New Issue!


Our July/August 2018 issue is now at the printers, and the electronic version has been sent to e-subscribers.  (Not a subscriber? You can subscribe here!)

Here is the editors’ note from p. 2, with a guide to what’s in the magazine:

This Is Your Economy on Corporate Rule

This June, the U.S. Supreme Court issued a five–four ruling in Janus v. AFSCME that stops public-sector unions from collecting fair-share fees from non-members. The decision is a major victory for big business interests in their long-standing campaign to undermine union power. The ruling was no surprise. (D&S readers were prepared for the ruling by Gerald Friedman’s Economy in Numbers in our May/June issue on “Why Janus Matters.”) A similar case would have produced the same result two years ago if not for Justice Antonin Scalia’s timely demise. A few commentators hoped that the Court’s renowned “swing vote,” Anthony Kennedy, would side with the unions this time, but most expected what actually happened: Kennedy voted with the conservatives, as he did almost unfailingly in cases concerning workers’ rights and corporate power.
On the day of the Janus decision, Kennedy announced he was retiring from the Supreme Court. As our issue goes to print, it looks likely that Brett Kavanaugh will be confirmed as his replacement. Kavanaugh is a product of the Federalist Society, the right-wing legal association that has seen huge success in pushing the Republican agenda through judicial appointments on courts across the United States. Advocates for reproductive freedom rightfully fear that Kavanaugh will spell the end of the legal right to abortion—as attenuated as that right has already become in many states.
On many issues, Kavanaugh will be a more consistent conservative vote than Kennedy was. But when it comes to backing capitalist class power, Kavanaugh will be almost indistinguishable from Kennedy. Business interests have had a reliable friend in the judicial system in recent years, on issues ranging from private arbitration hearings to class action suits to protections for whistleblowers. These victories have taken place on courts both high and low. Indeed, Trump has appointed dozens of Federalist Society-approved judges in seats that remained vacant under President Obama due to Senate Republican obstructionism. But many of these victories came at the hands of both conservative and liberal judges. Now, as for most of U.S. history, the courts are a vexing obstacle to any challenge to corporate dominance.
In our cover feature for this issue, Rob Larson looks at a case where some major corporations had positioned themselves on the side of progressive change: the battle over net neutrality. Tech companies fought alongside First Amendment activists and consumer advocates to retain net neutrality under Obama, but when Trump’s Federal Communications Commission moved to end net neutrality last year, the biggest companies had abandoned the cause. What happened? The answer, in short, is that the tech companies are transforming into the telecommunication companies they once opposed. This story reminds us, as Larson puts it, that “Capitalists are only social-change allies as long as it suits the bottom line.”
John Miller’s column in this issue examines another measure of corporate power: the ratio of pay for a CEO to an average worker at their company. New SEC data reveals how drastic the CEO pay gap really is, whatever corporate allies in the media might claim. Yet as Gerald Friedman explains in his column, the country’s wealthiest people haven’t been investing all that money back into the economy. The best explanation for rising public debt across the Global North in recent decades has been government spending to maintain growth in the face of declining private investment. Though this growth has slowed, especially since the Great Recession, Arthur MacEwan notes in his column that the Federal Reserve has started to raise interest rates in order to slow it even further. The Great Recession also contributed significantly to both public and private debt, as Steve Keen emphasizes in his recent book Can We Avoid Another Financial Crisis?, reviewed in this issue by Steven Pressman. Raising interest rates will only make another financial crisis more likely.
There are alternatives to an economy at the mercy of corporations. In the second installment of her series on developing an equitable economy in Los Angeles, Jane Paul shows us that another world is possible, and that the seeds of it are visible in our own. Cooperatives and other organizational models that shift power to workers can begin the slow work of economic transformation. As Costas Panayotakis writes in his review of Catherine Mulder’s important new book on co-ops and capitalism, these efforts will face challenges both external and internal. But they remind us that working people, so often on the defensive, can build their own power when bound together in creative solidarity.


From Germany to America: A Dialog on Inequality

By Polly Cleveland

At a coffee break between sessions at the annual History of Economics Society meeting, I chatted with D___, a tall, blond young woman, a professor of political science at a German university. On hearing that I work on inequality, she immediately challenged me.

