The Imperative Need to Rebalance a Political Economy in Crisis

It is periodically useful to remind oneself of the character of our nation’s political economy. Doing so now seems especially apt as we witness our President and legislators engaged in fraught posturing, if not negotiations, concerning how to address America’s looming fiscal problems, even as the country slowly recovers from a long-lived recession and remains at risk of falling into a fresh slowdown. Put simply, our political economy mixes contradictory organizing forms: capitalism and democracy. The first is the most successful form of wealth creation humans have yet devised, while the second calls for self-governance and equality by all of a regime’s citizens. By its nature, the market creates inequality and valorizes efficiency and profitability above all claims, while democracy calls for individual freedom and equality for all citizens. Meanwhile, capitalism by itself does nothing to secure the conditions (read rules) on which it relies to operate and for which the people and their elected regime are responsible.

The market’s capacity to create wealth is powerfully alluring as it offers material goods and possibility. Its force has not remained confined to economic activity alone, but has deeply suffused the nation’s culture. We are not only a democratic nation, but also a deeply capitalistic and materialistic culture and people. This observation, when combined with the insight that no democratic leader can ignore the claims of market-based actors whose firms and businesses provide the bulk of the nation’s employment without fear of electoral recrimination, allows one to understand why political officials would pay very close attention indeed to the supposed needs of capitalist actors.

The question, therefore, is not whether government leaders will seek to ensure the markets’ vitality, but how they will do so in the face of democracy’s claims for equality and freedom for the nation’s citizens. And more, how they will ensure that the social foundations for capitalism’s effective functioning remain strong, since market actors themselves will not ensure such conditions, and indeed may undermine them for financial advantage. The challenge, then, for the nation’s public officials, is, or ought to be, one of securing a reasoned balance between the market’s capacity to create material wealth and the regime’s primary responsibility to ensure freedom and equality, broadly understood, for the polity it serves.

So, where generally might our politics be when viewed through this political-economic frame? How well have we balanced the forces at work in our mixed political economy of democracy and capitalism during the last several decades? The first observation one could make is that since the late 1970s and under the thrall of neo-liberal claims that a larger role for the market in the political economy would per se result in increased social wealth, our elected leaders generally, and the Republican Party particularly, have contended that the market should play a larger role in the nation’s life. This stance has occasioned a range of policy choices since the early 1980s, including the following, among many more that might be cited:

• Massive reductions in income tax and capital gains tax rates imposed on the most wealthy in society on the assumption that those citizens will translate the resulting gains into investments that will create jobs,
• A protracted campaign to integrate market institutions into government programs, including the armed forces, on the argument that such would necessarily result in service delivery efficiencies,
• A less and less supportive infrastructure, at least in terms of political will, for the nation’s private sector labor unions, now often tagged as overreaching “job-killers,” resulting in their marked decline from comprising more than 24% of the workforce in 1973 to less than 7% today, with a consequent deterioration in labor’s capacity to mobilize to make claims of private employers on behalf of workers,
• A continuing effort, especially, but not only on the part of the GOP, to secure widespread public sector deregulation of private firms on the grounds of regulation’s purported a priori pernicious effects on economic activity,
• Continuing political efforts, especially by the GOP, to curtail and/or eliminate public support for the poor and disadvantaged as well as social transfer programs for the middle class. Among other changes, this long-term political effort resulted in the elimination in 1996 of an entitlement to benefits for poor families receiving public support.

Meanwhile, real wages for those on the bottom rungs of the nation’s economic ladder have hardly risen since the early 1970s. The reverse has been true for the wealthy in our society, who now enjoy unprecedented levels of income and who, as noted, policy-makers have routinely rewarded in addition. The disparity in wealth in our society between those of highest means and everyone else is now as large as it has ever been. As Josh Bivens of the Economic Policy Institute, has reported, using the Walton family as an exemplar,

The three years of wealth data from 2007 to 2010 just provides an extreme example of how the economic fortunes of Walmart’s owners have diverged from those of typical American households. Concretely, between 2007 and 2010, while median family wealth fell by 38.8 percent, the wealth of the Walton family members rose from $73.3 billion to $89.5 billion. … And in 2010, as the Walton’s wealth [rose] and most other Americans’ wealth declined, it is now the case that the Walton family wealth is as large as the bottom 48.8 million families in the wealth distribution (constituting 41.5 percent of all American families) combined (http://www.epi.org/blog/inequality-exhibit-wal-mart-wealth-american/).

All of this said by way of illustration, it appears straightforward to contend that our nation’s leaders ought not now to continue to pursue public policies that will result in still greater inequality and still larger ascendance for the market as an organizing entity in our society, but instead to develop and embrace strategies that will rebalance democratic and capitalist forces so as to ensure a healthier political economy overall. How best to do so in tax and programmatic terms, and what constitutes a reasonable balance, are challenges that are rightly the province of democratic debate. Simply supposing the market itself will ensure democratic outcomes for the citizenry, or that continuing to shower public largesse on corporations and businesses will produce democratic or even economic benefits for the bulk of the nation’s citizens, however, it now seems clear, represents both poorly conceived policy and a democratically and morally indefensible position. The nation cannot and must not address its current crisis by continuing in its clearly untenable course of simply enlarging the role of the market in the country’s political economy. Its leaders can and must seek a new balance in favor of democratic claims and of freedom rather than continue to seek a mythological and always evanescing supposed market-based nirvana.