In 1962 Rachel Carson published her environmental epic, Silent Spring, which documented how chemical-based agriculture was killing the bird-life and birdsong of America\u00e2\u20ac\u2122s countryside. Over the last forty years the Democratic Party has also slowly lost its voice and fallen silent on the economy, with Democrats substituting a laundry list of program plans for economic vision. <\/p>\n
What happened to mute the Democrats\u00e2\u20ac\u2122 voice on the economy? The academic ascendance of the laissez-faire vision of an economist named Milton Friedman. Friedman\u00e2\u20ac\u2122s vision benchmarks modern economic theory and it thereby benchmarks policy. Put another way, most economists are singing the same hymn—Friedman’s 1968 classic, proclaiming a \u00e2\u20ac\u0153natural rate of unemployment\u00e2\u20ac\u009d that is worsened by minimum wages, unions, and labor standards.<\/p>\n
For Rachael Carson, restoring America\u00e2\u20ac\u2122s birdsong called for banning the chemical DDT. For Democrats, recovering their voice calls for rediscovering an earlier economic paradigm now extinguished in policy discourse. The problem is that contemporary economics has been captured by Friedman’s Chicago school construction of free market economics, leaving little room for alternative interpretations of economic reality.<\/p>\n
As a result of the dominance of the Chicago school, both Democratic and Republican economic advisers are trained to occupy a common intellectual space. The only differences that can survive relate to values and the defense of an egalitarian society. This has huge implications for policy, but it is a difficult issue to convey to pragmatic worldly politicians. Seventy years ago, John Maynard Keynes acerbically captured this reality:<\/p>\n
\u00e2\u20ac\u0153(T)he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slave of some defunct economist. (J.M. Keynes, The General Theory of Employment, Interest and Money, 1936, p.383.)<\/p>\n
And so it remains today. The current cohort of Democratic policy advisers unconsciously uses the same analytical framework as their Republican counter-parts.<\/p>\n
Mentioning names can appear churlish, but not doing so invites charges of vagueness. Consider the following. Professor Greg Mankiw of Harvard University (famous for his observation that flipping hamburgers is a manufacturing job) was Chairman of President Bush\u00e2\u20ac\u2122s Council of Economic Advisers (CEA). Mankiw made his name in the 1980s as a new-Keynesian, a school of thought that maintains unemployment exists because of inflexible prices and wages. This intellectual background readily qualifies him to serve in a Democratic administration. The same holds for Ben Bernanke of Princeton University, who was recently confirmed as the next Federal Reserve Chairman. Like Mankiw, he too made his name in the 1980s as a new-Keynesian, writing about the Great Depression.<\/p>\n
Alan Blinder of Princeton University is the very best of Democratic economic advisers, being deeply sensitive to problems such as income inequality and out-sourcing. Yet, Blinder shares the same analytical views of the economy as Mankiw and Bernanke. Specifically, he shares their views regarding the conduct of monetary policy and the economic logic of free trade and globalization, though his values lead him to have different positions regarding progressive taxes and the need for social insurance<\/p>\n
Bernanke is from Princeton; so is Blinder. Mankiw is from Harvard; so is Lawrence Summers. All four got their Ph.D.s from Harvard or MIT. No doubt, all four are virtuous people, but virtue is not the issue. The issue is that all share the same invisible hand paradigm, albeit each may see varying degrees of arthritis. How this state of affairs came about is a complicated story. One important factor is the science myth in economics, whereby economists tolerate only one \u00e2\u20ac\u0153core\u00e2\u20ac\u009d theory about how the economy works.<\/p>\n
Given this common shared analytical framework, what distinguishes economic advisers is their level of \u00e2\u20ac\u0153compassion.\u00e2\u20ac\u009d Ironically, this makes the Democrats the true \u00e2\u20ac\u0153compassionate conservatives.\u00e2\u20ac\u009d However, within the laissez-faire paradigm, compassion usually reduces economic efficiency. Consequently, Republicans own the market efficiency franchise, while Democrats own the fairness franchise. Meanwhile, efficiency appears to trump fairness with the American electorate, which explains Democrats relative disadvantage in public economic debate.<\/p>\n
This pattern is evident across an array of issues. The Clinton administration consistently ducked on trade and labor standards. To the extent that there was support, it was for reasons of compassion and political expediency. The same holds for elite Democratic policy thinking about trade unions and the minimum wage. The one area where elite Democratic policymakers have made an upfront economic efficiency argument is the budget deficit, but this poorly conceived foray has merely risked turning the party of FDR into the party of Herbert Hoover.<\/p>\n
What is needed are Democratic economic advisers that challenge the flawed economic assumptions of Friedman’s laissez-faire school. Three generations ago Keynes identified the economic challenge as one of optimizing capitalism so that it delivers for all. That challenge continues in the era of globalization. Meeting it requires unashamedly and openly making the economic efficiency case for labor standards, trade unions, minimum wages, corporate accountability, and financial market regulation. Additionally, today\u00e2\u20ac\u2122s advisers must confront the environmental challenge posed by the industrial economy itself. That\u00e2\u20ac\u2122s a big ticket, but it’s a ticket that can own both the efficiency and fairness franchises, and that\u00e2\u20ac\u2122s a politically unbeatable combination.<\/p>\n","protected":false},"excerpt":{"rendered":"
In 1962 Rachel Carson published her environmental epic, Silent Spring, which documented how chemical-based agriculture was killing the bird-life and birdsong of America\u00e2\u20ac\u2122s countryside. Over the last forty years the Democratic Party has also slowly lost its voice and fallen silent on the economy, with Democrats substituting a laundry list of program plans for economic […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-33","post","type-post","status-publish","format-standard","hentry","category-political-economy"],"_links":{"self":[{"href":"https:\/\/thomaspalley.com\/index.php?rest_route=\/wp\/v2\/posts\/33","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thomaspalley.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thomaspalley.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thomaspalley.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thomaspalley.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=33"}],"version-history":[{"count":2,"href":"https:\/\/thomaspalley.com\/index.php?rest_route=\/wp\/v2\/posts\/33\/revisions"}],"predecessor-version":[{"id":1682,"href":"https:\/\/thomaspalley.com\/index.php?rest_route=\/wp\/v2\/posts\/33\/revisions\/1682"}],"wp:attachment":[{"href":"https:\/\/thomaspalley.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thomaspalley.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thomaspalley.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}