- David Atkins highlights Gallup's latest polling showing that U.S. trust in public institutions continues to erode. And Paul Krugman notes that there's reason for skepticism about the snake oil being peddled as economic policy in order to further enrich the already-wealthy:
- And on the subject of corporate capture, Alan Pyke reports that Michigan's idea of making prison food services more efficient has involved hiring a private contractor which doesn't seem interested in actually feeding anybody. And Jenny Uechl points out Kinder Morgan's sweetheart deal from the National Energy Board which is allowing it to force the public and to foot the bill for a nine-figure pipeline application - from which it would of course claim the profits.Why, after all, should anyone believe at this late date in supply-side economics, which claims that tax cuts boost the economy so much that they largely if not entirely pay for themselves? The doctrine crashed and burned two decades ago, when just about everyone on the right — after claiming, speciously, that the economy’s performance under Ronald Reagan validated their doctrine — went on to predict that Bill Clinton’s tax hike on the wealthy would cause a recession if not an outright depression. What actually happened was a spectacular economic expansion.
Nor is it just liberals who have long considered supply-side economics and those promoting it to have been discredited by experience. In 1998, in the first edition of his best-selling economics textbook, Harvard’s N. Gregory Mankiw — very much a Republican, and later chairman of George W. Bush’s Council of Economic Advisers — famously wrote about the damage done by “charlatans and cranks.” In particular, he highlighted the role of “a small group of economists” who “advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue.”
(H)ow can you justify enriching the already wealthy while making life harder for those struggling to get by? The answer is, you need an economic theory claiming that such a policy is the key to prosperity for all. So supply-side economics fills a need backed by lots of money, and the fact that it keeps failing doesn’t matter.
And the Kansas debacle won’t matter either. Oh, it will briefly give states considering similar policies pause. But the effect won’t last long, because faith in tax-cut magic isn’t about evidence; it’s about finding reasons to give powerful interests what they want.
- Richard Wilkinson and Kate Pickett document (PDF) the role of unions in working toward greater equality (h/t to James Bloodworth), while reminding us what role we should expect unions, workers and corporations to play in a healthy society:
Companies have two functions. One is to produce the goods and services which we all need, but the other is to concentrate wealth and power among top executives and generate profits for shareholders. We need the first of these, but not the second. The second has been the mainspring of rising inequality and has provided powerful perverse incentives to top management.- Finally, Denis Campbell interviews John Ashton about the importance of greater equality as a matter of public health. And Faiza Shaheen writes that we can't have sustainable development without challenging inequality.
Increasing employee representation on company boards and expanding the share of the economy made up of mutual, cooperative and employee owned companies would begin to tackle growing inequality and the concentration of wealth at the top. More democratic companies tend to have much smaller pay ratios among their staff.
As well as smaller income differences and good economic performance, cooperatives, employee owned companies and others in the stakeholder business sector have other advantages. Community life has weakened substantially in rich countries over the last generation but, as Oakeshott remarks, an employee buyout can turn a company from being a piece of property into a community¹. Perhaps a stronger sense of community at work could replace the sense of community that has declined in residential areas. It is also likely that less hierarchical structures at work could begin to change the experience of work – making it possible for more people to gain a sense of self-worth and of being valued from their employment. Certainly, a sense that you don’t have control over your work, of unfairness, or an ‘effort-reward imbalance’, have each been linked to worse health and wellbeing.
The scales of top pay and of tax avoidance are two indications of how problematic the mismatch between profit seeking and the public interest can be. Other indicators include corporate-funded opposition to scientific evidence of harm associated with company products, such as the role of fossil fuel companies opposing climate science, the manipulation of regulatory bodies set up to safeguard the public interest, and the purchase of political influence on a scale which threatens the effective functioning of democratic institutions.