of the more brutish aspects of life. This is because it is in the balance of opposites that true Democracy exists. Reconciling and living with opposite tendencies, as opposed to merely controlling or vanquishing them, is the essence of the checks and balances that Enlightenment thinkers used to create our amazing Constitution.

In line with that, if we realize how economics is tied at the hips with politics, it’d behoove us to become more aware of the seemingly boring, yet very important, study of economics. Too often, politicians reduce economic ideas to the simple concept often repeated that the rich get richer while the poor get poorer. Ironically, many of the people who advance such a simple economic dogma are often rich themselves. In addition, another simple economic myth politicians sometimes promote is that those who struggle economically simply don’t work hard enough.

If we embrace the fact our complex world demands the ability to think and debate more rationally, there’s a chance politics can return more to the concept of Representative Democracy our Founding Fathers had when they framed America’s constitutional government. As they envisioned it, such a system, by creating checks and balances through a separation of powers, would be superior to the dogmatism of a monarchy or dictatorship. This sense of governmental balance, which seeks to somewhat reconcile opposites, as opposed to controlling or vanquishing them, has been key to America’s strength. If we can work towards this concept of government more, the promise that elections hold for Democracy may become bright yet again.

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Towards a More Practical View of Economics

Economics, Theory and History, , , , , , , , , , ,

When some people hear the term economic theory, they often act indifferent or roll their eyes. This is because for years, many have equated it with a type of intellectual game playing.

Unfortunately, few modern theories have as much day-to-day impact on people’s lives as economics. Also, since economics is the silent partner of politics, few issues escape its grasp. In fact, when one applies a follow-the-money approach to political topics, they often find that across the spectrum, many issues have their origin in economic theory.

Because economics is misunderstood, it can be hard to discuss beyond the usual clichés. Therefore, when anyone mentions the possibility it can become more practical, many shrug and say, “Here we go again.” This confusion is compounded by how some theorists seem to setup axioms out of premises before all data is collected. As a result, economics is sometimes viewed as a statistical mishmash of competing ideas arranged in an arbitrary fashion.

But is economics really just a game? How can it be just a game when so much of what we do in life revolves around some kind of monetary exchange?

One of the reasons modern economic theory puzzles many is that much of it seems counter-intuitive. The abstract nature of modern economics, just like the abstract nature of modern physics, proves to be a barrier.

For instance, to the average American who’s struggling to pay down debt, the fact that our government can seem to function with a large amount of growing debt appears somewhat illogical. When politicians and economic experts talk about Debt-to-GDP ratios, and favorable levels of debt, many average Americans shrug as if it’s yet another example of political-economic gamesmanship.

In addition, to the average American that looks upon their family as a self-enclosed economic entity, the ever-present concept of globalism seems confusing. To many, the American nation is still the largest economic entity we envision. Therefore, getting used to the whole globe as an economic entity can appear abstract. Yes, most Americans understand globalist trade concepts and the importance of global trade. After all, since the days of Marco Polo and the Silk Road, individuals and countries have enriched themselves through trade. However, that’s not what creates confusion for many.

What puzzles many about globalism is how some American-based multinational corporations pursue loopholes to drastically lower their taxes. On occasion, these companies hint at the fact that such tax practices are a necessary part of globalist trade. Although the American corporate tax rate is high on paper, they often pay much less than what the official rate implies. Unfortunately, the reputation of corporations that pay taxes fairly is damaged by the tax avoidance pursued by some.

Adding to the bewilderment many have with modern economics is the fact that corporations are now viewed as people in legal terms. Therefore, many think that as people, corporations could pay a fair share for the roads, bridges, ports, and airports they use to conduct trade.

Probably the most confusing part of economic theory is how it’s used in the political arena. As is well known, both parties have economic experts and economists at their disposal who polish the rhetoric politicians employ. As most Americans attest to, there’s a tug-of-war between the Republican embrace of the more Free-Market approach of the Supply-Side revolution starting in 1980, and the more socialist Democratic approach of government-based Keynesian ideas used to maintain economic demand. 

In reality, although America has swung between Republican and Democratic directions the past 30 years, the economic dogma espoused by both seems to have resulted in the system that some call Corporatism. In a sense, Corporatism, as reflected in the political talk of Public-Private partnerships, has arisen since implementing the economic views of both parties in total has proven difficult. Therefore, the political-economic theorists that predicted Corporatism are correct to say this system could grow out of modern political rivalries. Although some say Corporatism resembles Socialism insofar as there’s a strong government hand in the economy, it differs by leaving the means of production in private hands.

As for developing a more practical economic view if indeed we’re living in the age of Corporatism, there are many proposals.

First off, since the post-Keynesian economic model has allowed for large amounts of unstable debt to accumulate in many advanced countries, there’s a need for debt limits that are achieved transitionally without imposing high levels of austerity. In line with keeping debt lower, the debt-risk posed by those wanting more finance deregulation needs to be recognized. After all, if another finance crash creates a freezing of liquidity assets similar to what we had in 2008, billions of dollars of outstanding derivatives contracts may trigger the need for another bank bailout. Obviously, another bailout would be added to our nation’s debt again.

Regarding debt reduction, we could actually increase tax revenue from corporations by both cutting their official tax rate, and then closing certain loopholes. This policy could help reduce debt, while also improving the negative public image many have of corporations due to how some pursue tax avoidance.

In addition, since many central banks have been pushing for lower interest rates the past 15 years as a means to stimulate certain areas of the business cycle, there needs to be recognition that we need to slowly allow interest rates to return to historic levels so the natural ebb and flow between saving and spending can be restored. As many economists note, such unnaturally low levels of interest rates, if continued, will make it hard for us to not only stimulate the economy for future growth, it’ll make it hard to stimulate the economy to reduce the chronically high levels of underemployment we now have.

Since chronic underemployment has become an outgrowth of globalism in many advanced countries, it’s apparent that relying on historically low interest rates as the main way to boost employment has led to a situation begging for creative solutions. As many have said, America could deal with its high level of underemployment by borrowing ideas from both right and left of the political-economic spectrum. These ideas include creating infrastructure improvement jobs and streamlining small business regulations to encourage true entrepreneurship. 

And finally, although globalism’s here to stay and has benefits, it’s obvious that although recent trade pacts reinforce large multinational entities, that the most important entity for each nation… remains that nation. Therefore, if politicians can honestly find ways to look out for all aspects of our nation more, America’s economic outlook could improve. 

Hopefully, with more involvement from ordinary citizens, economics will start to lose its reputation as a confusing line of thought, and become more an everyday part of everyone’s lives.