New Issue! Plus: Regional economic disparities and Hillary Clinton’s Unfortunate Remarks


Our March/April issue is at the printers (and in e-subscribers’ inboxes). (Not a subscriber yet? You can subscribe now here!)

We just posted an article from the new issue–Jerry Friedman’s “Economy in Numbers” column, Growing Together, Flying Apart: Regional Disparities in American Politics and Economics.  Coincidentally, it provides excellent commentary on the remarks Hillary Clinton made recently, to great controversy, characterizing the parts of the country she won in the 2016 presidential election compared to those won by Trump:

“If you look at the map of the United States, there’s all that red in the middle where Trump won,” Clinton said. “I win the coast, I win, you know, Illinois and Minnesota, places like that.”

“I won the places that represent two-thirds of America’s gross domestic product,” she continued. “So I won the places that are optimistic, diverse, dynamic, moving forward. And his whole campaign, ‘Make America Great Again,’ was looking backwards.”

Jerry’s article talks about the regional economic disparities that have left Trump-voting regions (and rural parts of Clinton-voting regions) behind, and the political consequences of those disparities.

Here is the editorial note for the issue:

This Is Your Economy on Finance

The Dow Jones Industrial Average reached an all-time high of 26,616 points on January 26 of this year. That was after rising almost 8,000 points since Donald Trump’s inauguration. The Dow then fell over 2,700 points in early February, which met the technical definition of a market correction—a drop of at least 10% from a recent high. Since then, the Dow and other indices have gone up and down, but mostly up, since the correction.

What does this mean for the rest of us, and what does it tell us about the economy? Much of the business press would like us to think the rising stock market is good news for the economy; that was President Trump’s message in his first State of the Union a couple of weeks before the correction. But the business press tipped its hand when it explained the correction as markets’ reaction to lower unemployment and a minor uptick in wages. Why would investors consider wage increases bad news? According to John Miller, it’s all about class conflict—and about the disconnect between stock market investors (and stock values) and workers on “Main Street.” Even slightly higher wages lead investors to fear higher labor costs and inflation. But workers’ share of output remains low, and corporate profits continue to be at record highs—numbers which “reveal the unwillingness of the financial powers to share with workers the gains of economic growth.”

In the second part of her three-part series on deindustrialization in Keene, N.H., Marie Duggan gets into more detail about the adverse effects of a financialized economy, and its tendency toward financial bubbles, on workers. The story of how a local company, Miniature Precision Bearings, was acquired by a much larger company, Timken, shows how asset bubbles and financialization have contributed to deindustrialization and job loss. When management spends its accumuated capital manipuating stock price, the math means there will be less capital available for investment in the equipmient and people to produce quality product. The financial bubble of the 1990s seemed so great at the time with the rising value of pensions, but it turns out that the market wasn’t raising funds for industry, but rather was persuading industry to abandon product quality and investment in the company, workers, and community. The backstory of the decline of rural America may be the giant sucking sound of the stock market removing funds from the industrial base into stock price manipulation, given the 1990s bubble. This is all the more ominious, given that the rise of the stock market under Trump gives every appearance of being a bubble itself.

Gerald Friedman’s Economy in Numbers column in this issue tells a related story of regional economic disparities and their political consequences. As Friedman points out, federal policies favoring Wall Street have been better for urban areas on the coasts, but have contributed to deindustrialization and lagging income growth in other regions (and, as we see from Duggan’s article, non-urban parts of coastal regions are also falling behind). Both political parties’ embrace of neoliberalism has eroded the safety net and has neglected industrial policy.

This issue’s cover story suggests an alternative understanding of finance and monetary policy that could point to a way out of neoliberal economic policies that have led to these regional disparities and to widening inequality. Modern monetary theory (MMT) addresses the connection between lending (and debt) and money, and undermines the standard views of taxes and deficits that justify austerity policies. MMT points to a way to stimulate the economy by providing the finance and credit people need to buy products, and that businesses need to be able to sell their products, and in that way moving economic policies beyond austerity and deficit fear-mongering. The MMT approach could finance government policies—including infrastructure spending, direct job-creation, national health care, and industrial policy—that would lead to full employment and greater equality.

Also in this issue: Arthur McEwan tallies up the economic costs of Puerto Rico’s ongoing crisis, Noah Berlasky lays bare the neoliberal foundations of the self-help literature, and more!

Re-theorizing the Welfare State and the Political Economy of Neoliberalism’s War Against It

This paper argues neoliberalism is engaged in a war against the welfare state. At issue are competing views regarding the size of the welfare state and how it should be organized. In waging this war, neoliberalism seeks to politically discredit the traditional welfare state and change the economic structure so that the latter becomes unviable. The paper presents a new theoretical framework that distinguishes between modes of production and financing of the welfare estate. Neoliberalism’s war rests on ideologically grounded criticisms drawn from mainstream economics; implementation of policies that undermine social solidarity toward the welfare state; exploiting pressures fostered by neoliberal globalization; and misrepresentations about affordability. The welfare state was critical in saving capitalism from itself after World War II. It is a way of embedding the market system so as to produce socially acceptable outcomes that are politically stable. Neoliberalism’s war promises a body blow against shared prosperity. More ominously, it may so dis-embed the market system as to recreate conditions Polyani (1944) blamed for the rise of fascism in the 1930s.

Find the paper here.