To The End Of Partisan-Centered Economic Leadership
On Friday we received the following statement from Congressman Jesse L. Jackson, Jr. regarding the resignations of Treasury Secretary Paul O'Neill and White House Economic Advisor Lawrence Lindsey:
"The Bush Administration is essentially admitting what many of us have been saying for some time: the President's economic policy has been a disaster.
"These resignations come the same day unemployment hits six percent-the highest level in nine years-with $40,000 jobs lost last month alone! That's an especially sobering statistic when you add it to the two million-plus Americans who'd already lost their jobs since President Bush took office. Personal bankruptcies are at their highest level in history, and hundreds of thousands of Americans are scheduled to celebrate New Year's with a loss of unemployment benefits or health insurance or both. Housing foreclosures are at the highest level in 30 years, and a projected $5.6 trillion surplus rapidly deteriorated into this year's $159 billion deficit.
"The Bush Administration's top solution remains making the tax cut permanent, which would be ludicrous. The President needs more than new economic advisors. He needs a new economic direction."
It is usually good to see Rep. Jackson, Jr.'s response to economic events. At times, since he has entered the United States Congress, he has been the most brilliant and critical in his analysis of U.S. economic policy, particularly its monetary component. But we were a bit disappointed at the lack of differentiation between what he wrote and the message that we received less than two hours later from, Democratic National Committee Chairman Terry McAuliffe:
"Congratulations to President Bush. After numerous unsuccessful attempts, he finally figured out how to make the market go up. He fired his economic team.
"These resignations come after two years of an economic policy that has failed to get the economy moving again. Just yesterday, we learned that the government could have a staggering deficit of nearly $3 trillion dollars over the next ten years. Today, it was announced that the economy lost 40,000 jobs last month and overall unemployment is now at 6 percent.
"When asked last month if President Bush had a specific plan to help the economy, his spokesman Ari Fleischer said: "No. The President does not." That shocking admission represents a fundamental problem with this administration that no bureaucratic shuffling will solve. Only sound policies will get this country's economic house in order.
"Democrats hope that in addition to rebuilding his economic team, Bush will reassess his economic policies as well and pursue an economic agenda that will stimulate growth, create jobs, and restore fiscal responsibility to bolster our long-term economic growth. If these fundamental problems aren't fixed, the resignations will be cold comfort to the 2.2 million Americans that have seen their jobs disappear - and the millions more that have watched their nest eggs dwindle - since Bush came to office."
Not paying attention to the gleeful jabs aimed at the competing political party, which we expect, there was absolutely nothing that we heard, from Rep. Jackson, Congressional Black Caucus members or the Democratic Party in a weekend full of economic discussion, that even remotely approaches the root economic problems of this country, much less the disparity in the economic condition of its Black and White citizentry. The criticisms, however true, were more motivated by partisanship than a principle-centered understanding of economic policy, under this administration and others.
As we have been writing since the Spring of 2001, the Black unemployment rate has dramatically and at times, alarmingly moved out of tandem with the general unemployment rate. While the rest of the country has problems of its own, astute politicians and economic minds should be able to grasp the unhealthy nature of growing inequality in wealth and poverty along racial lines. Rep. Jackson did well to point to the nation's 6.0% unemployment rate, in his statement on Friday. He would have done even better to make an instructive example of Black America's seasonally adjusted unemployment rate of 11% in the month of November, and the root that it grows out of and which still prevents the country from ever fostering comprehensive economic growth.
At the heart of the problem that finds Black politicians sounding ever so similar to the Democratic Party on economic matters is the degree to which Black leadership has been absorbed by the Party of Roosevelt. The problem is also a byproduct of the degree to which a handful of think tanks in Washington D.C. do the thinking for almost all of the politicians in the two major parties, whether Black, White or other. A third factor is the degree to which a genuinely free economic market is prevented by politicians who do the narrow bidding of select interest groups.
In his classic 1998 work, Development As Freedom, Nobel Prize economist Armartya Sen eleoquently describes the problem:
The role that markets play must depend upon not only on what they can do, but also on what they are allowed to do. There are many people whose interests are well served by the smooth functioning of markets, but there are also groups whose established interests may be hurt by such functioning. If the latter groups are politically more powerful or influential, then they can try to see that markets are not given adequate room in the economy. This can be a particularly serious problem when monopolistic production units flourish - despite inefficiency and various types of ineptitude - thanks to insulation from competition, domestic or foreign. The high prices or the low product-qualities that are involved in such artificially proped-up production may impose significant sacrifice on the population at large, but an organized and politically influential group of "industrialists" can make sure that their profits are well protected"
It would be easy to understand the labels "industrialists" and "monopolistic production units" in their most common elite usage in today's lexicon. But from the perspective of the Black experience in America, they take on an entirely unique meaning. At one point, in very general terms, all of the "industrialists" and "monopolistic production units" were non-Black as a result of slavery and its legacy. The result of such is that Blacks were denied access to both labor markets and capital markets. The impact is both economic and, even deeper, in nature. As it relates to labor, Amartya Sen wrote:
"The unibiquitous role of transactions in modern living is often overlooked precisely because we take them for granted. There is an analogy here with the rather underrecognized - and often unnoticed - role of certain behavioral rules (such as basic business ethics) in developed capitalist economies (with attention being focused only on aberrations when they occur). But when these values are not yet developed, their general presence or absence can make a crucial difference. In the analysis of development, the role of elementary business ethics thus has to be moved out of its obscure presence to a manifest recognition. Similarly, the absence of the freedom to transact can be a major issue in iteslf in many contexts.