D: “I don’t believe in equality. Inequality is just a statistic, a side effect. What’s relevant is how people actually live. What matters are policies to improve citizen’s wellbeing, like health or education, not policies to reduce inequality.

P: But aren’t those statistics useful in identifying those societies that are or are not doing a good job providing those services? After all, there are many statistical studies showing that more equal societies have grown faster and have a higher GDP per capita.”

D: No. Inequality statistics are just an artifact. They don’t mean anything. We could all be perfectly equal in extreme poverty, like we were in East Germany. [Obviously before she was born.] Is that what you want?”

P: In the United States, our Congress just passed a new tax law reducing income taxes for the rich and for large corporations.  That will surely lead to reduced services and other benefits to poorer people.

D: Well, what do you want? A flat tax? The same tax on each person? That would be a perfectly equal tax.

P: A flat tax would be regressive because it would take a higher percent of the income of poor people—if they could pay it at all. How about a flat percentage tax on wealth? Since wealth is much more unequal than income, that would be more progressive even than an ideal progressive income tax.

D: That’s not the point. We need to focus on ordinary citizens’ wellbeing. If we do that, the rest will take care of itself.

P: OK, how about a basic income grant, that is, the same sum paid monthly to every citizen of a country, man woman and child, rich and poor. A large enough sum to provide a modest living. That idea has become very popular lately. It is being promoted by some Silicon Valley tech entrepreneurs.

D: No, I don’t think that’s a good idea. People should contribute to society. Basic income would give people bad incentives. They would take it easy.

P: Wait a moment, there’s a difference between basic income with no strings attached, and public assistance money. Here and I assume in Germany, public assistance is phased out as people earn more income. What’s amazing is that some people who receive assistance keep on working even though they lose income. The dignity of holding a job is very important.

D: Well you may be right about that, especially in Germany.

P: In the 1970s there was a guaranteed minimum income experiment run for five years in Manitoba, Canada. Recipients received additional income which—as with public assistance—was phased out as they earned more. A few years back Evelyn Forget, who’s here at the conference, analyzed the data. She found that only new mothers and teenagers worked substantially less. The teenagers became more likely to finish school, presumably due to less pressure to support their families. New mothers and school age teenagers are just the people you’d want to stay home. Remember, this was not a fixed basic income, but a guaranteed minimum with a sharp phase-out at 50% or more effective tax.

D: Still, you have to make a choice. Do you want equality of opportunity or equality of outcome? You can’t have both.

P: Actually, I think you can, sort of. A basic income grant, plus the public services we expect in a modern society—health, education, pensions, security, justice –including protection from unfair practices like monopolies—those should guarantee a rough equality of opportunity. Above that, it should be OK for people to earn high incomes by hard work, talent, or even luck. But you need progressive taxes to finance the system.

Whoops, just as I was getting to the punch line, the elevator arrived to take us downstairs to the next sessions. I would have said that as Adam Smith wrote in the Wealth of Nations (1776), taxes should be proportional to benefits received—a notion more radical than any proposed by today’s leftists. Chief among benefits received, Smith included government protection of title to land, in an era when some 2% owned most of the land in England. The tax he favored was a tax on the value of that land, a tax that would capture the “rent” or unearned income England’s “great proprietors” gained from the mere title to land granted and protected by the king. England had a land tax, but at low rates and poorly administered. The French “Philosophe” reformers whom Smith visited in Paris is 1766 advocated land taxes, as did the next generation of economists such as David Ricardo.

A hundred years later, in 1879, the American economist and radical reformer Henry George took Smith’s idea and ran with it. In his world-wide bestseller Progress and Poverty, George argued that all taxes should be replaced with taxes on land values only, and the revenues used for public purposes like schools and infrastructure (including public bath houses!). This was a perfectly practical proposal: property taxes then and now are assessed on land and buildings valued separately. In the heyday of George’s influence in the late 19th and early 20th century, assessors just left out the buildings and raised the rate on land to make up the difference.

Now almost 140 years later, as support for basic income has grown, some advocates have made the obvious connection: why not finance basic income with a land tax? That squares the circle, doesn’t it? Equality of opportunity at the bottom via a basic income grant, financed by a tax that limits inequality of outcome at the top.

That might be too theoretical for my pragmatic German acquaintance. She’s right, though, that we need to be more specific in talking about inequality.