Transcript Part 1
WHAT’S THE ECONOMY FOR, ANYWAY? Part 1 of 3 Two Competing Views of the Economy The Private Ownership Society Vs. The Public Good Society The Logic of the Ownership Society • “If you own something, you have a vital stake in the future of our country. The more ownership there is in America, the more vitality there is in America, and the more people have a vital stake in the future of this country.” -- George W. Bush. • We need an “ownership society [in which] individuals are empowered by freeing them from dependence on government handouts. . ., patients control their own health care, parents control their own children's education, and workers control their retirement savings.” -- The Cato Institute Criticisms of the Ownership Society Criticisms of the Ownership Society (cont) • Some call it the “You’re on Your Ownership Society.” • Others call it “The Risk Society.” “Before they can join the ‘Ownership Society’ they…[Americans]…have got to pay their credit card bills, their rising variable-rate mortgages and their auto loans. After that, there’s no money left…” -Robert Reich The Logic of the Public Good Society Supporters of the public good society envision an economic system that provides: • Fair and Decent Wages • Good Healthcare • Affordable Housing • Secure Communities • Good Education • Efficient and Clean Transportation • A Healthy Environment • Time for Family • Time for Friends • Retirement Security Criticisms of the Public Good Society Criticisms of the Public Good Society (cont) • “The larger the slice taken by government, the • • smaller the cake available for everyone."” -Margaret Thatcher ”… And you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It's our duty to look after ourselves…” -- Margaret Thatcher “Government is not a solution to the problem, it is the problem.” -- Ronald Reagan Evaluating Current Policies Before evaluating current policies we need to ask a fundamental question: What’s the economy for, anyway? The Conventional View of the Economy • The American economy's "ultimate purpose is to produce more consumer goods." - Arthur F. Burns, Chairman of President Eisenhower's Council of Economic Advisors, 1953 • "Our enormously productive economy demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfaction and our ego satisfaction in consumption. We need things consumed, burned up, worn out, replaced and discarded at an everincreasing rate. - Victor Lebow, Retail Analyst, 1955 Conventional Measures of Economic Well-Being • The various stock market averages (DIJA, NASDAQ, S & P 500, etc.) Housing Starts The Inflation Rate The Unemployment Rate Consumer Confidence • • • • • Gross Domestic Product (GDP) The World Bank’s GDP Rankings (2006) U.S. Millions of Dollars Rank Rank 1 United States (13,244,550) 11 Russia (979,048) 2 Japan (4,367,459) 12 India (886,867) 3 Germany (2,897,032) 13 South Korea (888,267) 4 China (2,630,113) 14 Mexico (840,012) 5 United Kingdom (2,373,685) 15 Australia (754,816) 6 France (2,231,631) 16 Netherlands (663,119) 7 Italy (1,852,585) 17 Turkey (392,590) 8 Canada (1,269,096) 18 Belgium (393,590) 9 Spain (1,225,750) 19 Sweden (385,293) 10 Brazil (1,067,706) 20 Switzerland (377,240) Some US States Have Bigger GDPs Than Most Countries The IMF’s GDP Per Capita Rankings (2006) Purchasing Power Parity (PPP) Rank Rank 1 Luxembourg ($80,471) 11 United Kingdom ($35,051) 2 Ireland ($44,087) 12 Finland ($34,819) 3 Norway ($43,574) 13 Belgium ($34,478) 4 United States ($43,444) 14 Sweden ($34,409) 5 Iceland ($40,277) 15 Qatar ($33,049) 6 Switzerland ($37,369) 16 Australia ($32,938) 7 Denmark ($36,549) 17 Singapore ($32,867) 8 Austria ($36,031) 18 Japan ($32,647) 9 Canada ($35,494) 19 Germany ($31,095) 10 Netherlands ($35,078) 20 Italy ($30,732) An Alternative View of the Economy • Gifford Pinchot was the first director of the US Forest Service (1905-1910) and a Republican governor of Pennsylvania. • According to Pinchot, the purpose of the economy is to promote 1) the greatest good 2) for the greatest number 3) over the longest run How Might We Measure the “Greatest Good”? • • • • • • • • • • Wealth Income Health Family Life Community Life Security/Safety Education Life Satisfaction Freedom Etc. How Might We Measure the “Greatest Number”? • Gap Between Rich & • • • • • Poor Poverty Rate Social Mobility Access to Health Care Access to Education Etc. How Might We Measure the “Longest Run”? • National debt • Personal savings rate • Pension security • Health security • Environmental sustainability • Etc. Time Series of the U.S. Personal Savings Rate Americans now have a net personal savings rate of -1%, lower than any European country except Greece!!! Please Continue with Part 2: What’s the Economy for, Anyway?