This is, of course, particularly so when the freedom of labor markets is denied by laws, regulations or convention. Even though African American slaves in the pre-Civil War South may have had pecuniary incomes as large as (or even larger than) those of wage laborers elsewhere and may even have lived longer than the urban workers in the North, there was still a fundamental deprivation in the fact that slavery itself (no matter what incomes or utilities it might or might not have generated). The loss of freedom in the absence of employment choice and in the tyrannical form of work can itself be a major deprivation.
Neither Blacks, nor the American economy have ever recovered from the inefficiencies and frustration of human rights caused by denial of access to labor markets on the basis of race. Jim Crow laws will always overcome Say's Law.
Reuven Brenner, coming from an insightful view of capital markets wrote, in his book, The Force Of Finance:
"Prosperity is the result of matching brains with capital and holding both sides accountable. In every society, there are only five sources of capital. The first three are:
- inheritance, which comes to individuals from parents (bankers furnished by nature) and to countries from nature (through natural resources);
- savings; and
- access to financial markets
If, for one reason or another, access to these sources of capital is hindered, there are only two sources left: government and crime. Government, when viewed from this angle, is a particular type of financial institution, one with monopoly powers, the demand for which varies depending on what happens to the other sources of capital...
If none of the the three private forms of capital is available, and if a government is not fulfilling its financial role properly, people will sometimes resort to crime. Though the word "crime" implies violation of laws, this activity is not necessarily a zero-sum game. When the institutions offering the other four sources of capital are severly flawed, those who venture into criminal activities may actually help society (and not become a burden on it)."
In the context of what Reuven Brenner writes one can see how deleterious is the emphasis placed on the role of government as the preeminent source of capital for Black people and others. It is because the other sources of capital - available privately in civil society - have been disrupted, damaged and denied, that the demand for government as financial intermediator grows. This intermediation role evolves into a monopoly. In fact, if one places Reuven Brenner's model into the context of Amartya Sen's it is easy to describe the government as a "monopolistic production unit" of capital, benefitting from the denial of a truly free market.
Reuven Brenner, in Force Of Finance explains how this process impacts Blacks in America:
One system that has been pursued with obvious success is the melting pot of the federal U.S. government - an example of a state creating, in the course of time, a new, larger tribe with the most open financial markets in the world. When American financial markets were closed to some groups, such as African Americans, symptoms of the aggressive "tribalism" that was common in eighteenth and nineteenth-century Europe surfaced there too. Militant organizations, whose goal was to rebuild the strength of the marginalized groups soon emerged.
But at the same time, events such as the civil rights movement were also helping to restore trust between the many "tribes" living under the U.S. federal umbrella. These new institutions were successful in transforming governments into a source of capital for these groups when private capital markets stayed closed. The debate today in the U.S. asks whether capital markets have now been opened sufficiently to members of these groups, and thus whether governments should no longer single them out for preferential treatment. In broad terms, then, the history of racial unrest in the U.S. over the past few decades can also be seen from the viewpoints advanced in this chapter and in chapter one. By looking at societies from the perspective of the "five sources of capital," one can predict the maze of complex conflicts that entangle societies when capital markets are closed and mistrust rises."
The result, for Black Americans, has been a disproportionate amount of Blacks in jail for crime which is compounded by draconian sentences for non-violent drug offenses; and a dependency upon government as the preeminent source of capital. This dependent state has increasingly developed into an intellectual deference to a single political party, under the guise that that party is more sensitive to the concerns of those who have been denied private sources of capital in civil society and a free market for their labor. The remedy, coming from the "sympathetic" political party, is for government to serve in the role of financial intermediary redistributing wealth to all of the country's laborers. Blacks are to set aside any unique or deeper problems that are race-oriented in order to elevate the class-centered arguments of the sympathetic political party and the broader coalition that supports it.
Today's partisan arrangement finds Blacks on the side of the Party that proposes to be on the side of those who don't own property - the Democratic party. However, it is not Black labor, or grassroot laborers, but a labor interest establishment that has the greatest say on how the Democratic Party approaches the marketplace. The same is true in the Republican Party where both Black small businesses and White entrepreneurs take a back seat to the capital interest establishment of corporations and bankers who write the Republican worldview of the marketplace. (Today, both establishment interest groups for labor and capital have influence in both parties, simultaneously - the passage of NAFTA, steel tariffs, and farm subsidies demonstrate this clearly)But in both cases, the establishmentarians succeed in disrupting the smooth functioning of the marketplace in order to protect "profits" rather than to promote economic growth among the entire electorate.
Neither the capital interest establishment based in the Republican Party, nor the labor interest establishment based in the Democratic Party go, in terms of economic policy, to the root of the damage done to the Black community through slavery, that still impacts and disrupts the American marketplace today. Neither side has the courage to connect the dots that would lead them right up to the best explanation of the Black community's 11% unemployment rate.
As a collective, the partisan-centered economic leadership does not have the ability, due to its current compromised status to adequately raise the failed economic policies of this country that prevent a free marketplace and result in a mismatch of available labor and capital. However, that does not mean that a voice or a collective voice among those at the bottom of the political establishment cannot emerge as an economic truth-teller capable of thinking for its self and taking its lead from an unshakeable grasp of economic principles and history rather than the directives or failed economic theory of the Inside-The-Beltway/Wall St. power elite.
In other words, in the light of history and sound economic principles there is no reason why Rep. Jesse Jackson Jr. should sound like Terry McAuliffe.
Monday, December 9, 2002