In Search of a Moral Economy

Financial FAQs

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vox.com

Vermont Senator Bernie Sanders defined a moral economy in a recent Duke University dialogue with the Reverend William Barber II: ““A moral economy is one that says, ‘In the wealthiest country in the history of the world, all our people should be able to live with dignity and security.’”

We don’t have to quote the very progressive U.S. Senator to know what a moral economy should look like. One has only to study the history of income and wealth redistribution since 1980 when demand-side economic theory—the Keynesian economics of English Lord John Maynard Keynes that guided Roosevelt’s New Deal—was replaced by so-called supply-side policies—under the conservative but never validated premise that enhancing the wealth of holders of capital with lower taxes and regulations would maximize production, while suppressing the rights and wages of their workers.

History since then has borne out the immorality of what came to be called trickle-down economics—record income inequality in the American workforce. Its rationale came from a diagram on a napkin that then White House Chief of Staff Dick Cheney took to heart as the mantra that guides conservative Republicans even today.

It’s an absurd equation. President Reagan at the time believed that lower taxes would motivate workers to work harder and produce more. The problem was reducing everyone’s taxes would stymie government programs that helped to level the opportunity table. It was the wealthiest that benefited most with reduced personal tax rates that were as high at 92 percent in the Eisenhower administration, which financed the federal highway system, sent us to the moon, and instigated many of the public programs that have made America so productive.

It’s hard to know where this thought process came from. History shows that people work just as hard—sometimes even harder—when they receive a smaller share of their paycheck; especially when a portion goes to insure future benefits like workman’s compensation insurance, social security, Medicare and Medicaid.

But conservatives latched onto several Austrian economists who hated any form of authority; so much so that they advocated limiting the powers of democratically elected governments to care for their own citizens. Such was the fear of centralized authority by economists like Fredrick Hayek in his book, whose book, The Road to Serfdom, called any regulations to tame capitalism a form of enslavement without recognizing that raw, unregulated capitalism meant serfdom and exploitation of those workers.

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Graph: metroscan.com

We do now have a better understanding of how capitalism—the worst economic system, except for all of the others (to paraphrase Churchill)—works for Main Street as well as Wall Street.

It means in part returning to the much more progressive tax rates of earlier U.S. administrations—before President Reagan made the immoral tax cuts that even underfunded the military at the time, and initiated the massive federal debt burden we carry today.

All the public programs funded by governments today enhance prosperity and productivity in some way—whether it’s to upgrade our infrastructure, fund new health discoveries, strengthen the public insurance and pension programs; as well as protect the environment, without which no Americans can prosper over the long term.

Then we can afford to protect those most in need. That is what a moral economy looks like.

Harlan Green © 2018

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
This entry was posted in Economy, Keynesian economics, Macro Economics, Politics and tagged , , , , , , . Bookmark the permalink.

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